Voluntary carbon markets have contracted for the first time in at least seven years. This decline can be attributed to several factors, including companies like Nestle and Gucci reducing their carbon credit purchases, as well as studies revealing that some forest protection projects did not achieve the promised emissions reductions.
Preserving forests is vital for global climate goals, making the contraction of voluntary carbon markets concerning. It’s particularly problematic for poorer nations that rely on funds from multinational companies for climate mitigation projects.
Kenya had ambitions of becoming a hub for carbon offset trading through initiatives like tree planting to mitigate greenhouse gas emissions.
Data from BloombergNEF and Ecosystem Marketplace shows that demand for carbon credits is on the decline in 2023. The number of credits used by companies fell by 6% in the first half of the year, marking the first decrease in seven years.
Companies like Gucci and Nestle have not disclosed their spending on carbon offsets, but they have either reduced or stopped using them in favor of other net-zero strategies.
The quality of carbon credit schemes has become a concern, with some studies suggesting they may not deliver the expected emissions reductions. This has led companies to become more selective and opt for higher-quality, albeit more expensive, credits.
Carbon credits have long faced criticism for allowing companies to appear climate-conscious without genuinely reducing emissions. As a result, prices for carbon offsets have plummeted in recent months.
Regulators and advisory bodies are also imposing limitations on carbon credits, with the EU Parliament planning to ban environmental claims solely based on offsetting schemes and draft carbon reporting standards requiring companies to report emissions before subtracting carbon credits.
Companies are increasingly wary of carbon credits, as they fear legal action and accusations of greenwashing. Some are choosing to develop their projects rather than relying on external providers.
These developments indicate a shifting landscape in voluntary carbon markets as companies reassess their carbon offset strategies amid concerns about effectiveness and credibility.
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