Buying carbon credits doesn’t discourage corporate decarbonisation, study finds

The UK, despite its global standing, ranks among the most nature-depleted nations.

This is based on a report published by Ecosystem Marketplace, an undertaking led by the non-profit organisation Forest Trends, using CDP Climate Change data from 2022.

In 2022, 7,415 companies publicly disclosed their activities to the CDP Climate Change program, mainly covering their actions in 2021.

Among these, 822 companies (11%) participated in voluntary project-based carbon credits as buyers (736) or originators (86), while 55 companies used project-based carbon credits solely for compliance purposes.

According to the findings, 59% of buyers in the VCM reported a decrease in gross emissions on an annual basis due to reduced emissions and/or increased utilisation of renewable energy, while this reduction was reported by only 33% of businesses that were not engaged in carbon markets.

The research further notes that VCM buyers exhibit a considerable tendency towards supplier engagement strategies, with a 1.3-fold higher likelihood of adoption compared to non-buyers, while also allocating a greater proportion of resources to emissions reduction activities.

Additionally, carbon credit buyers demonstrate an inclination towards science-based targets for addressing climate change. The study found that they are 3.4 times more likely to possess approved science-based climate targets in contrast to companies not participating in carbon markets.

It bears noting that VCM carbon credits constitute a minority of corporate greenhouse gas (GHG) emissions.

In 2021, the average purchaser in the carbon market acquired credits equivalent to less than 2% of their overall emissions. The research emphasises the necessity of adopting a comprehensive GHG reduction strategy that extends beyond carbon credit acquisitions.

Transparency and accountability

Regarding transparency and accountability, VCM buyers, relative to their counterparts, display a greater likelihood of disclosing emissions data to the CDP.

Moreover, the median voluntary credit buyer surpasses non-participating entities in terms of emissions volume disclosed in their Scope 3 reporting.

Nevertheless, following the emergence of recent controversies linked to carbon credit projects, authorities are initiating efforts to strengthen the oversight of the carbon credits market.

The EU will soon prevent products from being labelled ‘carbon-neutral’ or ‘carbon-negative’ if the claims rely on offsetting.