(Bloomberg) -- A widely touted effort to clean up the embattled carbon-offsets market has been met with disappointment among experts.
The new guidelines from the Integrity Council for the Voluntary Carbon Market, released Thursday following three years of work, present incremental improvements to a system that allows corporations and individuals to pay for credits that compensate for their climate damage.
“Twenty years ago this kind of effort might have been a good idea,” said Danny Cullenward, a research fellow at American University. “Now it feels like far too little, too late.”
William McDonnell, chief operating officer of the Integrity Council, said there is a pathway. “We're very committed to continuous improvement and further raising ambition in the market,” he said.
Offsets are promissory notes sold on a voluntary basis, where the seller will spend money protecting a forest or building a renewable-energy plant and undertake to ensure that certain emissions are avoided or removed in the process. In 2022, the market reached $1.3 billion and some 170 million tons of CO2 worth of credits were used, according to Trove Research Ltd.
A series of recent investigations by Bloomberg Green have shown how easy it is to poke holes in claims against existing offsets projects. That fear of greenwashing has hamstrung the growing market, with data suggesting fewer offsets are being claimed against emitters’ carbon footprints. Carbon-offset retirements, which involve taking credits out of the market to prevent double counting, fell 4% last year, according to BloombergNEF. That’s the first decline since at least 2019.
The “core carbon principles,” or CCPs, and accompanying documentation released by the Integrity Council lay out criteria for offset standards setters, such as Verra and Gold Standard.
There was an expectation that the CCPs would identify the worst kinds of offsets, which do little to reduce carbon emissions, and call for standards setters to — in turn — exclude them. But that’s not what the guidance released today does.
Instead the 10 top-level principles focus on governance, emissions impact and sustainable development. Most repeat widely-acknowledged — but poorly implemented — doctrines like the need for credits to finance something that wouldn’t have happened anyway and not to be used twice by the same entity. In some places, they go further than the status quo. For example, the Integrity Council includes a requirement to disclose a credit’s end-user, whether it be a company or individual. They also ask for publication of the spreadsheets detailing the complex math behind the carbon calculations.
Verra, the world’s largest standards body that has faced allegations for systematically issuing junk credits and paused dozens of projects, said it’s “very supportive” of the council’s work and “looks forward to reviewing” the documentation.
Annette Nazareth, the Integrity Council’s chair, said in a statement that the new documentation is “an important step towards a transparent, regulated-like market where buyers can easily identify and price carbon credits.”
Yet market participants that reviewed the documents told Bloomberg Green that the guidance falls short on critical safeguards to help ensure the funds are channeled to environmental projects and the people doing the work. Notably, there are no requirements on the management or transparency of project revenues, an area of controversy after investigations revealed the bulk of proceeds go to middlemen.
The guidance “goes in the right direction but is too hesitant,” said Juerg Fuessler, managing partner at INFRAS, a research and consulting firm, and member of the council’s expert panel.
The work the council has done began with a taskforce in 2020. Then former Bank of England Governor Mark Carney, founder of that taskforce, said the offsets market might be worth $100 billion annually. That may turn out to be too rosy a prediction.
“If the CCPs are not taken up in the market, then forget about those projections,” said Pedro Martins Barata, a carbon markets expert with the Environmental Defense Fund, who co-chairs the council's expert panel. “They will just simply not materialize.”
Other flashpoints like whether a country and company can use the same credit will be addressed later, the council said. Later this year it will also offer further guidance on criteria for assessing categories of offsets.
The CCPs published Thursday represent an advancement, but they’re “insufficient” in terms of doing what’s needed to deliver impact, said Gilles Dufrasne, global carbon markets lead at nonprofit Carbon Market Watch and a member of the council’s expert panel. An irreconcilable logic of emissions compensation has left Dufrasne jaded. “The concept of offsetting itself should be abandoned,” he said.
(Bloomberg Philanthropies, a charity funded by Michael Bloomberg, is one of many funders that support the work of the Integrity Council.)
(Adds comment from council executive in third paragraph.)
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