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We're all familiar with the phrase net zero, the state where we stopped increasing the level of greenhouse gases in the atmosphere. But how do we get there? A big part of the answer of course lies with reducing our emissions. But in a recent report, the UN Intergovernmental Panel on Climate Change said that large-scale Carbon Dioxide Removal or CDR will be essential if we are to have any chance of limiting long-term global warming to 1.5 degrees Celsius.
The methods being explored include planting trees, managing soil so it absorbs more carbon, and machines that suck carbon dioxide from the air. But how will all this be paid for? Entrepreneurs in the CDR space are pinning their hopes on the voluntary carbon offset market. For every tonne of carbon dioxide they remove from the atmosphere, they can sell a one tonne carbon credit. Businesses can then offset their own emissions by buying these credits and could then claim to be carbon neutral.
But pure removal projects made up just 3 per cent of all projects issuing credits from January 2021 until April 2022. The vast majority of carbon credits on the market today are linked to projects that aim to avoid emissions. In a typical avoidance based project, a developer might buy an area of forest and promise to preserve it. If the deforestation rate is below the local average, the developer sells carbon credits to reflect the tree loss that has been avoided.
Avoidance linked carbon credits are much, much cheaper than those linked to carbon dioxide removal. And many companies have been using them to claim carbon neutrality. But critics have said that some of these projects have far less impact than they claim. For example, if you protect one area from illegal loggers they might just attack the next area with exactly the same climate impact.
Also the carbon impact of a forest linked offset lasts only as long as the trees survive. The voluntary offset system is currently unregulated. And allegations of greenwashing are growing against companies using low quality offsets.
A new body called the Integrity Council for the Voluntary Carbon Market is now drawing up standards aimed at helping offset buyers identify high quality projects which meet key requirements such as longevity and measurability. It won't be easy. Checking that offset projects genuinely deliver the benefits they claim is difficult and laborious work.
The council also wants to standardise contracts for offsets making them easily tradable on a market. But valuing the relative benefits of different projects is extremely complex. Improving the offset market's effectiveness is a major challenge. But as scrutiny of the space heats up, companies will need to choose their offsets more carefully.