Cutting the red tape around carbon markets

This article is sponsored by SustainCERT.

The increasingly dire climate crisis demands immediate action in carbon markets — yet mounting red tape is slowing progress. After experiencing the hottest summer in recorded history, the science is clear that we’re in a climate emergency. 

Yet many of us committed to climate action in carbon markets are not moving fast enough. To ensure carbon markets channel finance into real projects and deliver the climate action it was created for, we must drive greater integrity and transparency. 

The good news is that we have a chance to deliver this — if we dare to think differently. We need a more practical and scalable mindset across the climate ecosystem to create the solutions we need. 

The value of improving carbon markets

This year started off with a renewed analysis and criticism of voluntary carbon markets, causing many companies to lose confidence. We have seen the market shrink for the first time in seven years, with the number of carbon credits used by companies reducing by 6 percent in the first half of the year alone. 

Effective carbon markets are a vital component of a net-zero transition. Despite their flaws, they remain powerful tools to catalyze climate finance at scale — in particular for projects with limited funding opportunities, such as clean cooking. To get rid of carbon markets because they are imperfect and have been misused would be to deny a huge potential for positive impact. 

Carbon markets need fixing, and a rethink of how carbon credits are used across voluntary or compliance market is essential. We already have the foundations for what’s needed, and must focus on two key areas: increased integrity and transparency in the market, and greater pace and collaborative solutions from key players in the ecosystem. 

Scaling carbon markets with technology

Stronger trust in a market brings more investment which make climate action projects more scalable. Trust comes from data and credible sources that reinforce quality. Technology is key — improving accuracy, reducing errors and ensuring data is timely.

During my time as CEO of leading carbon standard The Gold Standard, I realized that third-party verification was a key bottleneck for the supply of high quality credits and scaling the market with integrity. Since 2018, I have been focused on digitizing this process, convinced digital technologies can help increase the accuracy and speed at which climate impact can be verified, and therefore trusted. I have spent considerable time persuading the market and investors on the need for the verification industry to invest in its digital transformation — one of the few sector that hasn’t done so yet. 

In 2023, I am pleased to see a growing consensus on the need to transition from conventional monitoring, reporting and verification (MRV) to digital monitoring, reporting and verification (D-MRV) systems to underpin future carbon markets. The question these days is much less focused on why D-MRV should happen, and more on when. There are still a number of barriers before we can make D-MRV a reality, though — and most of them aren’t tech related. 

Greater collaboration enables D-MRV

Recently, I spoke to other nature tech CEOs on my “How to Net Zero” podcast, and we agreed that our biggest hold back was that we are ahead of the market. The technology is there. What we need is our ecosystem and the market to think differently — and at pace — to create an enabling environment for it. 

Just like carbon markets, technology is no silver bullet. In isolation, without application and process, it won’t help much. International standards, such as the Verra Verified Carbon Standard (VCS) or Gold Standard need to update their core requirements to allow for use of D-MRV. This means revising their monitoring methodologies and verification protocols to accommodate for the use of digitally monitored and reported data or rethink project cycles and allow the decoupling of GHG and non-GHG data monitoring — much harder to digitize — to enable near-real time issuance of carbon credits. 

Collaboration across the board is essential to creating the right enabling environment. Verra and Gold Standard’s working groups on D-MRV are a step in the right direction. I believe we could go a step further though and increase collaboration between the standards themselves. Historically they tend to work in isolation, when there is in fact much technical alignment between them. I see the future being simpler, where the technical decision-makers of leading standards formally engage with each other and the wider ecosystem to share learnings, challenges and co-design solutions. 

We were also pleased to contribute our input to the Article 6.4 Supervisory Body on its draft standard. Article 6.4 of the agreement provides a unique opportunity to think digitally right from the get-go. We can’t afford to miss out on this chance to unleash the power of D-MRV. 

Picking up the pace

We have enough knowledge and technology today to drive a genuine transition — nothing will speed us up though if we don’t act. In our current state of climate emergency, we need a new “operational model.” One with shorter release cycles, leaner development approaches and a focus on rapid, iterative improvements. 

We don’t have the luxury of waiting for perfection — if it even exists. We need to prioritize thoughtful action with the knowledge we have today, and accept that improved science and better technology will be available tomorrow. 

We know we can — and need to — accelerate action. We need pragmatic, action-oriented collaborative mindsets. How about we imagine that the climate is our main shareholder, who demands continual progress, short-term gains and quarterly updates? The return on investment is the direct impact that we see happening to the climate. Are we performing well, through halting the acceleration of global temperature increases and volumes of natural disasters caused by the climate? 

No. Do we have time to implement a turnaround plan? Only just.  If we are the mission-led organizations we say we are, we should let this lead how we deliver climate solutions, rather than historic frameworks not fit for purpose. With the climate, the purpose is urgent action.