Climate change cannot be solved by governments alone. How can the private sector help?
Just before the start of this year’s round of international climate talks at COP23 in Germany, the UN’s Environment Programme published the 2017 edition of the Emissions Gap report. It delivers a stark message – that there is a “catastrophic climate gap” between where the existing Paris Agreement commitments will get us, and where science says we need to be to limit global warming to less than 2°C.
But with every challenge comes opportunity, and economic analysis such as the Stern Review shows that the benefits of avoiding the consequences of climate change far outweigh the costs of reducing greenhouse gas (GHG) emissions. As a result, it is in all our interests to close the emissions gap and constrain global warming to less than 2°C.
What can the private sector do?
Climate change is a truly global issue; the atmosphere does not differentiate between where GHGs are emitted or where they are reduced. This means we can focus emission reduction activities into low-cost options and be highly efficient with the finance we choose to dedicate to the challenge. These are the underlying scientific and economic principles of carbon offsetting and the voluntary carbon market.
But the benefits for business in using the carbon market go much further than just cost-efficient emission reductions. Carbon finance through offsetting delivers low-carbon sustainable development to operational areas, growth markets and supply chains.
It provides a mechanism to direct finance into emissions reductions activities, such as renewable energy, reforestation or energy efficiency. These reductions are independently validated and verified according to agreed methodologies, before being certified by standards organizations. This is the point at which carbon credits are issued and can be bought by companies and organizations wanting to take voluntary action. To use these carbon credits to offset emissions, they are then permanently cancelled on independently run registries, which provide a platform to track the flow of credits and deliver transparency to the market.
Consequently, the market represents a tool to put a price on carbon that reflects the cost of abatement. This has two benefits for organizations wanting to take voluntary action:
- By being cost-efficient, it allows companies to maximise their ambition and bridge the gap between their internal reductions and more challenging targets such as carbon neutrality.
- It delivers a price on carbon that can be used to drive transformation both within companies and in their supply chains. For companies operating outside compliance systems, the voluntary carbon market is the only mechanism to deliver a price that is linked to the cost of abatement.
But the market is not just a tool to help mitigate the causes of climate change. Many emissions reduction projects deliver non-carbon benefits such as health improvements, alternative livelihoods, water stewardship and biodiversity conservation. An Imperial College study, commissioned by ICROA, estimated that for every 1 tonne of CO2 reduced through an offset project, additional benefits totalling US$664 were also delivered. Through the simple process of buying carbon credits, organizations are directing finance to critically challenged economies and ecosystems. This means their funding is not only helping to mitigate climate change, but also helping communities adapt to its impacts and deliver sustainable development outcomes. Read the whole article here