Mistrust towards corporates buying carbon credits is unfounded, study suggests

Companies that participate in voluntary carbon markets are outperforming those that do not on a range of climate action indicators, a new study has found.

Published today, the analysis by Forest Trends reveals that companies purchasing carbon credits are eight times more likely to be decarbonising year on year, and three times more likely to have supplier engagement strategies.

They are also four times more likely to have an approved science-based climate target, and the median voluntary credit buyer is investing three times more in emission reduction efforts within their value chain.

Furthermore, these companies are two times more likely to have board oversight of their climate transition plans, and three times more likely to include scope 3 emissions in their climate targets.

The analysis is based on voluntary carbon credit transactions and climate disclosures to CDP by 7,415 organisations, on behalf of 590 institutional investors with a combined $110trn (£90trn) in assets and more than 200 major purchasers with over $5.5trn in procurement spend.

Dr M Sanjayan, CEO at Conservation International, said that those who criticise companies engaged in carbon markets or lagging on the sidelines “should take note” of the findings.

“Carbon credits offer an immediate way for businesses to reduce global emissions right now,” he continued. “Today’s report reaffirms what we’ve long known: carbon credit buyers tend to be leaders in taking climate action.”

Many have criticised carbon credits for giving companies a licence to pollute, while a recent study found that tree planting projects supported by carbon credits can actually damage biodiversity. There are also concerns around a lack of standardisation, integrity and transparency in carbon markets.

However, the researchers found that there has been an uptick in demand for pricier, higher-quality carbon credits, suggesting that companies are willing to pay more to ensure supply-side integrity.

The voluntary carbon market was valued at $2bn in 2021, and industry experts expect it to grow at least five-fold to $10-60bn by 2030.

The study also found that the carbon credits companies are buying represent only a small proportion of overall action, accounting for an average of just over 2% of their total emissions.

Stephen Donofrio, managing director at Forest Trends’ Ecosystem Marketplace said: “Our analysis indicates that corporate voluntary buyers are using science to backstop their investments into a suite of climate solutions, including project-based carbon credits.

“Over the past decade, our market analyses have shown remarkably consistent results: that companies investing in voluntary carbon markets are outperforming their peers across a range of key indicators.”

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