The importance of trust in the carbon market

There has been a series of articles in the Guardian, Die Zeit and SourceMaterial calling into question the validity of some carbon credits. Whilst we don’t certify credits of the type in question in the articles, Gold Standard was mentioned in an explainer on carbon offsetting, and quotations imply that the issues investigated are prevalent in other credit types. We have also received questions about the issues raised. We are therefore publicly outlining Gold Standard’s position on these questions. To be clear, we are not commenting on the details of the articles.

Carbon credits are not tangible. You can’t touch the tonnes of CO2 that are not in the atmosphere. Regardless of your resources, it is hard to visit the projects you are supporting and see how the benefits of the credits you have purchased are helping to meet the UN’s Sustainable Development Goals (SDGs). And you might not have the right expertise anyway. Methodologies to calculate emission reductions and removals are complex, relying on complicated parameters and equations to estimate impact.

That is why standards setting organisations like Gold Standard exist. We set the methodologies used to issue and sell credits, working with the project developers delivering the benefits on the ground, and validation and verification bodies (VVBs) who check that the projects are delivering what is claimed.

Avoided deforestation (REDD+) projects: why does Gold Standard not issue this type of credit?

The preservation of our standing forests is one of the most important steps in the fight against the climate crisis. It is essential that we continue to find new ways to channel finance to maintain them and restore degraded landscapes. Both are critical to meeting both our climate and SDG targets.

The articles mentioned above dealt with avoided deforestation (REDD+) projects. These projects claim to avoid emissions by protecting a forest from being deforested, as compared to a baseline deforestation rate. This protection aims to stop the CO2 stored within the trees and forest ground from being released into the atmosphere if they were to be cut down.

This type of project is NOT eligible for Gold Standard carbon credit issuance. This is because it is very difficult to set a defensible baseline of deforestation rates, and therefore emissions, to effectively measure and guarantee the causality and quantity of CO2 reduction. These activities also have difficulty guarding against ‘leakage’, where trees elsewhere are cut down instead. These issues have been a concern in carbon markets since their beginnings. Gold Standard took the decision not to issue REDD+ credits over a decade ago.

Of course, avoiding deforestation is vital. But we do not believe carbon crediting is a credible way to finance it. Especially when those credits are used for offsetting which promises precise accounting of CO2 to compensate for actual real-life emissions in the atmosphere.

This is important. Carbon finance is not just free money for mitigation and sustainable development. It is also used to offset emissions elsewhere. Imagine an organisation holding a major sporting event and building the necessary infrastructure. They are aware of climate scrutiny but decide to include elements that could be considered indulgent, based on a perception that they can ‘offset’ these aspects by purchasing carbon credits - and defend them accordingly. In that scenario, if the credits they buy do not accurately represent what they claim to, then the ability to offset has led to an increase in global emissions.

At Gold Standard we are exploring new ways to encourage forest conservation. These include corporate collective action in shared sourcing areas, sustainable commodities and Scope 3 markets; and landscape finance, blended finance vehicles and emerging nature strategies and more appropriate mechanisms to support them - which could have components of results-based finance, but without carbon crediting.

Safeguarding: how can standards guard against human rights risks?

While the climate crisis is the most pressing issue facing humanity, that does not mean we are not facing other vital and interlocking challenges. The changing climate is affecting the poorest first, and standards bodies must ensure that the projects that they certify are not additionally harming the communities in which they operate.

Gold Standard has detailed safeguarding principles to guard against such outcomes. We are proud to have market leading safeguarding, independently verified by organisations such as the Oeko Institute, outlined in their report “Ensuring safeguards and assessing sustainable development impacts in the voluntary carbon market”. Our published safeguarding principles are available to read online.

But principles are only written on paper. What matters is that people follow them. Standards don’t guarantee no problems will ever arise; the world is too chaotic for that. A good standards system will include criteria to minimise these risks and have a proactive set of processes to address the ones that do arise. That is why we have a grievance process which allows anyone to raise a problem with any project – for which we will then investigate and rectify where appropriate.

For example, in 2015 there were allegations that one of our projects in Uganda was coming into conflict with the local community. Following our grievance procedure, we commissioned an independent expert consultant to lead a review of the issues, including land title issues, accusations of violence in the project boundary, and use of chemicals that had adverse effect on local livestock.

Based on the results of this review, Gold Standard required several further actions to be taken by the project and thorough assessments to be carried out during the next on-site audit. These included remediation for infractions and training for local staff, ongoing resolution of any land title disputes, and minimisation and monitoring of chemical usage. The project developers pro-actively participated in the investigation and took positive steps to address the issues.

Because openness is vital to maintaining trust, all the relevant documentation for this grievance and others is publicly available on our website. This details our grievance procedure, and the details and documentation of the grievance cases we have addressed.

Difficult challenges can arise on good projects, and it is important to stress that the process isn’t designed to punish, but to support and improve.

Rectifying errors in estimation: how should standards systems respond?

Of course, errors in issuances also happen. No system is perfect. The most important climate actions are often those in the most challenging locations and with the most challenging forms of monitoring, reporting and verification. And it is often the burden of expectation set by a desire to offset that drives these challenges.

Striking the right balance of fitness for purpose, rigour and practicality in methodologies, monitoring and verification is challenging. But Gold Standard is determined that people who purchase our credits can be sure that every one of our credits purchased represents what it claims to. A system cannot guarantee nothing will ever go wrong, but a good system should have processes in place to put it right when it occurs.

That is why, when we identified a problem with our safe water supply methodology, we acted. Following an independent investigation, due to the seriousness of the situation and to ensure environmental integrity, we compensated for any potential over issuance by retiring an equivalent number of Gold Standard carbon credits to account for the difference. Again, we have been fully transparent about this process. You can find out more on our website.

This does not always imply that the issuer of credits is always at fault for over issuance, though it is responsible for its system. Depending on specific circumstances it may be that other methods of rectification are appropriate.

Issues across the board: Are the issues raised a concern for all credit types?

The issues raised in the media coverage are long-standing concerns about a specific activity type. The way that activity type sets its baseline and estimates impact is completely different to any other credit type.

However, this should prompt us all to think about how impact is estimated and whether this is fit for the intended purposes of the buyers of carbon credits. Other credit types face different challenges, reflecting the nature of the work they support and the challenging contexts in which they operate. None should be thrown out based on sweeping conclusions, but we must all strive to improve where we can and to mitigate the inevitable risks.

The importance of trust

Trust is hard won and easily lost. At Gold Standard we constantly strive to bring the highest-integrity credits to the market. We continuously review and update our methodologies to take account of the latest science and we are proactive about solving problems as and when they are identified. Since our very beginning, we have aimed to raise the bar for quality in the carbon market – and we will continue to do so in the years to come.


Media Category: Comment
Event Dates: Thursday, January 19, 2023