CO2 certificates: savior of the climate?

Paris climate protection agreement

The Paris Agreement on climate protection has been in force since January 1, 2021. It replaced the Kyoto Protocol of 1997, which for the first time set binding targets under international law for greenhouse gas emissions in the industrialized countries. The fact that the Kyoto Protocol only obligated industrialized countries to reduce emissions describes a major difference from the Paris climate protection agreement. Here, it is recognized that climate change is a shared problem. All 195 contracting parties thus committed themselves to advancing climate protection activities in their countries and reducing CO2 emissions so that global warming is limited to 1.5 degrees Celsius if possible, but to a maximum of 2 degrees Celsius.

An important step in this direction is controlling the CO2 budget available to countries and regions. This is where CO2 certificates come into play! The Paris climate protection agreement regulates the basic structures for this, at state and corporate level. Each certificate represents one ton of CO2.

In Europe, there are two markets for the purchase of CO2 certificates. The mandatory market is where companies purchase their allowances, but there is also a voluntary market where companies can buy additional allowances to further improve their environmental performance. This gives companies flexibility and encourages innovation. For example, the industrial, building, transport and aviation sectors are obligated. Here, companies must buy pollution allowances (tons of CO2) from the EU or national registry in order to be allowed to emit CO2 in their business in the future. Over time, the number of allowances that can be purchased is reduced - and so are emissions. For CO2 emissions that continue, the voluntary market is the best option. The certificates traded here are intended to ensure that the quantities of CO2 are withdrawn from the atmosphere again or that emissions are avoided elsewhere. If the certificates meet the standards of the Paris Agreement and are not credited to the CO2 balance of the country of the climate project, one can speak of compensation, which companies or public institutions can credit to their own CO2 balance.

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CO2 compensation

Carbon offsets, also known as CO2 offsets, are a reduction or elimination of emissions of carbon dioxide or other greenhouse gases and are undertaken to compensate for emissions created elsewhere.

The Paris Climate Agreement has had an impact on the offset market in that a country offering offset projects must record CO2 reductions in its emissions inventory. This ensures that registered climate protection projects and their CO2 impact are only counted once towards the global balance - either in the country of the project or in the balance of the country/company purchasing the certificates.

In addition to the mandatory market, companies can take voluntary action and rely on these new standards. The Taskforce on Scaling Voluntary Carbon Markets (TSVCM), sponsored by the Institute of International Finance (IIF), estimates that demand could increase by a factor of 100 by 2050. According to this projection, the carbon market would be worth $50 billion as early as 2030.

In addition, the voluntary market can contribute to other positive effects, such as preventing pollution, improving public health, creating jobs, and promoting innovation in climate technologies. The voluntary market thus covers a broader spectrum than the mandatory market, which is focused purely on CO2.

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Regeneration

In our view, we can achieve an even greater and more important step with regeneration. We talk about this when further SDGs(Sustainable Development Goals of the UN) are fulfilled, especially with regard to biodiversity. This delimitation is important for us, as many positive ecological effects only emerge gradually and accordingly cannot be fully reflected in CO2 (equivalents). However, they are essential for our planet to recover and for us to transform to a sustainable economy.

In addition, there is the option of supporting climate projects that count towards the carbon footprint at the country level, not at the company level. For companies, this can be a very important financial commitment - under the name Climate Finance. Here, too, the international requirements for climate finance should be observed.

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Finance climate projects

With the amendment of the Climate Protection Act, Germany has tightened climate protection requirements for companies and initiated the goal of greenhouse gas neutrality by 2045. However, if emissions-intensive activities cannot be avoided, there is the option for companies to voluntarily financially support climate projects and thus make a positive contribution. Again, this offers the chance to select climate projects that also support other SDGs and thus give something back to our planet - in other words, they help to regenerate.

As 2zero, we pay close attention to which SDGs are met by the climate projects we work with.

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Reforestation in Paraguay

Global-woods-international has been implementing reforestation projects in southern countries for over 20 years. In northeastern Paraguay, 400 hectares of pastureland will now be reforested to provide an alternative to livestock and sequester carbon. Twenty years ago, global-woods-international sealed a memorandum of understanding to ensure legitimate recognition of the climate projects by the Paraguayan government and to allow the sale of carbon credits. The "Forestal Rio Aquidaban" project involves the reforestation of 300ha, combining sustainable pasture management. It is expected that up to 66,000t of CO2 will be sequestered with this climate project.

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Moorland Mecklenburg-Western Pomerania

Mecklenburg-Western Pomerania has an area of about 300,000 ha, which has one of the highest proportions of moorland in the German states. Of this, the majority is used for agricultural purposes. In the years from 1960 to 1990, extensive drainage measures were carried out in most of the moors to allow intensive agricultural use. However, this resulted in height loss and a significant release of climate-damaging greenhouse gas emissions due to peat mineralization. Since August 4, 2009, the peatland protection concept from 2000 has been updated under the title "Concept for the Protection and Use of Peatlands in Mecklenburg-Vorpommern". Now the association of Mecklenburg-Western Pomerania, Brandenburg and Schleswig-Holstein wants to offer carbon certificates for sale with MoorFutures in order to promote the rewetting of the moor landscape and thus regenerate the carbon reservoirs. One of the climate projects is the Königsmoor of Schleswig-Holstein.

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