Carbon credit market confidence ebbs

VOLUNTARY carbon markets have shrunk for the first time in seven years as companies including food giant Nestle and fashion house Gucci reduced buying. This news comes in the wake of studies which have found that several forest protection projects did not deliver promised emissions savings.

Reuters reports that BloombergNEF data shows that demand for carbon credits is on track to fall in 2023 as the number of credits used by companies fell 6% in the first half of the year.

A spokesperson for Gucci said, “Gucci is in the process of reviewing its climate strategy and commitments with a view to achieving the most positive overall impact.” However, Reuters notes that the company has deleted claims from its website that it is entirely carbon neutral.

Nestle, which has also not disclosed its spending on offsets, said it would stop using carbon offsets and was seeking other routes to net zero.

Nestle told Reuters, “We are moving away from investing in carbon offsets for our brands to invest in programmes and practices that help reduce GHG emissions in our own supply-chain and operations, where it makes the most difference to reach our net zero ambition.”

The quality of carbon offset schemes seems to be a key issue. Stephen Donofrio, managing director of Ecosystem Marketplace told Reuters that a number of negative studies on carbon credits have caused enough concern for some companies to pause purchasing and wait for more guidance on what sort of credits they should buy. “Companies are moving in the right direction, in that there is growing preference for higher quality, more expensive, credits.”

Until this year, the voluntary carbon market had grown as more companies came under shareholder pressure to adopt net zero policies.

The market was worth around $2 billion in 2021 and Shell and Boston Consulting Group jointly forecast in January that it could reach between $10 billion and $40 billion by 2030.

But carbon credits have long struggled to inspire confidence. Environmental groups say they allow companies to appear to take climate action when in reality they are not cutting emissions.

As demand slowed, prices of carbon offsets traded via Xpansiv market CBL, the world’s largest spot carbon exchange, fell by more than 80% over the last 18-20 months.

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