The world has eight more years to cut greenhouse-gas emissions (GHGs) by 50% to meet targets set by the Paris agreement. By 2050, GHG levels must be brought down to net zero. Carbon credits have become a popular mechanism to help companies, institutions and governments attempt to “keep 1.5 alive” when direct decarbonisation doesn’t deliver. But can carbon credits—and voluntary carbon markets in general—also contribute to sustainable-development outcomes like protecting and restoring nature, or supporting the health and well-being of local communities?
Organisations are responsible for reducing GHGs from their own operations and supply chain, but where the slashing of emissions is not immediately possible, carbon offsets—achieved through purchasing carbon credits linked to projects that remove carbon from the atmosphere—come in to fill the gap.
The carbon marketplace is already booming. In 2020, for example, buyers offset carbon credits for around 95m tonnes of carbon-dioxide equivalent (MtCO2e), more than double the figure in 2017. The voluntary carbon market in particular has reached record highs, and in 2021 was valued at more than US$1bn. The Taskforce on Scaling Voluntary Carbon Markets (TSVCM) estimates that demand for carbon offsets will increase 15-fold by 2030 and by a factor of 100 by 2050. The market for carbon credits could reach US$50bn by 2030.
The challenge for voluntary carbon markets today is no longer finding credit buyers. We need to guide the markets to deliver the highest quality possible, with the greatest benefit possible for the planet and communities.
Prices of carbon credits have been driven up by a tightening supply and an increased interest in high-quality credits that have additional climate and community benefits, though these are harder to verify. Average credit prices per tonne from forestry and land-use projects that reduce emissions or remove carbon have been steadily rising, from US$4.33 per credit in 2019 to US$4.73 in 2021. Meanwhile, prices for waste-disposal credits, such as landfill methane capture, rose by 42% in 2021 compared with the previous year.
“The challenge for voluntary carbon markets today is no longer finding credit buyers,” Michael Jenkins, CEO of the non-profit group Forest Trends, said in a statement. “We need to guide the markets to deliver the highest quality possible, with the greatest benefit possible for the planet and communities.”