The next step for carbon credits

SINCE the signing of the Kyoto Protocol in 1997, efforts to address global climate change effectively have been glacially slow as they are expensive and politically unpopular. Bloomberg’s green-energy research team estimated in July 2023 that the cost of achieving a net-zero world would amount to US$196 trillion in investments by 2050. Governments are focused on immediate concerns such as rising food costs and combating inflation rather than tackling the climate crisis and meeting net-zero targets. It is thus small wonder that climate change commitments have not been kept, and we are experiencing the tragedy of the commons while facing an existential crisis.

How then should the world move towards halting the climate crisis? Enter carbon credits. These were designed as part of the clean development mechanism framework to incentivise developing nations to protect the environment while pursuing economic growth. The intent is to create a win-win model for saving the environment without short-changing developing countries. The premise of carbon credits is conceptually sound, but many feel that their implementation has been beset with problems.

Teething challenges

In recent months, the media has been awash with bad news on voluntary carbon credits, with hundreds of millions of dollars’ worth of credits generated from environmental projects being invalidated. Detractors say that projects set up for creating carbon credits are often based on vague predictions, can cause community conflicts, and do not create additional climate benefits. Yet, it seems that this may fail to recognise the reversed greenhouse gas (GHG) effect of such projects on the climate and their benefits. The world still needs carbon credits, and their proponents are still pushing for them. After all, carbon credits are a vital part of the strategy to mitigate the growth in GHGs that comes from economic development, thus incentivising businesses to adopt environmentally sustainable practices. Governments have sought to implement a carbon tax for businesses that are heavy polluters, forcing them either to purchase carbon credits, reduce their GHG emissions, or pay hefty fines. This compels businesses to reduce their carbon footprint and helps those with greener processes become more competitive.