Amazon seeks to restore trust in voluntary carbon market with new credit designation

Amazon is pushing for a new brand of carbon credits it hopes will instill more public confidence in the carbon offset it knows will be necessary to reach its 2040 net-zero goal, according to a technical lead of the online marketplace's carbon reduction strategy.

On July 7, the international carbon registry Verra announced the launch of a process to develop a label that can be attached to carbon credits to indicate their higher standards. As envisioned, the label -- called the ABACUS Verified Carbon Unit -- would be generated by projects that satisfy additional standards on top of those already required by Verra's traditional VCUs.

The creation of the ABACUS label was spearheaded by a working group composed of Amazon research scientists, carbon trading researchers at the University of California Berkeley, The Nature Conservancy and other non-governmental organizations and carbon consultancies. Although Verra has created several other VCU labels and certifications to satisfy other narrow requirements, ABACUS is the first one proposed by a third-party working group, Verra said.

For Amazon, the label is an effort shore up public trust in the voluntary carbon market and the carbon credits companies use to offset its unavoidable CO2 emissions. Offsets have attracted various criticisms from researchers and activists over issues related to additionality. Greenpeace, for instance, has called carbon offsetting a "bookkeeping trick intended to obscure climate wrecking emissions."

"What we see today is a dynamic where companies purchase carbon credits believing that they're having the [climate] impact that the credits represent, only to have the value of that contribution challenged and questioned in the public square," said Jamey Mulligan, a senior scientist with Amazon's Sustainability Science and Innovation division. "We don't believe that that dynamic is conducive to success. Carbon markets need to be a mechanism that buyers can trust and that their customers and stakeholders can trust."

As a cofounder and signatory to The Climate Pledge -- a broad net-zero by 2040 commitment that encapsulates over 300 other businesses -- Amazon will most certainly rely on the voluntary carbon market to obtain offsets to reach its net-zero target. The company's business operations touch nearly all aspects of the global economy, and thus has a carbon footprint that involves hard-to-abate value chains. It builds warehouses with cement and steel, flies airplanes to deliver packages and supplies its grocery stores through carbon-heavy supply chains.

"If there's a hard-to-abate source of emissions that you can think of, chances are it's probably somewhere in our footprint," Mulligan said.

The issue for Amazon and hundreds of other large cap companies with climate goals is that the voluntary carbon market simply isn't large enough to satisfy everyone's offset needs. In 2020, for instance, Amazon's total carbon footprint equaled about one-quarter the volume of the entire voluntary carbon market, Mulligan said.

The company's motivation behind the ABACUS label is to improve public trust in the environmental integrity of carbon credits -- an ingredient necessary for the voluntary carbon market to grow.

"What we're seeing now is that voluntary corporate action is being called to the front lines in the climate fight, for better or for worse. The Supreme Court decision a week ago I think is all the proof you need on that front," Mulligan said, referring to the high court's June 30 ruling that curbed the Environmental Protection Agency's ability to regulate carbon emissions.

"What I'm seeing is a voluntary carbon market that's in transition," he said. "It's transitioning from a mechanism to help companies do more good, into one of the actual engines that we're going to need to hit the Paris Agreement targets. So it's got to grow, and we've got to take a fresh look at how we do impact evaluations so that people can trust it."

ABACUS requirements

The ABACUS label would create a higher standard specifically for agroforestry and reforestation carbon projects. The label would require project developers to track changes in its carbon stock over the course of the project's lifetime and continuously compare it to a baseline. That practice, known as a dynamic baseline, is the latest way to evaluate a project's total climate impact and has been incorporated in other Verra standards.

The label is also being designed to eliminate leakage, or the knock-on effects a carbon project can have that cause unintended emissions elsewhere in the economy. If a plot of agricultural land in a rainforest is reforested, for instance, that dip in food supply could send a market signal to other farmers to increase production by clear cutting forestland, thereby offsetting or eliminating the reforestation project's original climate benefits.

The ABACUS label will attempt to address this by requiring projects to create new agricultural production or enhance existing agricultural production in the surrounding area.

Verra's July 7 announcement of the ABACUS label launches a two-month long preconsultation period followed by a full consultation period in October, through which its core concepts will be vetted. A final decision on the proposed label is not expected until January 2023.