COP27: UN slams use of 'greenwashing' offsets ahead of direct abatement actions

Businesses must reduce their own climate emissions first before buying carbon credits for "beyond value chain" mitigation purposes, according to a new UN report published at the COP27 Climate Change Conference in Sharm El-Sheikh, Egypt.

"High-quality" carbon offsets can be used by non-state actors but only to balance out remaining emissions once short and medium-term science-based targets are met, the report said.

Presenting the recommendations on Nov. 8, UN Secretary-General António Guterres launched a blistering attack on corporate greenwashing -- the act of misleading the public and shareholders on the environmental impact of products and operations.

"I have a message to fossil fuel companies and their financial enablers. So-called 'net-zero pledges' that exclude core products and activities are poisoning our planet. They must thoroughly review their pledges and align them with this new guidance," he said at the UN conference.

Full and rapid decarbonization this decade was the ultimate test, with non-state entities accountable for publicly available, detailed transition plans to net zero, he said.

Non‑state actors could not claim to be net zero while continuing to build or invest in new fossil fuel supply.

Similarly, deforestation and other environmentally destructive activities were "disqualifying" to net zero.

Further, non‑state actors could not buy cheap carbon credits that often lack integrity instead of immediately cutting their own emissions across their value chains.

"The absence of standards, regulations and rigor in voluntary carbon market credits is deeply concerning. Shadow markets for carbon credits cannot undermine genuine emission reduction efforts, including in the short term," Guterres said.

Beyond value chain mitigation

The report, the first from the UN's new High-Level Expert Group on Net-Zero Emissions Commitments of Non-State Entities, states that high integrity carbon credits in voluntary markets "should be used for beyond value chain mitigation but cannot be counted toward a non-state actor's interim emissions reductions required by its net zero pathway."

It recognized, however, that good quality carbon offsets were useful in raising much‑needed financial support toward decarbonizing developing country economies.

"As best-practice guidelines develop, non-state actors meeting their interim targets on their net zero pathway are strongly encouraged to balance out the rest of their annual unabated emissions by purchasing high-integrity carbon credits," it said.

Minimum criteria

A high‑quality carbon credit should, at minimum, fit the criteria of additionality -- meaning the mitigation activity would not have happened without the incentive created by the carbon credit revenues -- and permanence.

Any credit transactions must be transparently reported, and associated claims must be easily understandable, consistent and verified, with land-based projects geo-referenced.

"Whether or not the credits used can also be counted toward Nationally Determined Contributions under the Paris Agreement must be transparently reported," the report recommended.

Further, non-state actors should invest in projects that prioritize the people and sectors most in need of support: those that protect biodiversity or restore degraded land; accelerate distributed energy projects; or projects that advance technologies for hard-to-abate sectors.

"These recommendations recognize the need for active monitoring of the market and recalibration as needed to establish the credible credits market that will be needed over the longer term to account for high-integrity removals," the report said.

Platts assesses the value of a wide range of voluntary carbon credits.

It assessed CORSIA-eligible (CEC) credits at $3.3/mtCO2 Nov. 8, down 59% year on year. Nature-based credits (CNC) and tech carbon capture credits were assessed at $6.00/mtCO2 and $139.00/mtCO2 respectively, on Nov. 8, data from S&P Global Commodity Insights showed.