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  • Writer's pictureCamila H. Kraus

LuxCS in Focus Series 2: Truths and Lies about the Carbon Market

We continue with the 2nd article of our LuxCS in Focus Series, an initiative launched on April 22, World Earth Day, aimed at sharing knowledge about the Carbon Market. On a daily basis, numerous stakeholders come to us with questions about the carbon market, as well as misconceptions about the role played by LuxCS as a certifier. In the following texts, we propose to clarify common doubts and resolve some misunderstandings.

Solar panels installed between trees. Can be part of carbon certification projects.
Photovoltaic power plants can be part of carbon credit certification projects.

1. Environmental actions are not "magical" transformed into carbon credits.

One of the main confusions we observe in the voluntary carbon market is the belief that any environmental action can generate carbon credits. However, this is not entirely true. Carbon credits are tradable financial assets, which represent one ton of carbon dioxide equivalent (CO2e) that has been avoided or removed from the atmosphere by a certified project. To generate these assets, it is not enough to have good will and interest in contributing to climate change mitigation. It is necessary to follow a series of procedures and technologies that prove the reduction or removal of emissions.

For example, voluntary initiatives such as the Green Rural Product Note (CPR Verde), the Payment for Environmental Services (PES) and reforestation with native species or the forest restoration of areas are excellent for the environment, but they do not generate carbon credits by themselves. Such initiatives may be eligible to generate carbon credits if they meet the certification requirements set out in the international codes of good practice (defined by institutions such as ICROA, IOSCO, CVMI, among others), which involve the preparation of a project design document, the choice of an approved methodology, independent verification by a certifying body,  the issuance and registration of credits on a recognized platform, among other steps.

Therefore, it is important to differentiate voluntary carbon offset actions from other environmental actions, which are also commendable, but do not follow the rigorous criteria that characterize carbon credit certification projects.

2. Is the carbon credit market just another profit tool for capitalist society, which does not solve the underlying problem of the climate crisis?

No, this is a misconception. The carbon credit market is a way to encourage the transition to a low-carbon economy, which values initiatives that contribute to climate change mitigation and generate environmental, social and economic benefits. Far from being a profit mechanism for capitalist society, the carbon credit market is a financing tool for sustainability, which promotes innovation, efficiency, accountability and climate justice.

Wooden and straw huts in an indigenous community. Traditional communities and peoples can benefit from the carbon market.
Traditional communities can benefit from carbon certification projects.

Some of the benefits that the carbon credit market brings are:

  • Improving the energy matrix: carbon credit projects encourage the use of renewable energy sources, such as solar, wind, biomass, and hydroelectric, which reduce dependence on fossil fuels and reduce greenhouse gas emissions. In addition, these sources generate jobs, income, and local development.

  • Society: carbon credit projects also generate social benefits, such as improving the quality of life, health, and education of the populations involved. Many projects involve vulnerable communities, such as indigenous peoples, quilombolas, riverside dwellers, and family farmers, who actively participate in the planning, management, and distribution of carbon credit resources. These projects strengthen the culture, identity, and autonomy of these populations, in addition to contributing to the reduction of poverty and social inequality.

  • Environmental preservation: carbon credit projects also have positive impacts on biodiversity, ecosystems, and natural resources. Many projects involve the conservation, reforestation, or restoration of degraded areas, which protect native fauna and flora, ecosystem services, and carbon stocks. These projects also help prevent or combat phenomena such as desertification, erosion, forest fires and floods, which affect the food, water and energy security of populations.

Therefore, the carbon credit market is not just another profit instrument for capitalist society, but rather a way of valuing actions that contribute to the solution of the underlying problem of the climate crisis, which is the reduction of greenhouse gas emissions. The carbon credit market is a way to recognize the economic, social, and environmental value of initiatives that promote sustainability and climate justice.


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