The carbon credits industry is currently navigating a survival period characterized by low demand for all types of carbon credits, not just CDR-specific ones. Following the latest report by the SBTi, the market is experiencing new uncertainties that are likely to keep demand subdued for some time.
The Renewable Energy Certificate (REC) market, once oversupplied, is now melting. Given its decline, avoidance and reduction credits are also struggling. Registries face compliance issues, economic uncertainties push corporations to prioritize cost-cutting over green investments, and REDD+ projects face credibility issues. Additionally, NBS projects are scrutinized for over-issuance issues.
Energy could be obtained through new investments, reducing reliance on RECs. Similarly, if companies genuinely reduce emissions (which would be the best option) instead of offsetting them, carbon credits might face the same fate as RECs. However, while energy can transition through grid changes and installations, what about other emitting aspects like raw materials, packaging, logistics, and waste?
Thus, offsetting should be seen as a tool to buy time until full decarbonization infrastructures and approaches are developed. If the perception persists that avoidance and reduction credits are not valuable tools, as Robert Höglund mentioned, the path to massive growth expectations might end here.
At the Carbon Forward UK 2023 conference, an SBTi representative stated, “SBTi is positioned as a target validator, so the quality or validity of carbon credits is not exactly within our purview.” This response is understandable; perhaps a different organization could be established to validate offsets under specific conditions, fostering cross-understanding and cooperation. The VCMI (Voluntary Carbon Market Integrity initiative), The Integrity Council for the Voluntary Carbon Market (ICVCM), Science Based Targets initiative, CDP, Greenhouse Gas Protocol (GHG Protocol), and the We Mean Business Coalition announced a shared objective to enhance carbon market integrity during COP28, which was promising. Although no developments have been heard so far, such declarations and their potential outcomes are more critical than ever for carbon markets today.
The issue remains: how will the CDR space establish itself amidst these realities? It is challenging for CDR to remain unaffected by the current uncertainties in the VCM. Carbon dioxide removal must be seen and positioned differently from energy credits and avoidance and reduction credits. This is not because avoiding or reducing new emissions is devalued, but because if we do not urgently start reducing the accumulated carbon concentration in the atmosphere, it will be too late for everything.