Building a More Efficient and Transparent Carbon Market with Toucan
At Toucan, we are dedicated to developing technology that enhances the efficiency and transparency of carbon markets. We understand that there are numerous factors to consider in order to equip the Voluntary Carbon Market (VCM) as a scalable instrument for climate action. One of the main challenges we face is the confusion surrounding the evaluation of meaningful climate actions. It is crucial for individuals and organizations to be able to quickly and independently assess the integrity of carbon credits. This is where rating agencies play a vital role.
To gain insight into the valuable work of rating agencies, we spoke with Polly Thompson from Sylvera. She shared how transparency in the VCM empowers people and organizations to take more efficient climate action. By ensuring transparency, we can evaluate the quality of carbon credits and hold actors accountable, ultimately leading to an improvement in demand quality and incentivizing credit quality on the supply side.
Let’s dive into our conversation with Polly Thompson:
Polly Thompson Explains the Role of Rating Agencies in the VCM
Q: What role do rating agencies play for credit developers (carbon supply)?
A: Rating agencies are essential in providing expertise and conducting detailed analyses at the project level to identify high-quality credits. They contribute to transparency by assessing credit quality and enabling buyers to make informed decisions.
Q: How can buyers (carbon demand) leverage rating agencies?
A: Buyers can collaborate with rating agencies to ensure accountability for credit quality. By working together, they can identify high-quality credits that have a positive impact on the climate and avoid greenwashing practices.
Q: How does a more transparent carbon market hold actors accountable and improve demand quality?
A: Transparency in the carbon market leads to increased trust and participation. Buyers can confidently invest in credits that align with their climate strategies and have a genuine impact. This incentivizes the development of high-quality projects and raises the overall bar for credit quality in the market.
Q: Can you briefly introduce yourself?
A: I’m Polly Thompson, a Policy Associate at Sylvera. Our mission is to bring transparency to carbon markets by providing trusted carbon data for genuine climate action. I work with the team focused on external relationships and market advocacy, aiming to build a high-integrity VCM.
Q: Why is transparency crucial in the VCM?
A: Transparency is essential because, for many years, the carbon market lacked insight into project performance and environmental impact. Sylvera was created to address this issue and provide transparency to buyers. Early signals show that transparency improves credit quality, enables informed decision-making, and directs investments towards projects with genuine impacts.
Q: What are the risks of participating in a non-transparent carbon market?
A: The key risk for buyers is the lack of visibility into what they are purchasing. Without transparency, they cannot be confident that the credits they buy represent genuine emissions reductions. This can lead to wasted spend, reputational risks such as greenwashing, and ultimately, failure to mitigate climate change.
Q: What trends have you noticed in the VCM?
A: The trends vary across sectors. Buyers in the consumer products sector are not only focused on offsetting emissions but also on telling a compelling story. They prioritize co-benefits and seek connections between credits and their supply chains. Scrutiny has increased, leading to more corporate disclosures and a focus on integrity. REDD+ credits remain popular, but buyers are becoming more cautious about baselines and over-crediting. Some buyers are also shifting towards removals credits.
Q: What are the benefits of a 100% transparent carbon market?
A: A fully transparent carbon market allows buyers to purchase credits with confidence, ensuring they achieve the impact they desire. It also facilitates price discovery and rewards projects that deliver genuine impacts. In the long term, this creates a positive incentive for quality, raising the overall standard across the market.
Q: What advice would you give to carbon credit buyers?
A: Buyers should conduct extensive due diligence and work with trusted partners. They need to acknowledge the complexity of the environment and continuously assess credit quality. Transparent communication about their actions and strategies is crucial.
Q: How can we make it easier for everyone to participate in the VCM?
A: Corporate climate disclosures, initiatives like TCFD, and regulatory frameworks play a vital role in encouraging companies to participate responsibly. By providing guidance and accountability, we can ensure wider accessibility and participation in VCMs and climate finance, which is essential for addressing climate change.