By Srinath Sridharan,
Just as a stable currency underpins economic transactions, a credible mechanism for valuing and trading carbon emissions is needed for propelling substantive progress towards net zero. Each time a new corporate scandal involving carbon credits emerges, such as the recent revelation of Shell’s involvement in fake carbon credits reported by the Financial Times, the world’s trust in the mechanism of carbon credits diminishes further. The crux of the challenge lies in the apparent alignment between governments and industry lobbies, which prioritise their interests.
Voluntary carbon markets, where buyers voluntarily purchase and trade offsets derived from emissions reduction or removal projects, have ignited a contentious debate. Advocates champion these markets as indispensable channels for bolstering climate finance and facilitating companies in achieving net-zero ambitions. Conversely, detractors assail voluntary schemes as elaborate greenwashing mechanisms, yielding scant impact on emissions reduction endeavours.
Carbon offsets epitomise the fusion of lofty ideals with the harsh realities of implementation. While theoretically compelling, they present inherent flaws. They engender a precarious equilibrium, contending with the stark verities of human nature, market dynamics, and regulatory maze and measurement inertia. Carbon credits are generated through activities aimed at storing, reducing, or preventing greenhouse gas emissions. However, relying solely on offsets to achieve emission reduction targets is inherently flawed and poses a significant risk of exacerbating the climate crisis. Analogous to a depreciated currency, carbon offsets grapple with a crisis of trust precipitated by inconsistencies in standards, verification processes, and project quality. This undermines the integrity of the carbon offset market, impeding its capacity to effectuate substantial emissions reductions.
Carbon credits, though touted as a mechanism to combat climate change by incentivising emission reductions among companies, perpetuate the misconception that emissions can merely be offset and temporarily, rather than fundamentally, reduced. This engenders a perilous complacency among corporations, enabling them to perpetuate pollution under the veneer of purchasing credits to “neutralise” their emissions.
Genuine progress in combatting climate change necessitates concerted efforts to curtail emissions at their source. Moreover, the concept of carbon credits presents a significant ethical dilemma. By commodifying the privilege to pollute, carbon credits establish a system where affluent entities can continue emitting greenhouse gases without consequence, while marginalised communities bear the environmental burdens and fallout of climate-related catastrophes.
Furthermore, the carbon credit market is rampant with loopholes and inconsistencies. The absence of standardised regulations and oversight results in disparities in the quality and reliability of carbon credits. In some instances, projects purportedly reducing emissions fail to deliver on their promises, engendering a false sense of achievement and squandering valuable resources.
The phenomenon of carbon-washing increases these challenges, as entities procure ineligible or subpar carbon credits to offset their emissions. This practice undermines the integrity of carbon markets and the efficacy of climate change mitigation endeavours. Besides, carbon-washing threatens to divert investments away from genuine emission reduction projects, impeding progress in achieving net-zero emissions and exacerbating the climate crisis.
The undue influence of wealthy global corporations within the framework of carbon credits is a glaring issue that undermines genuine action. These influential entities wield significant political power and often exploit regulatory loopholes to their advantage. Holding these corporations accountable and ensuring they bear the true cost of their pollution is essential. However, this task is complicated by the fact that many of these corporations are headquartered in affluent nations, which themselves have failed to fulfill their commitments to fund climate initiatives.
While advocating for setting up a universally recognised framework for carbon pricing and offsetting is crucial, scepticism persists regarding its feasibility and effectiveness. Despite acknowledging the importance of governmental support, industrial strategies, and regulatory measures, the historical implementation of such frameworks has been inconsistent. The reluctance of some nations to commit to meaningful climate action adds to these concerns.
While a robust carbon pricing mechanism holds promise, practical challenges and a lack of concrete actions to address systemic issues cast doubt on its ability to deliver transformative change.
While carbon credits may be an approach to reducing overall emissions, they ultimately fall short of delivering substantive results. Carbon credits can be likened to outsourcing physical fitness by paying someone else to work out on your behalf. While it may seem convenient, this approach fails to address the root causes of the problem. Purchasing carbon offsets doesn’t fundamentally reduce carbon footprints, but it creates a false sense of accomplishment while allowing the underlying issue of emissions to persist. In order to truly combat climate change, we must prioritise genuine emission reductions rather than relying on offsetting measures that merely shift responsibility elsewhere.
The author is a policy researcher and corporate advisor.
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