Navigating Complexity, Criticism and Carbon Credits

The voluntary carbon market remains a powerful tool for businesses to address their emissions, meet government and regulatory requirements, and contribute to climate change mitigation and sustainable development. However, amid recent controversy, some companies may hesitate to engage with carbon credits.

To abandon support of voluntary carbon projects would mean abandoning a powerful way for companies to take responsibility for their ongoing emissions, contribute meaningfully to the fight against climate change, and encourage sustainable development. Since Gold Standard was established 20 years ago, around 2,900 projects issuing Gold Standard carbon credits have supported the reduction or removal of 238 million tonnes of CO2 and created over 36 billion dollars of shared value from verified sustainable development impact – and behind each of these numbers lies results such as cleaner air, solar powered schools and safe drinking water.

Nevertheless, companies that buy credits have recently been subject to increased criticism.

Guard against criticism by investing in effective ways to benefit the planet and society:

For many organisations, like smaller companies or those with little influence over their suppliers, one of the most effective actions they can take will be buying carbon credits. Ease of transaction and the ability to compare different types make it a particularly appealing form of taking action. Companies can also buy credits from different project types, allowing them to choose a blend of projects that suit their priorities. All Gold Standard projects must have a verified contribution to at least three of the UN’s Sustainable Development Goals. They can therefore choose to invest in credits from projects that align particularly well with a company's values. Gold Standard credits can be procured on our Gold Standard Marketplace online marketplace, on the spot market, over-the-counter and now through standardized instruments such as Xpansiv’s benchmark contract SD-GEO offering cookstove project credits.

However, there are some sectors where money could be spent in different ways to more effectively meet business objectives. For example, the steel industry is incredibly energy intensive. The planet may well be served better by steel companies investing heavily in R&D to reduce the amount of energy required to produce steel, to supplement the money they spend on carbon credits. And the in the world of finance, where companies regularly deal with sums of money that dwarf the voluntary carbon market, then making responsible, sustainable investments, and measuring the impact that those investments have, will be the most effective thing to do.

Cut through the complexity and get ahead of regulations using an internal carbon price

The carbon market, and the changes we need to make to reduce emission can seem complicated. But in many ways it’s very simple. The latest IPCC report makes it clear that global greenhouse gas emissions need to peak before 2025 at the latest and be reduced by 43% by 2030.

The problem is clear, yet the carbon market has never forced the issue of business decision making. As the system is voluntary, increases in prices of credits can drive companies to stop buying them. Instead, companies need to set an internal carbon price which increases over time and is built into their long-term business model. This will encourage companies to not only take account of their emissions, but by providing an incentive across teams to reduce emissions it will also drive wider efficiencies – and carbon and cost savings – throughout a business.

And by reducing emissions companies can reduce future risks to profit. For example, in Canada, the carbon tax on fuel is currently $65 a tonne and will raise by $15 dollars every year until it reaches $170 in 2030. By setting ambitious targets to reduce emissions in line with science, and compensating for those emissions that can’t yet be eliminated through the voluntary market companies can minimise future liabilities.

Ensure your carbon credits are high-quality

The recently released IC-VCM Core Carbon Principles (CCPs) aim to make it easier to avoid buying credits that don’t represent what they claim. They set a “floor” for what a carbon credit should include. Gold Standard already meets their criteria, and we will apply for approval. However, you could view these as analogous to minimum safety requirements for consumer goods – you wouldn’t want to buy a toaster that isn’t safe, but you wouldn’t choose what to buy based only on it meeting minimum requirements or you’ll end up with a burnt snack.

Gold Standard was established as an NGO by WWF and other international NGO’s 20 years ago to bring a sustainable development focus to the voluntary carbon market. Our mission is climate security and sustainable development for all.

Uniquely among carbon standards, Gold Standard is a member of the ISEAL Alliance, the leading membership body for governance in sustainability systems. Our governance, including our approach to standards setting and assurance, is scrutinised independently and monitored in line with good practice.

The changing climate is affecting the poorest first, and standards bodies must ensure that the projects that they certify are not harming the communities in which they operate. Gold Standard has safeguarding principles to guard against our methodologies harming those they are supposed to help. We are proud to have market leading safeguarding, independently verified by organisations such as the Oeko Institute.

We have systems to put right mistakes that happen. Our grievance process allows anyone to raise a problem with any project – which we will then investigate and rectify where appropriate. Gold Standard was rated as the only carbon market standard that provides appropriate recourse to file grievances to communities affected by climate projects in a report by Carbon Market Watch.

At Gold Standard we understand that the recent controversies in the Voluntary Carbon Market may have unsettled purchasers of credits. But the most recent IPCC report makes it clear that we are falling short of the policy and investment changes needed to meet climate goals across all sectors and regions. We can’t afford to throw away innovations that can help us achieve a climate secure and sustainable world.

We want to be clear: the integrity of our methodologies is our North Star, and we are absolutely committed to helping the organisations that purchase our credits to achieve their sustainability aims.

With business, civil society, government and individuals all working together then a 1.5 degree world is still within reach.