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UN Report about offsetting

November 22, 2022
UN Expert Group Report recommendations for offsetting

“Right now, the planet cannot afford delays, excuses, or more greenwashing,” says former Canadian climate minister Catherine McKenna in a new report released at the COP27 climate conference in Egypt this month.

McKenna is talking specifically about the rise of vague net zero pledges. To be truly effective, these commitments must be “about cutting emissions, not corners,” she said as she announced the release of the report by the United Nations’ High‐Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities (or “Expert Group”).

The report acts as a roadmap or how-to guide to help private organizations, regions, and cities develop credible and accountable net zero pledges. Its recommendations for making effective climate pledges include a discussion about the role of carbon credits in net zero targets (Recommendation #3). This article explores the report’s recommendations for using carbon credits in climate pledges, and how organizations can act on these guidelines post-COP27.

Challenges and opportunities within the voluntary carbon markets

VCMs need better standards

The report is clear that although carbon credits can help to support accelerated emissions reductions globally, we need better systems in place to “define and ensure standards for both the integrity of the credits themselves and how non-state actors claim them.”

Without these systems and guidelines in place, the voluntary carbon markets (VCMs) is abundant with low-quality carbon credits that could in fact harm progress to reduce emissions in the near term. Limiting warming to 1.5C requires rapid absolute emissions reductions, and using carbon credits in place of deep emissions cuts can be highly detrimental to the climate response.

According to the report, the voluntary carbon market needs “active monitoring … and recalibration … to establish the credible credits market that will be needed over the longer term to account for high-integrity removals.”

But it’s not all bad news.

Better standards are on the way, but robust ratings are available now

There is plenty of work being done on both the supply and demand sides of the VCMs to produce better guidelines and controls over market activity. 

On the demand side, the Voluntary Carbon Markets Integrity Initiative (VCMI) and the SBTi are working to incentivize, recognize and reward “high-integrity companies who purchase and retire carbon credits to go further and faster in their climate action.” Such frameworks and guidelines are crucial to ensuring that carbon credits do not take priority over a company’s own science-based emissions reduction efforts.

On the supply side, the report highlights the work of the Integrity Council for the Voluntary Carbon Market (ICVCM) Core Carbon Principles are complementary to Sylvera’s ratings, but the finalized framework will not be available until next year, and assessments will take some months at least. 

While such efforts come to fruition, Sylvera’s carbon credit rating platform is available now, and its robust assessments help companies filter out the low-quality credits that exist in the carbon markets to ensure their offset investments maximise impact.

How organizations should approach carbon offsetting

Here are the report’s key recommendations for integrating carbon credits into meaningful and effective climate pledges.

Follow the mitigation hierarchy

Even when outlining its recommendations for carbon credit usage, the report first re-iterates that:

Non-state actors must prioritise urgent and deep reduction of emissions across their value chain.

In other words, organizations should follow the mitigation hierarchy: avoid, reduce, offset.

Meet interim targets first

By following the mitigation hierarchy, organizations should aim to meet ambitious short and medium-term emissions reduction targets first before turning to carbon credits to offset their carbon footprint:

High-integrity carbon credits are one mechanism to facilitate much‐needed financial support towards decarbonizing developing country economies. As best-practice guidelines develop, non-state actors meeting their interim targets on their net zero pathway are strongly encouraged to balance out the rest of their annual unabated emissions by purchasing high-integrity carbon credits.

These targets should involve absolute emissions reductions and not simply reductions in emissions intensity.

Carbon credits help organizations go ‘above and beyond’

The report makes it clear that companies cannot count carbon offsets as emissions reductions:

High-integrity carbon credits in voluntary markets should be used for beyond value chain mitigation but cannot be counted toward a non-state actor’s interim emissions reductions required by its net zero pathway.

Rather, companies should think about investing in carbon credits as making an additional contribution to global emissions reduction and climate change action.

At Sylvera, we see beyond value chain mitigation as the beginning of a global move away from the concept of ‘offsetting’ and towards the idea of carbon credits as a ‘contribution’. Carbon credits allow companies to make an impact on global climate change response, above and beyond their existing 1.5°C commitments or obligations.

The SBTi’s net zero offsetting guidelines also align with beyond value chain mitigation, encouraging companies to think beyond their own value chains when decarbonizing, contributing what they can to finance sustainable developments in developing countries.

Consider additionality and permanence

The report recommends carbon credits be verified for additionality and permanence:

A high‐quality carbon credit should, at a minimum, fit the criteria of additionality (i.e. the mitigation activity would not have happened without the incentive created by the carbon credit revenues) and permanence.

Determining additionality and permanence is a difficult process that varies for each project type, which is why Sylvera has built individual frameworks for each type of carbon project. Additionality and permanence are two of the three key components that Sylvera evaluates, alongside carbon score and co-benefits. 

Final thoughts on greenwashing and offsetting

The UN’s report on non-state net zero commitments provided welcome recommendations on carbon offsetting. Carbon offsets are not all bad news if investment makes its way into high-quality projects. Then they play a key role in helping organizations to meet ambitious climate targets and go beyond their own value chains to provide additional contributions to global climate action.

But carbon credits must be approached within a broader framework of deep emissions cuts and beyond value chain mitigation. And as the voluntary carbon markets welcome stricter regulation and monitoring, the future looks bright for organizations that embrace high-quality carbon credits.

With carbon offsets under increasing scrutiny, verification and due diligence are more important than ever. Sylvera’s independent and in-depth carbon ratings are here to help you invest in high-quality offsets and deliver on your net zero commitments. Request a demo today.

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This article features expertise and contributions from many specialists in their respective fields employed across our organization.