Exploring the voluntary use of carbon credits

Best practice and norwegian experiences

June 18, 2024

Event Overview

On 27 May 2024, Norwegian stakeholders convened to explore the voluntary use of carbon credits. This event aimed to foster a comprehensive understanding of best practices at the national, Nordic, and international levels, and facilitate the exchange of insights regarding the challenges and opportunities associated with carbon credit programs. The event was divided into two parts: the first part provided high-level guidance on the utilization of carbon credits, while the second delved into practical implementation experiences.

Photo by Marton Volstad

Key takeaways

Growing Interest and Evolving Market Dynamics: Norwegian carbon credit buyers are increasingly interested in purchasing removal credits, highlighting a growing demand within the Voluntary Carbon Market (VCM). Despite past challenges, the market is gaining momentum, becoming more serious, and witnessing increased transaction volumes. However, some suppliers are questioning the local relevance of international standards, such as ICVCM.

Emphasis on Quality and Trust: There is a rising importance placed on the quality of carbon credits, driven by factors such as the EU regulations and guidance, and the need for high-quality, albeit more expensive, credits. Companies recognize the need to ensure rigorous project assessments to maintain trust in the market, despite the significant administrative burdens this can create.

Strategic Engagement and Communication: Effective engagement in the carbon market requires a structured approach: mapping emissions, reducing emissions, and taking responsibility for remaining emissions with high-quality credits. Clear communication on claims is crucial to avoid greenwashing. There is a growing awareness that carbon credits should be used to complement, and not to substitute, reductions in own value chain emissions in line with science.

General insights
  • Challenges with Market Participation: High administrative burdens for smaller companies; larger companies manage through consultants, ratings agencies, accounting providers etc.
  • Claims and Communication: Companies need incentives to invest in carbon credits and make meaningful climate claims, including the option to use “net zero” in their marketing.
  • Terminology Debate: Different understandings of terms like “offsetting”, and the need for terminology to reflect the key principles of carbon credit use, such as prioritising science-aligned reductions in own value chain emissions and using carbon credits only to complement, not to substitute, these science-aligned reductions. This would mean using carbon credits only to take responsibility for “unabated” emissions along the way to net zero and “residual” emissions at the net-zero target year and beyond.
  • Political and Practical Distinctions: Debate on differences between avoided emissions and removals have significant political implications.
  • Importance of Immediate Action: Emphasis on acting now despite potential for imperfect solutions, e.g., purchasing credits in high quantities versus only prioritizing quality.
  • Role of Standards: Debate on the efficacy and objectivity of existing international standards.

Photo by Marton Volstad

Highlights from participants

Biochar company

  • Interest in Removal Credits: Companies like Equinor are showing interest in buying removal credits.

 

Environmental NGO

  • Market Evolution: Companies are keen to engage in the Voluntary Carbon Market (VCM), despite past negative experiences.
  • Growth in Market Activity: The market is becoming more serious with increasing volumes and transactions.

 

GHG accounting company

  • Engagement Process: Carbon market engagement should consist of 1) Mapping emissions; 2) Reducing emissions; 3) Compensating residual emissions with high-quality credits.

 

Climate fintech company

  • EU Regulations and Credit Quality: New questions about the relationship between price and quality of credits.
  • Rising Importance of Quality: Companies are prioritizing higher quality, albeit more expensive, credits.
  • Demand for Removal Credits: Growing demand, currently at 20% removals vs. 80% emissions reduction credits.
  • Co-Benefits and Financing: Increasing emphasis on co-benefits and the need for financing in the host country.
  • Trust in the Market: The market’s foundation is built on trust, with quality directly impacting credit price.
  • Project Assessment: Companies must individually assess projects, creating a significant administrative burden.

 

Independent climate research institute

  • Lessons from Clean Development Mechanism: Emphasis on the quality of carbon credits.
  • Market Formalization: VCM is transitioning into a regulated market.
  • Subjectivity of Standards: Carbon crediting programmes vary in quality.

 

Forestry carbon credit supplier

  • Supplier Perspective: High access barriers due to the need to choose between multiple carbon crediting programmes.
  • ICVCM Relevance: Questioning if it is the right approach for Norwegian companies.
  • Mitigation Hierarchy: Companies should reduce and avoid emissions before compensating remaining emissions with credits.

 

Large energy company

  • Buyer Perspective: High administrative barriers to accessing carbon credit rating agencies like Sylvera and BeZero.
  • Case-by-Case Evaluation: Quality evaluation depends on individual projects.
  • Reliance on Carbon Crediting Programmes: Crediting programmes and ratings agencies are essential.

 

Article 6 expert

  • Purpose of Credits: Depends on usage and claims made by buyers.
  • Focus on Additionality: Climate finance should support projects that wouldn’t be financed otherwise, especially in developing countries.
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