‘Crazy’ Carbon Offsets Market Prompts Calls for Regulation

When Swedish bank SEB AB announced recently that it wanted to buy into the market for carbon credits, what it got was a pile of duds.

Hans Beyer, SEB’s chief sustainability officer, says most of the roughly 150 pitches that he received last year weren’t backed by any recognized body validating claims to be permanently removing carbon dioxide from the atmosphere. And some were pitched on the basis of doing nothing at all -- merely pledges to avoid emitting CO2 in the future.

The buying and selling of credits that purport to offset a company’s pollution has become a cornerstone of the effort to limit global warming, and it’s being bolstered by a deal to create an international market mechanism struck at the COP26 talks in Glasgow last year. But the regulation of projects to cut carbon and win those credits is still its infancy, and amid hopes that the market will balloon to some $180 billion by the end of the decade, opportunism is rife.

“The whole concept of ‘I will not pollute and therefore I should get paid’ solutions are likely the worst,” Beyer said. “This will be a crazy market until it is regulated, completely crazy.”

In an October report, the United Nations warned that without stronger emissions-reduction targets, the world will warm 2.7°C by 2100, with catastrophic consequences. That’s creating a new wave of urgency to announce that businesses will be “net zero” in terms of carbon emissions within the coming decades. Global banks with a combined $130 trillion balance sheet are piling in.

At COP26, global leaders agreed on general principles for projects that generate carbon credits, which include initiatives as diverse as re-forestation, renewable power installation or measures to help household energy efficiency. The guidelines now say that projects which generate credits by claiming to remove carbon emissions must not have been done otherwise; reductions must be long-term and not lead to polluting elsewhere. COP26 also agreed to the creation of a registry, to track credits and the use of proceeds from their issuance.