Companies making bold claims about achieving Net Zero have recently come under intense scrutiny. Major corporations like Shell, Gucci, McKinsey have been accused of investing in carbon credit projects that fail to deliver real emission reductions, or worse, harm local communities.
90% of projects certified by Verra, a major carbon standard system, do not represent real emissions reductions.
Guardian
70% of carbon-offset projects have caused harm to Indigenous people and local communities.
Carbon Brief
These stories have cast a shadow over the voluntary carbon market, making businesses wary of engaging in carbon offsetting. Reacting to this, governments and think tanks are proposing major reforms in 2024 to restore trust and integrity in the market.
Let’s explore these developments, understand why they matter, and see how they can help your company be on the right side of history by making a genuine positive impact.
1. US Government’s Support for Carbon Credit Reforms
In May, the government released a policy document outlining principles for high-integrity carbon credits. These guidelines ensure that carbon credit projects:
- deliver real emission reductions
- avoid harming local communities
- encourage companies to decarbonize their operations before buying offsets
The principles also support using carbon credits to offset Scope 3 emissions. These are indirect emissions from a company’s value chain, including suppliers and product use.
The government’s principles emphasize the need for high-integrity voluntary carbon markets (VCMs). VCMs can speed up decarbonization by providing reliable revenue streams to various projects, including nature-based solutions.
The principles also highlight the importance of:
- Avoiding environmental and social harm
- Supporting co-benefits like biodiversity and sustainable development
- Ensuring transparent and inclusive benefits-sharing
2. IPCC Report Says Tropical Forests Have Biggest Potential
The Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report reaffirms a key finding. Reducing deforestation in tropical regions has the highest climate pollution-reduction potential of all land, ocean, and agriculture-based climate actions.
The report also confirms that investments in nature make up three of the top five most cost-effective approaches to limiting global warming
This finding underscores the critical role that forest carbon credits can play in climate action.
By investing in projects that protect and restore forests, companies can:
- Achieve significant emission reductions
- Support biodiversity and local communities
3. SBTi Proposes Scope 3 Reductions to Fight Climate Change
The Science Based Targets initiative (SBTi) has proposed including carbon credits for abatement purposes in Scope 3 emissions. This proposal aims to address the indirect emissions that occur throughout a company’s value chain. The company does not directly produce these emissions, but they result from activities the company does not own or control.
Scope 3 emissions include:
- Upstream emissions (supplier emissions, transportation and distribution)
- Downstream emissions (use of sold products, end of life treatment)
- Emissions from suppliers for promotional materials, events, digital services, etc.
The SBTi’s proposal, if implemented with integrity, could create a path to net zero. It would deliver much-needed funding from the private sector for nature and communities on the frontlines of climate impact. This approach enables corporations to set a price on emissions on their balance sheets, creating financial incentives to reduce their value chains’ footprint.
When rooted in rigorous science and implemented well, forest carbon projects can:
- Create new livelihoods in rural areas
- Keep wildlife out of harm’s way
- Promote food and water security
Our project in Tanzania is a great example of this.
4. New State Carbon Reporting Laws For Carbon Offsets
California’s Climate Accountability Package, which includes SB 253 and SB 261, requires companies with over $1 billion in revenue to report their full GHG inventories. This includes Scope 1, 2, and 3 emissions.
Illinois mirrored this with their own Illinois Climate Corporate Accountability Act. It will need companies in the state to verify and disclose their emissions starting in 2024.
Other states are expected to pass similar laws soon. New York, Colorado, Minnesota, and Michigan are already taking significant steps towards stricter climate regulations.
Broad Impact on All Businesses
It’s not just billion-dollar companies that should be concerned. California has set a precedent affecting businesses of all sizes.
In October last year, California passed the Voluntary Carbon Market Disclosure Rule. This act requires all companies involved in the marketing, selling, and purchasing of voluntary carbon offsets to disclose detailed information about the projects.
As more states follow California’s lead, companies across various sectors should expect similar regulations.
