Climate finance: carbon offsetting is not the (only) solution

While the COP 26 in Glasgow promises tense discussions on the subject of climate financing, Planète Urgence initiated a study in the summer of 2021 to better identify the financing issues of actors who act on the ground, and in particular NGOs and foundations. This study was carried out and distributed with the support of the Climate and Development Commission of the Coordination Sud network of associations, the French Coalition of Foundations for the Climate and the Climate Action Network France.

It demonstrates the urgent need to rethink climate financing by companies to better serve the general interest.

 

 

A- The voluntary carbon offset market is growing fast

 

The voluntary carbon market for the private sector is growing exponentially. It has grown from around 40 million tonnes of CO2 generated and sold in 2010 to over 250 million tonnes in 2020.
In 2019 the average price per tonne of carbon was $3.78.

Source EcoSystem MarketPlace : number of carbon credits generated and sold between 2005 and 2020 worldwide

 

In France, the market is following the same trend with a 260% increase in credits sold between 2016 and 2020 with almost 7 million credits sold in 2020 at an average of €5.4.

 

Source Info Compensation Carbone : Carbon Offsetting 2020 Status Report

 

B- The carbon market is not always adapted to the challenges of project developers

 

41 public interest organisations from 18 countries – mostly associations, foundations and endowments – responded to a study carried out by Planète Urgence on the challenges of financing projects with an impact on the climate.
According to the study, 71.8% of the organisations state that current financing is not adapted to their needs in terms of financing projects with an impact on the climate.

Source Planète Urgence : Study 2021 on climate finance issues for non-profit organisations

 

Despite these issues of access to finance, only 24% of organisations have bought or sold carbon credits, the others are recalcitrant to engage in it, as this carbon market is currently considered too complex and incompatible with quality projects.

Source Planète Urgence : Study 2021 on climate finance issues for non-profit organisations

 

Resellers themselves are aware of the mismatch between voluntary carbon finance and the needs of project developers, with only 37% believing that the market is suitable.

Source Info Compensation Carbone : Carbon Offsetting 2020 Status Report

 

C- The general interest actors would like to see in-depth reflection on the emergence of carbon finance that is consistent with the objectives of sustainable development

 

Source Planète Urgence : Study 2021 on climate finance issues for non-profit organisations

 

3 alternatives emerge as a priority for major projects:

  • Climate philanthropy with a label
  • .

  • Certified carbon credit with a quality label on benefits other than climate
  • Hybrid sponsorship and carbon finance

For small projects, the majority of stakeholders stress the role of sponsorship as a legitimate alternative to carbon finance.

 
For 80% of stakeholders, full transparency of methodologies and figures for measuring climate impacts will be essential to propose alternatives to voluntary carbon finance; they are also in the majority to advocate the creation of a common repository of climate indicators.

 

Conclusion

This study therefore shows the strong inconsistency between a carbon finance market that is exploding but does not meet the challenges of project developers in terms of the complexity of access to financing and the quality of projects that can be financed. It is therefore urgent to rethink climate finance as soon as possible by ensuring that climate finance meets the real needs of projects with a climate impact.

 

 

Data sources:

Study conducted between June and August 2021 by Planète Urgence with the support of Coordination Sud, the Coalition of French Foundations for Climate and the Climate Action Network, among 41 NGOs, foundations and social enterprises with an impact on the climate.

2020 inventory of carbon offsetting, Info Compensation Carbone