March 20, 2024

Carbon Debits: A New Era in Climate Accountability

Carbon Debits: A New Era in Climate Accountability

Carbon offsetting activities offer businesses a valuable opportunity to connect with eco-conscious consumers. They enhance a company’s reputation and show its commitment to the environment. However, the impact of these activities hinges on their transparency and effectiveness. Unfortunately, this is where most of today’s offsetting practices fall short – due to one fundamentally flawed concept.

Carbon credits – an environmental loan

In the EU Emissions Trading System (EU ETS), carbon credits are used on the mandatory market. They are tradeable certificates that allow companies to emit a certain amount of carbon dioxide (or greenhouse gas equivalents). Companies need these credits to cover their emissions. If they emit less than their allotted amount, they can sell their extra credits; if they emit more, they need to buy more credits. This system aims to reduce emissions by creating a financial incentive for companies that emit less. However, the idea that a company is given a permit to pollute is far from an ideal solution. 

In other places, carbon credits work like carbon offsets. This allows businesses to make up for their emissions by investing in projects that reduce carbon dioxide. When a company pollutes, it can purchase carbon credits from projects that will store or capture an equal amount of emissions. However, this poses its own set of issues since many carbon projects produce credits of questionable quality. Following several controversies over the last couple of years, many big companies lost confidence in the carbon market altogether – a logical conclusion after suffering irreparable damage to their reputation. 

Earlier this year, an investigation uncovered the mass use of “phantom credits” by companies like Disney, Shell, and Gucci. According to the investigation, these credits did not translate into real climate action. Compounding this issue is the fact that they were verified by the biggest carbon credit certifier. 

An indirect example of the pitfalls of using carbon credits would be the greenwashing lawsuit against KLM. Brought to the Dutch court by the climate activist group Fossil Free Netherlands, the lawsuit accuses the airline of misinforming customers about the impact of its sustainable initiatives.Severe as they are, these are only a handful of examples of the current status quo. Historically, fraud has run rampant in the voluntary carbon market since it was conceived. The problems with it are numerous. Double-counting or the use of credits that should have been retired. The diversion of funds away from environmental projects to intermediaries. Phantom credits with no meaningful environmental impact; – the list goes on. All of these reasons highlight the need for a new solution.

Carbon debits – deposits for a sustainable future

Carbon debits mark a significant shift away from the traditional concept of carbon credits. Carbon credits are either permissions that allow more pollution or offsets that only promise future carbon reduction. Carbon debits are based on carbon dioxide already captured and absorbed by plants. Following the methods of the Global Carbon Standard, they use carbon capture from agroforestry systems. These are reforested plots of land that host a newly planted mix of fruit-bearing trees and shrubs, as well as ground cover. This difference ensures the genuine impact of carbon debits. They are a provable and measurable reduction of carbon in the atmosphere and have many invaluable co-benefits.

Redefining transparency and accountability

The creation of carbon debits involves a precise and well-documented process. After confirming the carbon absorption rate of an agroforestry system, carbon debits are gradually issued. They represent the exact amount of captured carbon. They are then securely brought on the blockchain, creating a permanent and unchangeable record. This step ensures that each carbon debit is easily traceable and transparent. It provides a reliable measure of the carbon capture process. Carbon debits introduce a more accountable and transparent method of carbon compensation.

A net positive concept – addressing the 3Ps of Sustainability

The concept of the Triple Bottom Line is pivotal in understanding the broader impact of sustainable initiatives. This sustainability framework emphasises three key components: People, Planet, and Profit. It allows businesses to look beyond financial outcomes – highlighting the social and environmental consequences of their activities. Carbon debits align closely with this holistic view. By accounting for actual carbon absorption, they contribute to “Planet”. Supporting local agricultural communities addresses “People”. Finally, it covers “Profit” by helping businesses meet increasing consumer demand for sustainable practices.

Moving beyond the limitations of carbon credits, carbon debits offer a more realistic and viable form of climate action. They align with the Triple Bottom Line principles, which reinforce a balance between economic growth, social responsibility, and care for the environment. Carbon debits also leverage blockchain to bring enhanced transparency and accountability to carbon compensation. This ensures that each step towards carbon neutrality is both verifiable and meaningful. 

As we continue to grapple with the challenges of climate change, the introduction of carbon debits represents a hopeful step forward. They offer a practical and accountable way for businesses to contribute to a sustainable future.