The end of climate indulgences has come

A few days ago, the NGO responsible for overseeing the carbon offset market — which allows companies to buy credits to neutralize their greenhouse gas emissions — announced that it wants to exclude from this system all projects funding renewable energy.

The Integrity Council for the Voluntary Carbon Market (ICVCM) is striking hard. With a single stroke of the pen, this organization removes from the market a volume equivalent to 32% of current projects. Its reasoning? Except in rare cases, investments in renewable energy are now profitable everywhere in the world. And therefore finance themselves. They should therefore no longer be included in the voluntary carbon offset market. All the more so because the construction of a solar farm does not necessarily lead to the closure of a coal plant.

A radical response

The measure under consideration is a radical response to the crisis of confidence that is eating away at the offset market. Investigations by journalists and academic studies have revealed that a very large majority of carbon offset programs were in fact sham. Not only is the financing of renewable energy projects no longer necessary, but several investigations have shown that certificates were sold to protect forests that were not threatened with deforestation.

More seriously, a few days ago, Brazil's Minister of the Environment, Marina Silva, raised the alarm about the actions of criminal organizations that had seized funds from certificates issued on lands that did not belong to them.

Few real effects

The record of the voluntary carbon offset market is not only suspect but, to be honest, catastrophic. A study by the Swiss Federal Institute of Technology Zurich (ETH Zurich) and the University of Cambridge estimates that only 12% of the purchased offset certificates result in a real reduction of emissions.

No wonder that companies like Air France, Disney, Volkswagen and even Swisscom (which bought a forest in Germany) are accused of greenwashing. Others are being sued for false advertising, particularly those that have applied a climate neutrality label to their products based on the principle of offsetting.

The European Commission and the U.S. SEC (Securities and Exchange Commission) have promised to intervene to restore the credibility of a market that consultant McKinsey saw reaching $50 billion by 2030. If it reached $2 billion in 2022, it is now in sharp decline, falling to $723 million in 2023. Some experts even think it will not recover from the scandals.

But obviously, these new codes of conduct are insufficient to restore trust.

Many companies, such as Nestlé, have indeed withdrawn from the market, fearing being tainted by the scandals. The Zurich agency South Pole, one of the main companies active in certifying carbon offset projects, was forced to launch a new label last year, in the wake of decisions taken by the Voluntary Carbon Markets Integrity Initiative, the NGO launched at the COP in Glasgow. But obviously, these new codes of conduct are insufficient to restore trust.

A very deep crisis

Make no mistake, the crisis is not only normative. It is the very principle of carbon offsetting that is at issue. As Malte Toetzke, a researcher at ETH Zurich, explains on his blog, "the vast majority of projects aim to avoid additional emissions but do not offset actual emissions".

Make no mistake, the crisis is not only normative. It is the very principle of carbon offsetting that is at issue.

It would be preferable to focus on projects that concretely remove CO₂ from the atmosphere, but that costs much more. The Swiss company Climeworks charges between $600 and $1000 to remove one ton of CO₂ from the atmosphere. In comparison, avoidance projects, like those based on renewable energy installations, cost only… $2 per ton. On their websites, airlines offer to offset a transatlantic flight for a few dozen francs extra. Yet it has been shown that a plane ticket promising the real and proven removal of the CO₂ emitted during the flight would carry an extra cost of… 3500 francs, if that were done according to a rigorous method.

As Professors Augustin Fragnière (UNIL) and Philippe Thalmann (EPFL) demonstrated in their publication "For a science-based decarbonization strategy", carbon offsetting cannot serve as a substitute for real reductions in CO₂ emissions. At best, it can complement companies' efforts. Or finance negative emissions that will be necessary to offset emissions that cannot be avoided.

And now, what will happen? If actors in the voluntary carbon offset market manage to restore confidence, its size will shrink at first. And prices will rise sharply, due to the new rules. It is the end of the climate indulgences that allowed polluters to buy a clear conscience for peanuts.

This column also appeared in the pages of 24 Heures and Tribune de Genève.

This article has been automatically translated using AI. If you notice any errors, please don't hesitate to contact us.