There is research to show that climate washing is on the uptick along with a growing trend by companies worldwide to utilise carbon credits to offset greenhouse gas emissions. The trend (carbon offsetting) is driven largely by companies making net-zero pledges. However in the absence of standardised frameworks and regulations claims of greenwashing can undermine the credibility of carbon mitigation efforts examples: overstating the impact, under reporting harm to communities or environment

To understand the ecosystem better I spoke with Shreya Garg, a seasoned climate professional and auditor to share her expertise on the dynamics of the carbon markets. Independent auditors are key to building trust in carbon markets by provide objective assessment of projects, prevent misrepresentation of data. In our wide-ranging conversation we spoke about additionality, permeance, community impact…...

👉🏾 The evolution of the Indian carbon market from niche, compliance driven model to a more dynamic and voluntary environment

👉🏾   The burgeoning international interest in Indian carbon credits and what is fuelling the demand

👉🏾 How global net-zero commitments and increased scrutiny around climate disclosures are major factors driving the evolution of voluntary carbon markets

👉🏾 The difference between compliance and voluntary carbon markets and how they can shape corporate reputation and sustainable practices

👉🏾 Why greenwashing remains a huge challenge

👉🏾 The need transparency, integrity and community engagement and technology in the evolving landscape of carbon markets.

In our conversation Shreya highlighted the necessity for equitable benefit sharing and community engagement to restore trust in climate initiatives. We also spoke about the need for more women in the climate space, emphasizing the unique perspectives they bring to community engagement and project sustainability.

To know more about carbon markets and climate washing head to the podcast 👇🏾👇🏾👇🏾

Episode Transcript:

Sudha: Good morning, Shreya, Thank you for being a guest on The Elephant in the Room podcast today.

Shreya: Morning Sudha. it's totally a pleasure.

Sudha: Brilliant. So let's get started with a quick introduction to who you are and what you do.

Shreya: So I'm Shreya, I'm a climate professional for about 14 years and I've been working in the carbon markets. Right now I'm associated with different organisations, gold Standard there’s FCF, India and Isometric. And my main work is guidance around the carbon credit quality strategies and market synergies. Prior to this, I was vice president operations at Earthood where I led a team of auditors who were working on validation and verification of climate projects.

Sudha: Brilliant. How has the carbon credit market transformed over recent years and what are the main factors contributing to this change? Especially when we consider a diverse country like India. I read a recent report that the carbon credit market in India is booming.

Shreya: Definitely. I think the carbon markets have evolved to a great degree. They've evolved from a niche compliance driven market to a broader, more dynamic voluntary markets. We have seen that there are no commitments per se, that are being made by the countries, but there are global players that are making their move towards climate action. So I would say the growth has been driven mostly by net zero commitments and also there has been huge demand in the voluntary market. And not to forget the heightened scrutiny around climate disclosures that all have played a role in shaping the markets.

When we come to the state of carbon markets in India, I would say there has been a combination of factors that has influenced. We have our own carbon credit trading scheme that is now shaping the market these days. And of course all the corporates are taking their sustainability targets that is providing the demand for the carbon credits and there is international demand for Indian carbon credits also. And there has been an increased awareness amongst the Indian businesses on how to utilize carbon finance to fund their decarbonisation strategies.

Sudha: That's very interesting. So are there big differences between the voluntary and compliance markets and why are they important for businesses?

Shreya: Yes, they are I wouldn't say diametrically opposite, but compliance market as the name suggest they're government regulated. So they're more like cap-and-trade systems.

So they're mandated by the law and involve legal obligations. However, voluntary markets are kind of self-driven and it's more like self-motivation, how you go to the gym every morning. It is not a hostile or it is not a regime that somebody enforces on you, but it's your own action and your drive towards a goal that takes you forward. So, both of them are equally important because the compliance market gives you the flavour of the requirement. So they help shape influence the mindset on what's good and what's bad. And the voluntary markets, of course take the step forward into doing the right things.

I think in terms of businesses voluntary markets do offer the flexibility. We also get influenced by the reputation. We have a certain notion about a company which says it is climate focused versus a company which is not making any such statements. I think compliance market, we can say we present the regulatory risk management. Like, India has its own targets and we are focused on certain things more as compared to other nations. So I think compliance market gives an overarching framework.

Sudha: And then companies can choose to go beyond compliance and of course it will help with their brand. It helps the business mitigate future risk but also I think in terms of reputation, like you were saying, it adds a huge halo to organisations. I think a lot of them are compliance driven rather than driven by altruistic or thinking about the world and society.

How do you evaluate the quality of carbon credit projects? Seems so deeply difficult to do and how do the criteria impact the credibility of organisations? Because in today's world, like you spoke earlier, everyone says that we are climate friendly, we are signed on to net zero and we want to achieve certain targets.

And a lot of people put targets that are in 2040/50 where probably nobody is going to be there to check them on accountability.

Shreya: Or nobody would remember.

Sudha: Yeah. Or nobody will remember. So, how do the criteria impact the credibility of these organisations?

Shreya: Very valid question Sudha and I would say that quality is always multidimensional.

And when we talk about carbon credits, there's certain aspects like additionality, permanence, leakage, monitoring rigor, not to forget, the community impact, and also the alignment towards science. When I say alignment towards science it's basically the adherence to the methodology that is checked when we are doing the quality checks.

And I say this because I've worked as an auditor for most of my life. So, I would say it's credibility of a credit mostly hinges on to these criteria. And how well are they integrated in a project. A project with a weak additionality, there were couple of cases earlier, a company would have gone for solar panels, with renewable energy anyway, with or without carbon credit. So how additional is that project? So if you were going to go for that, what is the benefit or should you have rightfully received the carbon credits for those projects or not?

And these kind of are the bigger questions and they form the general impressions on what should be done, where is climate finance more suited to be used, for example, maybe community-based projects where the same amount of money can benefit a larger number of people.

So a lot of these are qualitative issues, but issues like permanence, leakage, and monitoring are quantitative, which can be seen and kind of set in black and white.

Sudha: So have you seen poor criteria impact credibility of projects. Like , you say that there is a project that is happening and there are criteria for measuring the quality and when somebody does, I'll use the G word greenwashing, then they are just, like you said there is a solar project that's already there, it's a part of the business and are you really doing something in order to contribute or is it something that's there as a part of your business?

Shreya: I think that is the unfortunate part of being an auditor is that we are bound by the standards. So we are limited by the scope of the standards which sets the requirements.

So I was