Carblecast
Can you use carbon credits to make your coffee and cocoa net-positive?
Carble
October 12, 2023
Measure, model, and mitigate carbon emissions and deforestation with Carble.
In Episode #2 of the Carblecast, Sander Reuderink asks if you can use carbon credits to make your coffee and cocoa net-positive. Immerse yourself in a 5-minute opinionated carbon credit explanatory: from growing skepticism toward carbon credits to a deep-dive into the GHG Protocol’s New Land Sector and Removals Guidance. Or scroll further to read our written explanation on carbon credits and net zero.
When companies in the coffee and cocoa industry reach out to us, many of them ask if they can use carbon credits to finance their transition to a net-positive supply chain. Using the voluntary carbon market to finance your climate goals sounds like a brilliant idea. But is it really so simple?
We have all seen the news articles (here and here) criticizing the carbon markets. The articles focus on the low quality of carbon credits. But there is a bigger problem with carbon credits. Namely, every credit needs a debit.
For instance, imagine you are a coffee trader. You are able to remove carbon from your supply chain, and you can sell these removals as carbon credits to an airline. Now, can you both include the removals within your carbon reporting?
The GHG Protocol’s New Land Sector and Removals Guidance is the draft for a new standard by which all major commodity companies will have to report very soon. Chapter 3, section 2.13, reveals an interesting passage that sheds light on the usage of carbon credits and offsets.
To avoid double counting of credits used as offsets or compensation, companies shall deduct emission reductions or removals associated with the sale of credits used as offsets from the company’s GHG target accounting (3.2.13).
The implications of this sentence are huge. And here’s why.
Let’s continue with the example of being a coffee trader. You’ve committed to net zero and you want to fund your transition with carbon credits. Currently, you trade 100 tonnes of coffee (5 container loads). At the start of your carbon credit project, your annual carbon emissions are 1000 tCO2e - 700 caused by land-use change.
You switch to regenerative farming and remove 100 tCO2e from the atmosphere. Then, you certify and sell your removals as carbon credits to an airline wanting to offer passengers an option to offset their emissions. So far so good. But the problem starts when you are preparing your GHG reporting.
Following the guidance of the GHG protocol, you have to deduct the removals associated with the sale of the credits. This makes sense since otherwise both your company and the airline would include the removals in your reporting, which would be double counting - which, unfortunately, still happens within commodity industries.
But after you deduct the removals, that you sold as carbon credits, your annual GHG reporting looks the same as your base year (a reference point in the past with which current emissions can be compared). And you’ve made no progress towards net zero. But it gets even worse when you understand which types of carbon credits you can choose from.
There are two types of carbon credits: ex-post and ex-ante. In the case of ex-post, the certificates are issued after the climate benefits have been achieved. It gets a bit weird and complicated in the case of ex-ante carbon credits: here, the certificates are issued in advance of climate benefits being achieved.
The GHG Protocol New Land Sector and Removals Guidance does not specify how companies should account for the sale of ex-ante credits in their supply chain. But, following the same logic, you would need to deduct removals that would happen in the future from your current year’s reporting. This means you could end up doing significantly worse compared to your baseline year.
The GHG Protocols New Land Sector and Removals Guidance addresses a big flaw in the way commodity markets used to perceive carbon. Because, as the GHG protocol makes clear, every credit needs a debit. This makes it completely unattractive for companies to use the Voluntary Carbon Market to finance transitions to net-positive commodities. But what should commodity markets be doing instead?
At Carble, we believe that the road to net zero starts within the supply chain. As all actors within the market work together, we can start mitigating emissions and work toward a net zero future in 2050. Learn how we support tropical commodity buyers to achieve their climate goals.
