Abstract
ABSTRACT On the one hand, a large number of companies have committed to achieve net zero emissions and many of them foresee to offset some remaining emissions with carbon credits, suggesting a surge of future demand. Yet, the supply side of the voluntary carbon market is struggling to align its business model with the new legal architecture of the Paris Agreement. This article juxtaposes these two perspectives. It provides an overview of the plans of 482 major companies with some form of neutrality/net zero pledge and traces the struggle on the supply side of the voluntary carbon market to come up with a viable business model that ensures environmental integrity and contributes to achieving the objectives of the Paris Agreement. Our analysis finds that if carbon credits are used to offset remaining emissions against neutrality objectives, these credits need to be accounted against the host countries’ Nationally Determined Contributions (NDCs) to ensure environmental integrity. Yet, operationalizing this approach is challenging and will require innovative solutions and political support. Key policy insights There is a growing mismatch between the faith placed in carbon credits by private sector companies and the continued quest for a common position of the main suppliers of the voluntary carbon market. The voluntary carbon market has not yet found a way to align itself with the new legal architecture of the Paris Agreement in a credible and legitimate way. Public policy support at the national and international level will be needed to operationalize a robust approach for the market’s future activities.
Highlights
Since the adoption of the Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCCC) in December 2015, the number of major companies that have put forward pledges to achieve net zero emissions has been growing significantly (Black et al, 2021)
These pledges could have a strong impact on the voluntary carbon market, a market which in its most original form allows individuals or organizations to buy carbon credits issued by privately organized certification schemes to voluntarily offset their carbon footprint for a multitude of reasons, including but not limited to ethical considerations
We have outlined how the context of the voluntary carbon market has changed with the adoption of the Paris Agreement and we have traced the struggle of the main actors in dealing with these changes in order to reposition the voluntary carbon market
Summary
This article explores the voluntary carbon market understood as comprising all transfers of mitigation outcomes for non-compliance purposes. Our analysis aims at filling this void by presenting the different approaches currently discussed and by tracing the discourse within the voluntary carbon market on how to deal with the Paris Agreement. The contribution of our analysis should be seen in the context of a renewed interest in the voluntary carbon market, where there is an increased need of investors for advice An indication of this need is the more recent publication of guidance documents that are to assist companies and organizations seeking to buy carbon offsets (Broekhoff et al, 2019; Schneider, Healy, et al, 2020).
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