Carbon Credits With Co-Benefits: A Clearer Conscience, But Not A Cure-All

Carbon credits have proven popular with firms looking to offset their GHG emissions. As the market develops, some carbon credit providers are now offering premium credits that come with co-benefits: additional positive impacts resulting from carbon offset projects beyond direct emissions mitigation. EY has predicted that the volume of carbon credits needed to meet climate targets could be 40 times today’s current volume, which could drive prices up to $150 per tonne by 2035. With prices for basic carbon credits already so high, it may seem unlikely for buyers to spend more for a product that surpasses core offsetting requirement. However, proponents of premium carbon credits with co-benefits argue that they provide significant additional value beyond emissions reduction and can help organizations achieve broader sustainability goals.

Carbon credit providers claim that by paying for premium credits, firms can help fund projects that have a positive impact on both the environment and society.  Research published by the International Carbon Reduction and Offset Alliance (ICROA) has shown that every tonne of CO2 offset can yield up to $664 in additional economic, social and environmental benefits, alongside the inherent emissions reduction. Because of this, co-benefits have become a deciding factor for some organizations when selecting offset projects. However, despite the admittedly valuable contribution these enhanced carbon credits schemes can make to sustainability efforts, firms should not rely on them for addressing climate change. Instead, they should be treated as a supplementary tool that can be used alongside other efforts to reduce emissions.

It's essential to carefully evaluate a specific project and its intended outcomes before purchasing carbon credits with co-benefits. Not all projects with co-benefits are equal, and some may even have negative consequences. Firms should therefore prioritize transparency and traceability in the sourcing and certification of carbon credits to ensure that the projects they support have meaningful and measurable impacts. Given the potential risks and uncertainties involved, it is crucial that organizations exercise due diligence in selecting and verifying the carbon credit projects they support, to avoid the risks of reputational damage and ensure that their efforts drive positive impact.

Maya Hilmi

Maya is a Net Zero, Climate Risk Analyst. She is currently specialising in carbon management, ESG regulations, and identifying climate risk solutions. Prior to joining Verdantix, Maya interned at Cardano Advisory where she gained experience in covenant, sustainability, and pensions corporate finance matters. Maya holds a master's degree in Conflict Resolution in Divided Societies with Distinction from King's College London, and an undergraduate degree in International Relations from SOAS, University of London.