Position Paper on Carbon Credits
The international research institution CDP (Carbon Disclosure Project) releases a position paper on carbon credits, which aims to explain CDP’s views on the use of carbon credits and provide some principles when applying carbon credits.
CDP believes that the use of global carbon credits is growing significantly, but there is still a lack of clear standards for measuring the credibility and transparency of carbon credits. Therefore, it is necessary to answer the questions that companies face when using carbon credits.
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Development of Global Carbon Credits Market
To achieve the 2050 climate goals, the world needs to reduce carbon emissions by 50% by 2030. Carbon credits are an important tool for reducing carbon emissions, allowing countries with more cost-effective reductions to sell their carbon emissions to countries with higher costs, thereby reducing the overall cost of carbon emissions. In recent years, the number of entities voluntarily using carbon credits has been increasing.
However, the global carbon credits market still lacks clear regulatory standards, which results in a lack of transparency in carbon credits and makes decarbonization assessment difficult. A lack of consistency in the use and reporting of carbon credits could have a negative impact on carbon emissions accounting. How to use carbon credits, calculate carbon credits and evaluate the effect of carbon credits are the focus of stakeholders.
CDP Recommendations: About Carbon Credit Targets
CDP believes that companies need to set emission reduction targets before considering purchasing carbon credits. This is because the emission reductions required to achieve the 2050 net zero goal cannot be met by carbon credits alone. The Science-Based Targets Initiative (SBTi) believes that the primary task of enterprises is to formulate short-term and long-term carbon emission targets. Carbon credits can only be used after actions are initiated based on these targets.
In addition to SBTi, some voluntary carbon market institutions have also begun to emphasize the importance of carbon emission reduction targets. The Voluntary Carbon Market Initiative (VCMI) believes that companies need to publicly disclose verified emission reduction targets before using carbon credits, the United Nations High-Level Expert Group on Net Zero Emissions for Non-State Entities (UN HLEG) also believes that emissions reduction targets need to be specified within the 1.5 degrees Celsius path before using carbon credits.
CDP Recommendations: About Carbon Credit Purchases
CDP believes that enterprises need to choose high-quality carbon credits during the purchase process. High-quality carbon credits can guarantee a scientific and factual basis for emission reductions, while low-quality carbon credits may exaggerate the amount of emission reductions. Businesses need to conduct due diligence on the carbon credits they purchase to ensure they have a positive impact on the environment, economy, and society. The Integrity Council for the Voluntary Carbon Market (ICVCM) is the governance body of the voluntary carbon market. It has provided a series of principles to ensure that carbon credits in the market are of high quality.
When companies quantify the emission reductions of their activities, they should consider whether there are potential risks that may cause the effects of carbon credits to be offset. At the same time, if a project will have a negative impact on the economy and society during the process of reducing emissions, it should not be considered. CDP data shows that companies have reported nearly 300 carbon credit projects in the past year based on the climate change questionnaire designed by CDP, including 400 different carbon credit standards. The specific requirements of each project are related to the carbon market standards that the company follows. CDP believes that companies can consult carbon credit rating agencies or third-party due diligence agencies.
CDP Recommendations: About Carbon Credit Accounting
CDP believes that carbon credits need to be accounted for in a credible and transparent manner to avoid double issuance, double use, and double accounting. Companies need to use sound accounting systems and promptly disclose the use of carbon credits. In addition, carbon credit disclosures should be reported separately from GHG emissions.
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