How Companies Should Approach Carbon Credits
To leverage these new policies and insights, companies should:
- Assess Their Emissions: Conduct a thorough assessment of their Scope 1, 2, and 3 emissions. Identify areas where carbon credits can be most effectively utilized.
- Invest in High-Integrity Projects: Choose carbon credit projects that meet high standards of integrity, ensuring real and measurable reductions.
- Engage with Stakeholders: Work collaboratively with suppliers, local communities, and other stakeholders. Implement decarbonization activities and ensure inclusive benefits-sharing.
- Disclose Transparently: Publicly disclose the nature of purchased and retired credits. Provide enough detail for stakeholders to check the integrity of the credits.
How ForestNation Can Help
At ForestNation, we offer a unique approach to help companies invest in high-integrity forest carbon credits. Here’s how:
- 79% of Revenue for Tanzania: With our nature-based climate change solution, 79% of the gross revenue stays in Tanzania. This creates sustainable livelihoods for local people and governments. Your investment has a significant positive impact on both people and the planet.
- A New Way To Verify Credits: Our carbon credits are the most verifiable and data-backed on the market. Independent validators on Open Forest Protocol’s blockchain-backed platform verify and challenge the accuracy of our data. This provides you with peace of mind.
- Transparency: We ensure transparency and integrity in the carbon market. Every climate action is traceable and impactful. This commitment to transparency builds trust and confidence among all stakeholders.
- Nature-Based Carbon Credits: Our carbon credits support local farmers, enhance food production, restore degraded lands, enrich soil nutrients, advance agroforestry, reduce soil degradation, and revitalize ecosystems and habitats. These projects mitigate climate change and promote sustainable development.
- Communication Strategy: We help you share your story with media and tools for powerful sustainability messaging to showcase your impact. This enhances your brand’s reputation and engages your audience in your sustainability journey.
Learn more about our carbon credits project and get in touch to understand how it works.
Frequently Asked Questions on Forest Carbon Credits
Forest carbon credits are a form of offset credit that represent a reduction or removal of carbon dioxide from the atmosphere through forestry practices such as reforestation and improved forest management. Purchasing forest offsets helps companies offset their carbon footprint by funding projects that enhance carbon sequestration, thus playing an important role in reducing emissions.
Forestry plays a crucial role in carbon offset programs by providing a natural method for carbon storage. Through activities like reforestation, improved forest management, and forest conservation, forests can absorb large amounts of carbon dioxide, offsetting carbon emissions from other sources and enabling companies to achieve carbon neutrality.
Companies can calculate their carbon footprint using carbon accounting methodologies that measure their total greenhouse gas emissions. Based on these calculations, they can determine the number of offset credits needed to neutralize their impact on climate change. Carbon registries provide verified carbon standards to ensure the credibility of the carbon offsets.
The voluntary market is essential for forest carbon credits because it allows companies to take proactive action on climate without waiting for regulatory mandates. By participating in the voluntary market, companies can invest in forest conservation and reforestation projects, generating credits that help offset their emissions and promote sustainable forest management practices.
Carbon credits are verified through independent audits and accredited by third-party organizations like the Verified Carbon Standard (VCS). These verifications ensure that the offset projects are real, additional, measurable, and permanent. Involving reputable project developers and adhering to specific methodologies also helps maintain credibility and prevent scams in the offset market.
Specific project types that generate forest carbon credits include reforestation, afforestation, improved forest management, and forest conservation. Each project type focuses on enhancing carbon storage and sequestration, thereby reducing carbon dioxide levels in the atmosphere and generating valuable carbon offset credits.
Forest carbon credits have a positive impact on climate change by enabling companies to reduce their net carbon emissions. Projects such as reforestation and the protection of existing forests enhance carbon sequestration, mitigate carbon losses, and sustain valuable carbon stocks. By promoting forest management and conservation, these credits help reduce the overall greenhouse gas concentration in the atmosphere, thereby mitigating climate change.
