Can Carbon Credits Be Self Monitored?

Carbon Credits

Carbon credits are an important tool for channeling money to conservation and sustainable development projects that reduce climate emissions while allowing companies to make claims of being carbon neutral or even net zero. But critics argue that if done poorly, they can fail on both counts and be used as a tool for greenwashing. In this week’s Radio Davos podcast, we hear from an expert who is drafting a rulebook for voluntary carbon offsets and from a forest in Indonesia that is being protected from slash-and-burn agriculture by selling credits to fund the project.

Carbon offsets are bought and sold in the voluntary marketplace to compensate for companies’ own emissions. But they are not subject to the same rules and regulations as regulated markets, and market participants have no strong incentives to ensure quality. Buyers may be unaware that the underlying project has not been independently verified and could include activities such as unsustainable deforestation or the use of biomass for energy. In addition, there are many different registries and standards for the issuance of carbon.credit, which allows developers with low-quality projects to shop around for a standard that will accept their product.

Despite the challenges, there is hope that the voluntary carbon market can improve its oversight of carbon projects and create a more robust and credible process for verifying and issuing carbon credits. A key step is the measurement, reporting and verification (MRV) system that is required to measure and confirm the actual emissions reductions achieved by a mitigation activity and ultimately result in payments for those emissions reductions.

Can Carbon Credits Be Self Monitored?

To do that, a series of steps need to be taken from the time an activity is undertaken and measured to the point when the results are reflected in payments made. This involves a wide range of data collection, from tracking the operation of clean cookstoves and reading electricity meters to monitoring changes in tree cover and forest restoration efforts.

In addition, local communities are often involved in these processes as they are the ones who know and understand their own environment. This is a complex and challenging task, but one that is essential if the voluntary market is to become a credible and effective tool for mitigating emissions and addressing global climate change.

Without a rigorous protocol for verifying and monitoring carbon reductions, companies will be tempted to ease up on their own commitments to reduce their own emissions by buying credits from projects elsewhere. With a strong set of guardrails and standards in place, however, the potential of carbon offsets to accelerate the pace of carbon reductions and help achieve the global goal of net zero emissions is firmly within reach.