The voluntary market for carbon credits has been haunted by low quality projects and greenwashing. Prices for the credits, which enable companies to offset their own carbon emissions, have plummeted over the past couple of years as buyers hit pause.
Such credits are an imperfect solution for reducing greenhouse gases, but are becoming a vital source of funding for sustainable development.
By generating additional revenue from carbon credit sales, innovative startups can lower prices for products such as clean cookstoves and solar-powered irrigation that improve lives in emerging markets. The credits are helping smallholder farmers adopt regenerative agriculture practices while increasing yields and boosting livelihoods.
“Our starting point is the impact that these solutions are having to people in poverty, the impact that clean cooking solutions are having to low-income communities, the ability for them to save more money so that they can invest it in education or in their community development,” said Amrita Bhandari of Acumen, which hosted a discussion at Climate Week NYC on how carbon markets can finance social impact.
“There is a co-benefit to planet.”
Carbon markets, imperfect as they are, are already playing a role in building an impact-driven economy where the value is tied to real, measurable outcomes, Bhandari said.
The discussion, at Acumen’s Tribeca offices, highlighted the need for stronger carbon crediting standards and transparency. To unlock carbon finance for impact, panelists suggested reducing registry costs for startups and projects, providing technical assistance and mobilizing philanthropic support to stabilize carbon credit prices.
“There’s a real role for philanthropic capital to come in and bridge some of those uncertainties,” said Jonathan Cedar of clean cookstove maker and Acumen investee BioLite. “There’s a huge role to just take that 10% risk out and allow us to start operating much more quickly.”
Cedar was joined by Daniel Sadik of Carbon Solutions Group, James Cahalin of Boomitra and Nick Jones of Shell Foundation.
A pilot project with Kenya’s SunCulture supported by the Shell Foundation and BII enabled the company to lower prices for its solar-powered irrigation systems by up to 40% and expand access to smallholder farmers. “We’re working towards something that could be a replicable model,” said Shell Foundation’s Jones.
Market moves
A wide range of stakeholders, from the US government to the Integrity Council for the Voluntary Carbon Markets, are working to strengthen standards and guardrails that have haunted early carbon credit activities.
At COP28, Former US climate envoy John Kerry laid out plans for an Energy Transition Accelerator that would generate revenue from selling carbon credits to generate critical funding for climate adaptation and mitigation in emerging markets. This week, Meta and Netflix joined the long list of corporations backing the ETA.
Corporations, including Big Tech companies looking to offset their ballooning data center emissions, have supported nature-based and engineered approaches to carbon removal.
This week, for example, corporations including Amazon, Bayer and H&M announced they would collectively buy $180 million worth of carbon credits, or 5 million credits at $15 per credit, to protect the amazon rainforest.
In a recent assessment of 4,000 global carbon offset projects by MSCI, none received the top AAA rating. The bulk were rated BB or less. But MSCI pointed to “an emerging trend toward higher-priced, higher-quality projects in the offtake market, particularly for nature-restoration projects.”
