We are currently witnessing historic momentum in voluntary commitments towards and beyond carbon neutrality by an increasing number of companies and other non-state actors wishing to contribute to the global transition to net zero greenhouse gas emissions. There are numerous international and national initiatives exploring how the voluntary carbon markets can help to turn voluntary commitments into real results. The Nordic Dialogue on Voluntary Compensation offers a timely opportunity to navigate, complement and inform these initiatives with Nordic perspectives.

Countries’ current mitigation targets under the Paris Agreement, known as Nationally Determined Contributions (NDCs), are critically insufficient to keep the world on a pathway to limiting global warming to 1.5 degrees by achieving net zero greenhouse gas emissions by mid-century. In addition to governments, an increasing number of non-state actors are joining the effort to step up ambition by voluntarily committing to move towards and even beyond net zero in their operations and value chains. To date, over 120 governments have committed to submit more ambitious NDCs as well as plans to reach net-zero emissions by 2050. More than 3000 non-state actors have joined the global Race to Zero Campaign.

The actual impact of these commitments will, of course, depend on how they are put into action. Commitments and actions come in various shapes and forms, making it challenging to compare and aggregate them. Non-state actors’ mitigation actions can help to achieve current NDCs and longer-term targets, as well as help to raise ambition beyond countries’ current commitments. To understand the net impact of all commitments and actions, mitigation outcomes (that is, reductions or removals of emissions) need to be measured and reported in a transparent, comparable and consistent manner, and systematically accounted. This will enable tracking overall progress towards our collective 1.5 degrees target.

The voluntary carbon market (VCM) is a potential tool for mobilising non-state actors’ resources – innovation and financing – for the net zero transition. The VCM covers the trading of carbon credits that are issued by carbon standards and used for voluntary purposes. The current lack of clear definitions and harmonised guidance undermines trust in the VCM. There is general consensus that the VCM can have a role in both meeting national targets as well as raising ambition beyond current targets. However, there is a vibrant debate ongoing on the conditions for making specific claims – such as carbon neutrality or net zero claims – associated with the voluntary use of carbon credits.

The VCM’s role in the net zero transition is explored by numerous international, regional and national initiatives. International initiatives include the Taskforce on Scaling Voluntary Carbon Markets (TSVCM), the Voluntary Carbon Markets Integrity Initiative (VCMI), the forthcoming ISO standard on carbon neutrality, the VCM Global Dialogue as well as Gold Standard-led work on aligning the VCM with the Paris Agreement. According to its latest report, published in July 2021, the TSVCM intends to engage with stakeholders to drive VCM demand and supply, set up a governance body and a standardised legal framework and develop guidance on credit-level integrity. The VCMI aims at developing principles and guidance for high integrity use of carbon credits for voluntary purposes. Its initial consultation report is open for feedback until 10 September 2021. VCM-related efforts are also ongoing, for example, in Costa Rica, New Zealand, Peru and Thailand, as well as in the EU and Nordic region.

The Nordic Dialogue on Voluntary Compensation was launched in June 2021 to help Nordic stakeholders to navigate the fast-evolving landscape of VCM-related guidance and initiatives, and to complement and contribute to them with Nordic perspectives. The dialogue brings Nordic actors together to co-create a robust and coherent Nordic approach to voluntary compensation of emissions in line with the long-term goals of the Paris Agreement and the United Nations Sustainable Development Goals. Ongoing activities under the dialogue include mapping of key issues through an online survey (open until 30 August 2021), interviews with Nordic stakeholders, and fostering a common knowledge base and understanding of key issues through a report on international guidance and a glossary of key concepts and terms, to be published in autumn 2021. The dialogue aims to co-create a Nordic Code of Best Practice and an action plan for a Nordic approach to voluntary compensation with Nordic stakeholders, drawing on international initiatives and initial stakeholder feedback.

The Nordic Dialogue on Voluntary Compensation is managed by Perspectives Climate Research and facilitated by an international team of leading climate experts from Perspectives, IVL Swedish Environmental Research Institute, Carbon Limits and Tyrsky Consulting. It is funded by the Nordic Council of Ministers’ Working Groups for Climate and Air (NKL) and Environment and Economy (NME).

For more information on the activities of and opportunities to participate in the Nordic Dialogue on Voluntary Compensation, please follow us on Twitter and read our Q&A.