As inhabitants of this planet, we all have a role in helping support nature and climate repair within our means and sphere of influence. Global carbon markets help us mobilise investment in nature and technology-based climate solutions and are an essential part of our race to net zero.
As one of the most relied upon yet least understood chemical elements, carbon is a commodity that connects us all. And as individuals and organisations, we take our place in the carbon cycle by simply existing. Although we’ve disrupted this cycle, we all have a role to play in restoring the balance.
So, how do we achieve this? Changing behaviours and reducing emissions are imperative steps, but more must be done. Recognising that we’ve come too far, we must also invest in repairing and restoring the balance. And we can make a difference by contributing within our means.
Global carbon markets are a tool that lets us place a value on what was once an externality and build it into our economics. In doing so, they enable international cooperation, support corporate net zero commitments and mobilise investment in nature-based and technology-based climate solutions.
And as the race to net zero intensifies, it’s a solution that we all must first understand and then embrace, if we stand a chance to win.
Today, we start with a reminder that carbon is not the villain, explore how we’re all global carbon market participants and challenge some of the misconceptions around the role of carbon markets in the net zero journey.
Carbon is an abundant element and a building block of all life.
It connects us all to nature and each other and exists in many forms, including in the atmosphere, as a compound known as carbon dioxide (CO2).
The carbon cycle is the process in which carbon is naturally converted and redistributed from the ground to the atmosphere and back again. The process occurs in many ways, including weathering of rocks, through fire, the decay of dead plants and animals and photosynthesis.
However, human activities — like the burning of fossil fuels and land change — return carbon to the atmosphere much faster than naturally occurs through this cycle.
The result? An imbalance in the carbon cycle, or a surplus of carbon dioxide in the atmosphere.
Carbon is to thank for much of our innovation and advancement as humans. And what we’ve achieved has been made possible because of it, mainly in the form of fossil fuel based energy supporting our modern life.
As with any unhealthy relationship, however, we’ve become over-reliant. We’ve been using more than our fair share for quite some time now, digging up captured carbon from millions of years ago and using it to fuel our modern lifestyles.
The carbon cycle, which would once redistribute the carbon naturally to maintain a balanced equilibrium, is disrupted. And we’re now using more than can be captured by natural carbon sinks such as our forests and oceans. As a result, we’re creating a net increase of carbon dioxide in the atmosphere, resulting in global warming and the climate crisis.
The urgency of our shared net zero goal means we simply don’t have the time to achieve decarbonisation by reducing emissions alone. There is a reason why we have a global ‘net’ zero target instead of an absolute zero one.
As inhabitants of this planet, we all have a role in helping support nature and climate repair within our means and sphere of influence.
Global compliance and voluntary carbon markets present an opportunity to do this with the necessary haste.
The Australian Government - like the governments of other nations around the world - has committed to strengthening our response to climate change as a party to the Paris Agreement and other international treaties.
Specifically, Article 6 of the Agreement recognises that countries can engage in voluntary cooperation to promote sustainable development and enhance contributions. Article 6.2 emphasises that cooperative approaches like this can extend beyond reducing emissions and provide other advantages, including job creation, technology transfer and food security. The global benefits are clear.
Global Paris Agreement commitments are being translated into (continuously tightening) national emissions regulation policies.
Country-based compliance carbon markets often underpin these policies. In each such system, the government sets limits on the total volume of greenhouse gas (GHG) emissions that certain sectors or businesses can emit. Limits are met through emissions reductions and, if required, the purchase of carbon credits.
There are now 30 compliance carbon markets globally. However, they currently only cover around a fifth of global greenhouse gas emissions.
And so we must do more. Luckily, many businesses are stepping up on a voluntary basis.
The time to act is now. Most business leaders no longer question the “why” and are now focused on the “how” of reaching our goal of net zero.
As a forefront issue for organisations, investors, boards, customers, and employees, some businesses are now acting beyond government-set regulation. But like with any meaningful emissions reduction, this transformative process requires significant investment, and it takes time. And, despite best efforts to reduce their carbon footprint, most organisations will have some level of unavoidable residual emissions.
