Chiara Liguori says the richest and biggest polluters must be targeted to finance the green transition, while Steve Brown says there is no sign of a transition away from fossil fuels. Plus Philippe Delacote, Tara L’Horty, Anna Creti and Andreas Kontoleon on flaws in carbon credit markets.
Philippe Delacote, INRAE Research director & Climate Economics Chair, Tara L’Horty, PhD candidate at INRAE & Climate Economics Chair, Anna Creti Professor, Université Paris-Dauphine PSL & Climate Economics Chair, Andreas Kontoleon, Professor of environmental economics and public policy, University of Cambridge.
Patrick Greenfield’s article highlights how states in Cop29 agreed to establish new common rules for the development of carbon credit markets (24 November). Yet several persistent challenges undermine the credibility of these reformed markets. We believe two major areas of improvement must be addressed to restore this credibility. The first is greater transparency, which is is one of the methodological requirements of Article 6.4 accepted at COP 29. It encourages transparency in data sources, calculations and monitoring methods used to establish estimates, including those related to the reference scenario, the project’s additionality compared to its effectiveness in reducing emissions, and potential carbon leakages. The supervisory body for Article 6.4 is responsible for ensuring transparency in certification methodologies. But efforts must go further. It is essential to disclose corporate transactions of carbon credits, as well as the distribution of revenues throughout the value chain. Such transparency would allow better evaluation of the real impact of offset projects and address accusations of “greenwashing”. Solutions such as digital platforms, regulations facilitating carbon credit tracking, publication of exchange prices, and standardised information could fulfil this critical need for transparency. The second area to be addressed is that the reliability of reference scenarios used to calculate credits must be supported by robust statistical methods. These would allow for more precise reference scenarios, thereby strengthening the robustness and legitimacy of carbon credits. However, these methods increase risks for project developers and may reduce the supply of credits. At the same time, companies appear to lack incentives to prioritise high-quality credits. It is therefore crucial to implement better evaluation and clearer labelling of high-quality credits.
The lack of credibility in carbon credits is not inevitable. Cop29 is a step in the right direction, but it is imperative to intensify transparency requirements and deeply reform evaluation methods to restore full legitimacy to these mechanisms.