Carbon credit regulation at the heart of COP26

Criticized by some environmental activists, such as Greta Thunberg, but approved by many companies, carbon credits and their regulation are the subject of many issues and discussions at COP26. What are they?

Carbon credits challenged by environmental activists

On Wednesday November 3, environmental activist Greta Thunberg walked out of a round table discussion involving a number of players, including oil companies such as Shell and BP, as well as several banks. " This is greenwashing! " she exclaimed before leaving, as the discussions focused on carbon offsetting, and more specifically on corporate carbon credits.


Supported by the NGO Greenpeace, which shared the video clip in question on social networks, Greta Thunberg subsequently declared on her Twitter account:

"Shell, BP & StanChart are here in Glasgow to try to step up offsetting and give polluters a free pass to keep polluting. Their plan could ruin the 1.5°C target ".   

The activist criticizes the principle of carbon offsetting, which she says " risks undermining human rights and harming already vulnerable communities ".

But what are carbon credits, decried by many environmentalists and sought after by many companies? How do these carbon offsetting tools work, presented by some as a means of achieving carbon neutrality?

Lack of regulation for carbon credits

Carbon credits have been booming for the past 2 years. Still limited at present, this market is set to grow and could represent no less than $300 billion by 2030, and up to $1,000 billion in the decades to come, according to some estimates.

In concrete terms, a carbon credit is equivalent to 1 tonne of CO2 that is not emitted into the atmosphere, thanks to a reduction in the use of fossil fuels, a project to reduce these emissions or compensation to increase the storage capacity of carbon sinks, as part of a reforestation project for example.

Companies and governments in possession of carbon credits can sell them to other companies or governments wishing to invest in "green" projects, particularly in the field of renewable energies, or who need them to compensate for greenhouse gas emissions that could not be reduced.

The carbon credit market suffers from a lack of regulation, which often makes it impossible to assess the true climatic value of these credits. Too many standards and too many intermediaries have made it impossible to monitor the market. Prices are disparate, and a large number of carbon credits are very old and therefore no longer have any climatic benefit.

Although Article 6 of theParis Agreement provides for the regulation of carbon credits, in practice, the signatory countries have not managed to establish a common value and standards for these carbon offsetting tools. This lack of regulation could do considerable harm to the climate, and limit or even wipe out the climatic benefits of the various commitments made by governments.

This would be the case if, for example, all the carbon credits obtained under the Kyoto Protocol, signed in 1997, were allowed to be used, even though they are too old to be of any benefit to the climate.

Agreement seems far from being reached between the various countries, prompting the private sector to pursue discussions without governments. Mark Carney, former Governor of the Bank of England and founder of the Glasgow Financial Alliance for Net Zero, has set up a working group dedicated to the regulation of carbon credits.