Governments and bourses across the Asia Pacific dealing in voluntary carbon markets say they are studying claims that Verra, the largest carbon credit certifier globally, has been vastly overstating forest projects’ climate credentials.
They also point to their own efforts in screening for contract compliance and due diligence on standard-setters as assurance for upholding high-quality carbon trading platforms, as they look to scale up the use of offsets to help businesses and their jurisdictions decarbonise faster.
British newspaper The Guardian ran a story last month that said over 90 per cent of Verra-certified rainforest carbon offsets are “worthless” because of inaccurate calculations, which appeared to miss the mark by about 400 per cent in some projects.
Verra has strongly refuted the “patently unreliable” claims, saying that the report used the wrong methods, looked at too few projects, and reached inaccurate conclusions.
Last week, Singapore sustainability and environment minister Grace Fu said in parliament that The Guardian’s report on Verra carbon credits, along with the certifier’s response, will be considered as it finalises a set of “environmental integrity criteria” for carbon credits used to offset the country’s carbon tax.
The country is looking to allow businesses – mostly power generators – paying the tax to offset 5 per cent of their emissions with international carbon credits from 2024 onwards, when the national carbon price is set to increase to US$18.80 per tonne.
Singapore signed deals with Verra and the second-largest project certifier Gold Standard last year, which allows businesses to use carbon credits approved by both standard-setters. Both agreements also specified work on avoiding double-counting of emissions savings between Singapore and the host countries of carbon projects – a step which could pave the way for Singapore to count the offsets towards its international climate obligations.
But neither agreements provide automatic qualification of carbon credits, Fu said, adding that a list of acceptable credits, along with eligible host countries, programmes and project methodologies will be published this year.
“We take all scrutiny of carbon markets and projects seriously, and are committed to ensuring that carbon credits uphold high environmental integrity standards,” Fu said.
Governments around the world are warming to the use of voluntary carbon markets, where businesses buy carbon credits and help national decarbonisation efforts.
Australia has had a government-led carbon neutrality certification programme, branded Climate Active, since 2019. Businesses are allowed to purchase carbon offsets as part of the scheme.
Australia’s department of climate change, energy, the environment and water (DCCEEW), the government stakeholder in the Climate Active programme, told Eco-Business it is seeking more information from Verra about its response to issues raised, as well as further actions that the certifier may be taking.
The department added that it assesses integrity principles of carbon offsetting “schemes” – referring to organisations like Verra and Gold Standard, instead of their specific programmes or carbon credits – to ensure that the offsets businesses use are “credible and genuine”.
Australian government agency Climate Change Authority said last year in a review that such scheme-level assessments are appropriate when paired with regular studies and consultations to identify problematic carbon credits. More granular probes into individual projects or methodologies would create a “resourcing challenge” for organisations like Climate Active, it said.
DCCEEW said it encourages members to do their own due diligence on individual carbon projects. Climate Active-certified organisations include ANZ Bank, University of Tasmania and online design platform Canva.
Eco-Business also sent queries to Thailand’s greenhouse gas management organisation, which runs a national decarbonisation programme that allows the use of carbon credits, as well as Indonesia’s environment and forestry ministry, which regulates carbon credit issuances from its territory and has halted projects involving Verra over compliance issues, but has not heard from these agencies as of press time.
Meanwhile, bourses in Asia say they continue to stand by high-quality carbon markets.
A spokesperson at Bursa Malaysia, the country’s stock exchange, said in response to queries that no “material matters” regarding Verra projects have been raised in engagements with prospective traders and market participants. Bursa Malaysia launched its carbon trading platform, BCX, last December. It is only accepting certification from Verra currently, but is working towards accepting other international carbon standards in the future.
The spokesperson noted that Verra has been improving its forest carbon project methodologies, such as by asking project developers to review calculations every six years instead of 10. An updated methodology which could give project developers less wiggle room in tabulating carbon credits is also set to be released later this year.
Credits are screened before being onboarded on BCX, the spokesperson added.
Singapore carbon trading platform CIX, a joint project involving DBS bank, state investor Temasek and the country’s stock exchange, said it is following the discussion around Verra’s projects, and has had talks with its stakeholders on the issue.
CIX chief executive Mikkel Larsen told Eco-Business that further analysis is needed to build a complete picture around the issues raised.
“We recognise that continuous improvements are absolutely vital to ensure that we keep moving forward as a market, and if we are to realise the full mitigation potential of carbon markets,” he said.
Bursa Malaysia’s spokesperson said that while the science around carbon trading is “not yet perfect”, high quality carbon credits need to be used to address climate change, citing a 1992 UN declaration that the lack of full scientific certainty should not postpone cost-effective measures to prevent environmental degradation.
Globally, the voluntary carbon market is growing rapidly, hitting US$2 billion in 2021. Last month, a report by oil major Shell and American consultancy Boston Consulting Group said that the market could balloon to between US$10-40 billion by 2030.
The United Nations-backed Intergovernmental Panel on Climate Change said in a landmark report last year that nature-based solutions are crucial to keeping global warming to a safe limit of 1.5 degrees Celsius, and for the world to reach net-zero emissions by 2050.
However, some quarters of the market are not convinced that businesses can remain focused on their own decarbonisation while also buying carbon offsets. The UN-backed Net-Zero Asset Owner Alliance, whose members manage US$11 trillion of assets, banned members from using carbon offsets in their sustainability plans until 2030.
