I had the opportunity to speak at the recent Net Zero Delivery Summit event on “The Role of the Voluntary Carbon Market in Unlocking Increased Climate Ambition.” And I owe a big thanks to the organisers, the @CityOfLondon. In my opening remarks, I highlighted the challenges and importance of the Voluntary Carbon Market (VCM), emphasising the need for simplicity, accessibility, and trust in the market. Below are my thoughts on some trends, key learnings, and insights from the event.
Trends and Learnings: The event brought together a diverse panel of experts, each offering valuable perspectives on the VCM. Here are some notable trends and learnings that emerged from the discussion:
- Importance of the VCM: The VCM plays a crucial role in helping to address emissions that fall outside of legislated Emissions Trading Schemes. It provides an avenue for companies with carbon footprints not covered by ETS to contribute to climate change mitigation efforts. This voluntary approach fills some of the gap left by regulatory frameworks.
- Challenges of Trust and Integrity: Trust and integrity have been tested in the VCM, with certain actors causing concerns by over claiming project carbon credits, intermediaries overcharging or misleading their clients and spurious claims being made by end-users. To encourage broader participation, the VCM needs to establish trust and ensure transparency in the market. Simple and accessible solutions are vital to overcome barriers and enable scalability.
- Simplification and Standardisation: Currently, there is a confusing array of initiatives in the VCM, making it difficult for corporates to navigate. Simplification and standardisation efforts are necessary to reduce barriers to entry, to provide clarity and to facilitate the efficient management of carbon footprints.
- Investor Interest: Investors are increasingly interested in sustainability and seeking opportunities to allocate capital in this space. A well-functioning VCM that offers reliable and verified carbon credits can attract investment and thereby provide a pathway for scaling carbon reduction projects.
- Industry-specific Challenges: Sectors such as aviation face unique challenges in decarbonisation. Addressing these challenges requires collaborative efforts between industry players, governments, and market regulators. Scaling up action quickly is crucial to meet climate ambitions.
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Key Messages to Investors: Considering the discussions at the event, here are some key messages that I would like to convey to investors:
- Focus on Long-Term Climate Action: Investors should prioritise long-term climate action and consider the timeline beyond immediate gains. Supporting companies with ambitious emission reduction strategies and investments in sustainable projects can have a lasting impact on combating climate change.
- Corporate Offset Strategies: Corporates should adopt offsetting strategies for their emissions, considering the current year, as well as the future milestones of 2035 and 2050, when net-zero commitments mean that any residual emissions must be offset by durable carbon removals. Net Zero Markets recently hosted a superb webinar on the subject of removals that featured Richard Barker of CounterAct, a VC fund dedicated to the space. A phased approach to the right kind of offsetting can ensure a gradual, i.e.less costly, transition to net-zero emissions.
- Expectations for COP28: As we look ahead to COP28, it is crucial to set realistic expectations and aim for tangible outcomes. Robust discussions on strengthening the VCM and establishing frameworks that incentivise sustainable investments will be instrumental in driving climate action.
In conclusion, the event shed light on the challenges and opportunities within the Voluntary Carbon Market. It emphasised the importance of simplicity, trust, and scalability to unlock increased climate ambition. I would like to express my sincere gratitude to the organisers for hosting such an insightful event and providing a platform for meaningful discussions amongst financiers, government representatives and service providers. The collective efforts of such organisations are crucial to driving the necessary changes for a sustainable future.
