Harnessing Voluntary Carbon Markets for Climate Ambition (An action plan for Nordic cooperation)

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https://pub.norden.org/temanord2022-563/#120520

http://dx.doi.org/10.6027/temanord2022-563

Copenhagen, 29 November 2022

Hanna-Mari Ahonen, Kati Berninger, Juliana Keßler, Kenneth Möllersten, Randall Spalding-Fecher and Oras Tynkkynen 

SUMMARY

Promoting climate action with the voluntary use of carbon credits   

Many Nordic non-state actors are committed to ambitious climate action and are taking steps to contribute to worldwide efforts to limit the increase in the global average temperature to 1.5 degrees in line with the long-term goal of the Paris Agreement. First and foremost, all actors need to reduce their direct and indirect greenhouse gas (GHG) emissions within their boundaries or value chains at a scale and pace compatible with this long-term goal. These efforts contribute to the mitigation targets of the countries in which they are implemented and can help countries to enhance their targets over time. Collectively, countries’ existing targets fall short of meeting the long-term goal, so mitigation beyond countries’ existing targets is also urgently needed. In addition to addressing their own emissions, non-state actors can contribute even more to global mitigation efforts by supporting mitigation beyond their boundaries or value chains.          

The voluntary use of carbon credits enables actors to support more, earlier and faster mitigation than what would be possible with own action alone, if the environmental and social integrity of voluntary mitigation activities can be ensured. To truly contribute to global climate action, the voluntary use of carbon credits needs to be of high integrity. This means that actors should use carbon credits only to complement – not to substitute – their efforts to reduce own emissions, and be transparent about their targets, emissions and carbon credit use. They should use high-quality carbon credits that represent real, additional, permanent and verified mitigation outcomes that are not double counted. Environmental and social safeguards should be applied. Claims about the use of carbon credits should be truthful and clear. While these general principles of the high-integrity voluntary use of carbon credits are well established, their interpretation in the dynamic context of the Paris Agreement is still evolving. International and national guidance on the high integrity of carbon credits and their voluntary use is under development.

Nordic perspectives on best practice for the voluntary use of carbon credits

Nordic countries and non-state actors can contribute to national and international efforts to ensure the high integrity of market-based climate cooperation, drawing on over two decades of carbon market experience. Nordic cooperation serves as a valuable link between local and global actors, as well as an opportunity for sharing experiences and learning together.

The Nordic Dialogue on Voluntary Compensation (“the Dialogue”) was launched in June 2021 to provide support and guidance for the robust use of voluntary carbon markets towards and beyond carbon neutrality. Under the Dialogue, Nordic stakeholders have explored key concepts relating to the voluntary use of carbon credits and co-created a Nordic Code of Best Practice for the Voluntary Use of Carbon Credits (“the Code”). The Code provides a Nordic perspective on the current best practice for the voluntary use of carbon credits, synthesising ambitious requirements and recommendations put forward by relevant initiatives as well as inputs from Nordic stakeholders. The Code’s specific focus on best practice complements relevant international and national initiatives. Even where best practice may currently be out of reach, it serves as an aspirational goal to drive a process of continuous improvement.

This report focuses on voluntarily supporting mitigation (emission reductions and removals) through the purchase and use of mitigation outcomes achieved outside of an actor’s boundaries or value chain. This mitigation could help the host country in meeting its existing targets or help to reduce global net emissions above and beyond countries’ targets, thus contributing to global ambition-raising. In the Code, claims relating to the voluntary use of carbon credits are differentiated depending on their net impact on global emissions, which in turn depends on whether they count towards or beyond the host country’s existing mitigation targets and whether they are used to counterbalance specific emissions attributed to e.g., an organisation, product or service.  

Recommendations for Nordic cooperation on promoting best practice for the voluntary use of carbon credits

Through the Dialogue, Nordic stakeholders identified areas where further Nordic cooperation could be valuable for promoting best practice for the voluntary use of carbon credits, and carbon market cooperation in general. First, a Nordic community of best practice should be set up, as a platform for learning-by-doing for Nordic stakeholders and their international peers. There is an ongoing need to build capacity and raise awareness on key issues relating to best practices in carbon market cooperation, including awareness of the Code, and to map international and national developments in the field. There is also a need to develop a common Nordic view on key issues. The Code could be taken as a starting point, and it could be complemented with additional elements and details. To maintain the credibility and relevance on Nordic views on best practice, there is an ongoing need to engage in the national and international developments, promote alignment with Nordic views on best practice, and update Nordic views as needed. Last but not least, there is a need for practical support and tools for implementing the best practice elements in various contexts.

Source:Nordic Council of Ministers 2022