Carbon Offsetting With A Conscience: The Pros And Cons Of Credits With Co-Benefits

Carbon Offsetting With A Conscience: The Pros And Cons Of Credits With Co-Benefits

Carbon credits have become a popular tool for firms looking to offset their GHG emissions. However, some carbon credit providers are now offering premium credits that come with co-benefits – positive impacts, other than direct GHG emissions mitigation, resulting from carbon offset projects. These co-benefits can range from biodiversity conservation to poverty reduction, and providers argue that they justify a higher price tag. But is this approach the right way to go?

Ernst & Young (EY) has predicted that the volume of carbon credits needed to meet climate targets could be 40x that of today’s volume, which will drive prices up to as much as $150 per ton by 2035. With prices so high, one might wonder why a buyer would want to spend even more for a product that surpasses the core offsetting requirement. However, proponents of premium carbon credits with co-benefits argue that they provide additional value beyond just emissions reductions, and can help organizations achieve broader sustainability goals.

Verra, a standard for the certification of carbon emissions reductions, adheres to the CCB Standards, which lay out the rules and requirements projects must follow to be certified. The standards stipulate contributions to the welfare of the climate, communities and biodiversity. Providers of carbon credits will therefore need to demonstrate the parameters of their carbon removal projects – primarily as these affect the sustainable economic and social development of communities. South Pole, a sustainability solutions provider, offers carbon credit projects that facilitate climate action across Europe, Africa and Asia, in alignment with the Paris Agreement and the UN Sustainable Development Goals (SDGs).

Research published by the International Carbon Reduction and Offset Alliance (ICROA) has shown that every tonne of CO₂ offset not only results in carbon emission reductions, but can yield up to $664 in additional economic, social and environmental benefits. For example, a renewable energy project might not simply reduce emissions, but also create jobs and improve energy access for communities. Carbon credit providers claim that by paying a premium for these credits, firms can help fund projects that have a positive impact on both the environment and society. From a demand lens, co-benefits have in some instances become a deciding factor for organizations when selecting offset projects.

Critics of credits with co-benefits argue that firms may use these premium credits as an excuse to continue emitting GHGs – in essence, covering up a failure to make progress against a difficult goal (decarbonization) with success in fundamentally unrelated sustainability goals. Some experts believe that the focus should be on reducing emissions first, and then on investing in co-benefits separately.

So, who's right? The answer is somewhere in between. While carbon credits with co-benefits can provide a valuable contribution to sustainability efforts, firms should not rely on them for addressing climate change. Instead, they should view them as a supplementary tool that can be used alongside other efforts to reduce emissions.

Moreover, it's essential to carefully evaluate a specific project and its outcomes before purchasing carbon credits with co-benefits. Not all projects with co-benefits are equal, and some may have negative consequences. Bloomberg Green’s recent report uncovered that BP has been purchasing carbon credits from numerous Mexican villages at shockingly low prices – raising concerns about the transparency of the carbon credit market, as well as the exploitation of communities and residents who are unaware of the true market price of the credits they are selling. Although such carbon credit programmes are intended to strengthen social and economic wellbeing, this report found that, in some communities, residents worked for years conserving existing forests and replanting, before receiving their first payment – a sum roughly equivalent to one week of work for other conservation programmes. 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.

Ultimately, carbon credits with co-benefits can provide an additional value proposition for firms looking to offset their carbon footprint and strengthen their reputation. Given the potential risks and uncertainties involved, it is crucial that firms tread with caution – they must 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.