In 2023, the volume of credits exchanged on the voluntary carbon market was less than half that in 2022, and the market’s value fell from $1.9 billion to $723 million. Corporate buyers have been turned off by scandals: some project developers claimed credits for safeguarding trees that were not in danger of being cut down.
Nonetheless, there are many optimists in Brazil. In the deforested parts of Amazon forest of Brazil, many small and medium businesses are germinating, relying on carbon credit notes.Â
Rather than preserving standing forests, as many carbon-credit initiatives do, these companies prioritize large-scale replanting. One company named Re.green, is planting trees on 8,500 hectares (21,000 acres) of deteriorated pastureland. In May, Microsoft, which aims to be carbon zero by 2030, agreed to buy 3 million tonnes of carbon credits from re.green for an undisclosed fee over 15 years. Google is likely to announce an agreement with Mombak, another Brazilian reforest company in the coming days, marking its first entry into reforestation credits.
According to believers, there are two compelling reasons to invest in the carbon credit market. For starters, most of the world’s largest publicly traded corporations already have emission reduction targets in place, as shareholders and authorities pressure them to go green. Heavy industries, aircraft, and energy-hungry technological companies cannot completely reduce their emissions, thus in order to attain net zero, they will have to pay to remove carbon dioxide from the environment.
Second, many governments are enacting stricter emissions regulations. The World Bank lists 75 carbon-pricing schemes around the world, accounting for an estimated 24% of worldwide emissions, up from 7% a decade earlier. Although the voluntary market is distinct from the compliance market, they do occasionally overlap. California’s cap-and-trade system allows participants to use credits obtained on the voluntary market.
Human-led efforts remove only 2 billion tons of carbon dioxide from the atmosphere each year, primarily through reforestation. To keep global warming to 1.5°C over pre-industrial levels, researchers at the University of Oxford estimate that the rate of extraction must increase to between 5 billion and 10 billion tons per year by 2050. According to McKinsey, the carbon-removal business would be worth $300 billion to $1.2 trillion if it reached 10 billion tons.
Carbon-dioxide removal can be accomplished naturally, such as by planting trees or restoring wetlands, or through technological means, such as direct air capture and storage (DACS), in which machines remove carbon dioxide from the air. Scammers are less likely to target technology-based projects. They are intended to store carbon dioxide eternally, for example by burying it underground, whereas forests can be burned or cut down. However, they are still very pricey. A tonne of carbon dioxide sequestered via DACS costs roughly $1,000, whereas planting trees costs $10-40.
Source: Economist
