Companies that buy carbon credits are doing more to tackle their climate footprints than companies that don’t, a new report finds.
The report, released Tuesday by Ecosystem Marketplace, an environmental finance nonprofit, is the most detailed snapshot yet of how companies are confronting climate change in their operations, including through carbon credits.
By buying carbon credits, companies and individuals can reduce their carbon footprint by preventing emissions elsewhere. For example, credits can generate funds to pay for the protection of a specified area of natural forests, which remove and store climate-warming carbon from the atmosphere. Yet critics have called out carbon credits as a license for companies to pollute.
The new report dispels that notion. It analyzed the voluntary carbon market transactions and corporate climate change disclosures of more than 7,400 companies with a combined US$ 110 trillion in assets and found that not only are companies that invest in the carbon market nearly twice as likely to be reducing their carbon emissions year over year, they are also outperforming their competitors in addressing climate change in their supply and value chains.
Many conservationists, who have long espoused carbon credits as a way to both address climate change and protect nature at the same time, were encouraged by the report.
“We are in a race against time, and the global scientific consensus is clear: We must invest in nature to combat climate change,” said Conservation International CEO M. Sanjayan. “Carbon credits offer an immediate way for businesses to reduce global emissions, and today's report reaffirms what we've long known — that carbon credit buyers tend to be leaders in taking climate action. Those criticizing them or lagging on the sidelines should take note."
Key findings from the report:
- Nearly 60 percent of carbon credit buyers reported lower year-over-year carbon emissions, compared with companies that do not participate in carbon markets.
- Companies that buy carbon credits are more than three times as likely to have science-based climate targets than companies that don’t.
- They are more likely to disclose their emissions, including so-called Scope 3 emissions — emissions associated with consumers’ use of companies’ goods and services, and which are among the most difficult to abate.
- Lastly, carbon credits represent a tiny share of corporate greenhouse-gas emissions: Rather than a way to “buy their way” out of their climate footprint, as many critics have characterized them, the carbon credits that companies buy represent just over 2 percent of their total footprint.
In the wake of a report last month that found the world is falling well behind its climate goals, the new findings could provide a shot in the arm for forest-based carbon credits. Without them, experts said, the world has no chance of keeping climate change below a “safe” threshold until fossil fuels can be phased out.
“We’re not going to stop flying airplanes,” Bronson Griscom, a Conservation International climate expert, told Conservation News last year. “We all know people are still going to fly. We all know that there is not an electric airplane available. So: How do you deal with that? You deploy things that are feasible and that we can actually afford, such as asking folks who fly to pay for restoration of ecosystems to remove more carbon than the airplanes emit.”
The Ecosystem Marketplace report also indicates that the market has seen an uptick in demand for pricier, higher-quality carbon credits, suggesting companies are willing to pay more to ensure and maximize their climate impact.
In 2022, the voluntary carbon market was valued at US$ 2 billion, and is expected to grow to as high as US$ 100 billion by 2030.
Further reading: A scientist’s view: Critics of carbon markets miss the mark
Bruno Vander Velde is the managing director of content at Conservation International. Want to read more stories like this? Sign up for email updates. Also, please consider supporting our critical work.