New Standards Boost Carbon Credit Credibility
UN rules seek to unlock climate finance and avoid greenwashing.
A system conceived over 20 years ago to help nations meet climate goals thru emissions trading may finally gain traction. New international standards aim to ensure the credibility of carbon credits,possibly unlocking significant climate finance,especially for developing nations.
Paris Agreement Crediting Mechanism (PACM)
The Paris agreement Crediting Mechanism (PACM) seeks to address issues of credibility and verification in carbon markets. It enables collaboration on emissions reduction through the exchange of credible carbon credits.
Last month, two standards were agreed upon. One estimates baseline emissions, preventing over-crediting and double-counting. The other accounts for unintended emissions increases (leakage) resulting from a project.
Along with baseline and leakage standards,the Supervisory Body for PACM decided to support equitable benefit-sharing with host countries and capacity-building to increase participation.
Expert perspectives
Jean-Marc Champagne, Managing Director of Seneca Impact Advisors, expressed optimism, noting that “One of the biggest challenges we’ve seen from the financing side has been the lack of consistency and transparency in emissions calculations and verification.”
Champagne anticipates that the new PACM standards can help scale emissions-reduction projects by improving credit integrity, unlocking climate finance in markets like Southeast Asia.
Bonzanni said PACM is expected to set a “very high bar in terms of environmental integrity – ensuring that everything that generates a carbon credit under this mechanism is absolutely representing tons of carbon that is being produced or removed, and there are no loopholes down the line.”
He added that “The key delegations, the expert community, want this to be a stringent and aspiring mechanism to increase the trust in carbon markets,”
Challenges Remain
while cookstove activities can now be credited and monitored, major initiatives like regenerative agriculture and nature-based solutions may be excluded.
Climate Farmers co-founder Ivo Degn stated that “The current carbon market system is not built for the kind of agriculture we set out to support,”
after the group stepped back from carbon markets.
Bonzanni noted the challenges for nature-based projects in ensuring emissions permanence, adding that there has always been a bias in UNFCCC that’s made nature-based solutions more arduous to credit.
champagne emphasized the high potential for nature-based solutions and coastal restoration projects in Southeast Asia.
The Risk of Greenwashing
Lisa Sachs,Director of the Columbia Center on Lasting Investment,said activities financed through carbon markets are “essential.”
However, she continued, “thay deserve robust financing on their own terms: not as a way to justify ongoing pollution, and not through a patchwork of project developers, verifiers, standard-setters, brokers, traders, registries, and data platforms that each absorb capital, shape incentives, and extract value from the system – and collectively divert scarce financial and political capital away from the kinds of strategic, publicly guided financing frameworks we urgently need.”
Greenwashing remains a significant concern, notably in voluntary markets.
EnergyAustralia recently settled a lawsuit over its “Go Neutral” carbon offsetting product, acknowledging that “offsets do not prevent or undo the harms caused by burning fossil fuels.”
Despite the risks, climate scientist Katherine Hayhoe argues that transparently verified carbon credits can do “far more”
than protect carbon, representing a key way to transfer funds to low-income communities.
She added, “If energy and cost-effective direct air capture can be developed at the same time that emission mitigation options are being implemented to their fullest degree, it can account for a fraction of emissions we can’t currently mitigate – and we know that ‘every bit of warming counts’.”
