The rich world isn’t helping the developing world decarbonise. Time for carbon markets to step in
- Amid climate inaction, a voluntary carbon market where companies and individuals pay for tree planting and renewable energy projects has sprung up
- Through these markets, the developed world can and should pay communities in the developing world to stop cutting down forests and switch to renewables
What could possibly explain this? The wealthy nations in the Global North acted quickly to bail out banks during the global financial crisis of 2008 and their economies during the Covid-19 pandemic, through quantitative easing and stimulus measures.
Government inaction can’t be about the money. Yet, climate aid from developed countries, promised at US$100 billion a year, has been slow in coming. Promises don’t change the climate. Action does.
One positive action taken by various carbon markets and projects is to support the development of tradeable carbon credits.
This is real climate action, putting points on the graph that can lead us to a cooler world. Yet such offsetting projects, and the entire notion of carbon credits, have been called into question on the basis that companies are untrustworthy and credits aren’t rigorous enough.
The quality and governance of carbon offsets is managed through third party verification, annual monitoring and evaluation, and adherence to peer-reviewed calculations of carbon sequestration.
While there are certainly examples of projects that do not do all that they have said they can do, the system is self-correcting, as more companies search the carbon market for high-quality credits, and more communities in the Global South create carbon projects that can be financed by corporate investments.
Some watchdogs have adopted an orthodoxy of climate mitigation. First, companies must cut their own emissions by reducing their energy use and switching from fossil fuels to renewables.
Second, they should require their supply chain to do the same. Only then should they be allowed to invest in carbon offsets (that is, pay others to capture carbon).
But basic economics tells us that this is exactly backwards. We should push CEOs to use offsets as their first resort, not their last one.
Rising prices for carbon offsets will drive companies to get rid of carbon emissions faster than carbon consultants, carbon footprint calculators and accounting mechanisms.
Plus, why take the corporate world’s word for it that it will clean up supply chains? Why not drive its investment into something tangible in the real world? We’ve heard how creative accounting departments can be in avoiding taxes.
Money that flows directly into forest and alternative energy projects in Uganda or Indonesia means much more to the world than an accounting ledger entry. Corporate carbon offsetting reverses the externalisation of costs – the damage to the environment, and so on – that the fossil fuel industry has imposed on the rest of society over the past century.
The voluntary offset market puts money to work doing good in the here and now – not in some carbon policy nirvana yet to be designed. Some critics believe that companies need to be perfect first before offsetting their emissions. This just pushes the most efficient way of capturing carbon off into some hazy future.
It also places the financial burden of conserving those forests and installing renewables back onto the peoples of Indonesia, Central Africa and the Amazon who have benefited the least from burning fossil fuels and are most vulnerable to the harsh effects of climate change.
It’s a perverse re-exertion of colonialism. Plus, without serious revenue flow to pay countries and indigenous communities a fair price to keep forests standing, those forests will continue to get cut down.
The question for the Global North is whether the Global South should be paid or just shamed into not cutting down its forests, assisted or left on its own to make the clean energy transition.
The south has been largely left out of the regulated carbon trading systems of Europe and North America. The flow of government and UN aid for decarbonisation has been miserly.
Is there a bias in the north against the efforts of the former colonies to be part of the climate solution – a relic of colonial paternalism, perhaps? Is it possible that the industrialised world only wants to pay for goods made by cheap labour, but resists paying for the preservation of the atmosphere?
I hope not. It’s time that climate action got inclusive. Let’s use the voluntary carbon offset markets to do good work now.
Charles Bedford is adjunct associate professor in the Division of Environment and Sustainability, Hong Kong University of Science and Technology