‘Incentivize and recognize’: Green NGOs and companies call for more investment in carbon credit markets

A group of environmental NGOs and sustainable business groups have called for more market incentives to encourage companies to invest in high-integrity carbon credits. They have signed an open letter published today highlighting the critical need to mobilize much more private sector financing for climate solutions.

The open letter – signed by the We Mean Business coalition, Conservation International, the Nature Conservancy and the Environmental Defense Fund – argues that several existing frameworks underpinning voluntary carbon markets and international climate targets are not doing enough to ensure high-quality business investments. ‘stimulate and recognize’. integrity of climate projects.

“If we want to scale corporate climate finance to the scale needed to meet 1.5C targets, the voluntary and policy frameworks that drive business investment must provide strong, unambiguous incentives to act today – across business value chains companies, and beyond,” the report said. letter states. “But far too little of this is reflected in the current climate objectives and claim frameworks.”

Corporate climate investments are critical to achieving “urgent and underfunded climate priorities,” such as halting and reversing nature loss globally by 2030 and advancing the clean energy transition in developing countries, the letter said. Yet it points to data showing that annual corporate climate financing has increased by just five percent since 2018 and 2023, from $183 billion to $192 billion per year.

The groups supporting the letter – which also includes BirdLife International and the World Business Council for Sustainable Development (WBCSD) – applauded the work of the Voluntary Carbon Market Integrity Initiative (VCMI), a group that aims to improve the credibility and effectiveness of increase global carbon emissions. credits market. But it also warns that “much more needs to be done to create effective climate incentive frameworks for companies working in the real world and driving investment in solutions today.”

Over the past 12 months, the voluntary carbon market has been hit by a series of allegations questioning the effectiveness of carbon credits, with a range of studies finding that a significant proportion of credits companies buy to offset their emissions are not backed by the required reductions of carbon in the atmosphere.

The exchange of investments in offset projects – for example tree planting, forest conservation or clean energy development – ​​in exchange for carbon credits remains highly controversial, with some environmental groups claiming it allows companies to delay real emissions reductions and mislead consumers about their environmental objectives. influence.

But proponents – including the signatories of today’s letter – argue that carbon credits are a crucial mechanism for channeling private sector financing into technologies and nature-based solutions that can push back the global emissions curve, provided good guardrails are placed to secure companies’ claims and compensatory projects are of high integrity and ensure the actual emission reduction that is claimed.

The NGOs that signed the latter – which include both business groups representing companies that buy credits and organizations that have played a role in crafting major offset projects – argue that most companies engaged in voluntary carbon markets are doing so “responsibly”.

The letter points to a series of recent studies from climate data analysts – including Sylvera, Trove and consulting giant Accenture – which have indicated that companies that buy carbon credits are more likely to invest in decarbonization and make real emissions reductions.

Some researchers have also questioned the credibility of research linking the purchase of carbon offsets to climate action, noting that studies rely on proprietary information provided by companies, as opposed to peer-reviewed data and methods. and sometimes only target a fraction of CO2 emissions. corporate emissions.

But today’s letter argues that most companies engaging in voluntary carbon markets are “doing so responsibly, using markets as a mechanism to accelerate climate action alongside much-needed investments to fuel their own and their decarbonize suppliers.”

“Despite this, companies that purchase carbon credits are more likely to be criticized than praised, and the voluntary carbon market remains a relatively untapped source of potential climate finance,” the letter concludes.

Do you want to understand what is going on at the intersection of sustainability? Checking out BusinessGreen Intelligence – the most important information for professionals focused on the UK’s green economy.

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