Investing in nature and technology-based carbon solutions makes sense for business and the planet.
A report by Trove Research found that companies who voluntarily invested in the carbon market were more likely to reduce their carbon emissions concurrently. The incentive to do so is likely, in part, because these organisations had an annual budget expenditure on their carbon credit investment, which they strived to minimise over time.
The role of business and sustainability leaders, therefore, is to act on two fronts: actively revising business processes to reduce Scope 1, 2 and 3 emissions and investing in nature or technology-based carbon removal or avoidance solutions.
As a planet, we simply don’t have the time to wait until all emissions reduction programs are complete. The time to leverage all climate repair tools available to us - including global carbon markets - is now.
As a global issue, individuals play an essential role in reducing our carbon footprint and committing to no more than 1.5 degrees of global warming. These examples demonstrate simple ways our actions can help.
Changing our own behaviours
We all need to consider how simple actions like food waste, travel, and energy-efficient appliances contribute to our carbon footprint. As employees, we can also encourage our employers to recognise the business’s own footprint and put a price on carbon. Businesses that act now, make efforts to learn, and improve their processes will be able to thrive in the low-carbon economy.
Voting with our wallets
We should all try to support businesses with ambitious climate commitments, transparent practices, and open communication regarding their net zero progress whenever possible. And it’s important to remember that participating directly in the carbon market isn’t reserved for corporations. Individuals can purchase carbon credits or pay to offset travel and other expenses if it’s within their means.
Chris Halliwell is the Co-founder and CEO of CORE Markets. He explains global carbon markets are a critical tool in achieving our net zero goals.
“By putting a price on carbon, and building it into our economics and our business decision-making, we can use market systems to drive the outcomes we need, specifically the reduction of greenhouse gas.”
Coupled with a clear emissions reduction strategy, investing early in nature and technology-based climate solutions is one of the most important actions a company can take for the planet and for their business.
According to Chris, many misconceptions about the carbon market cloud people’s attitudes.
“The ultimate one is that buying carbon credits is an excuse to pollute and to continue doing what you're doing without actually driving any real transformation. But we know that companies that participate in the voluntary carbon market are also more likely to make meaningful emissions reductions. This is partly because they place an internal price on carbon, helping the business recognise carbon as a cash expenditure item, an expense most businesses would want to see reduce over time.”
However it is important to recognise that there are issues with some of the legacy and dated projects in the industry. These projects were often scoped and created before the market frameworks, standards and technology we have now. A key issue is around the concept of ‘additionality’, which is a core key principle that underpins carbon credit quality. This means that in order to ‘count’, a carbon credit must deliver incremental benefit, and further climate reduction impact. Not just a benefit that would have likely occurred in the first place.
But the industry has since evolved significantly.
“I am yet to meet a carbon project developer that operates from a place of undesirable motivation. But even if they did, we’re not in a world where you can get away with that. There is so much advancement in creating and improving standards, frameworks and systems - especially when it comes to digital capability, human capital, innovation and investment. The game has changed and the decarbonisation and nature repair industry has moved, and continues to evolve, at lightning speed,” says Chris.
More must be done for businesses to effectively contribute to our global net zero target. While meaningful emissions reduction should be a priority, this must happen in parallel with investing in other nature and technology-based carbon solutions. It makes financial sense, as well as climate sense.
“In the context of climate science and aligning with a 1.5-degree target in 2030, we need internal emissions reduction and investment in carbon avoidance and removal projects to happen in parallel and as fast as possible,” says Chris.
“We simply don’t have the technology or the time for any one business to say ‘Let's just try to reduce as much as possible internally before we take a look at other external initiatives’. The consequence of the additional cost and time of doing things in sequence means that we will collectively fail.”
Carbon markets present an opportunity to amp up our climate repair efforts and have a fighting chance at achieving our net zero goals. And whether acting as individuals within the businesses we work for or the governments we lobby for change, we must act now.
Coupled with changing behaviours and reducing emissions, it has never been more critical to invest in high-quality climate solutions and contribute to restoring balance to the carbon cycle. The stakes are simply too high.
Get in touch with us and take the first step.
Important reminder: We’re all global carbon market participants