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 just having a call yesterday where I was saying that, as auditors, when we visit the communities, we do check if they are aware of the carbon project, if they are aware of a grievance mechanism in place. However it does not fall into our purview, how much money have they received from the project? What is the frequency of money that they have received? So there's certain aspects which do not fall under the scope of a carbon audit. So I would say there you can say a poor criteria. I mean, I wouldn't say poor, it is like a canvas which keeps growing.

I think the time we are going to see more added criteria as to auditing in scopes, I hope.

Sudha: And what are the biggest challenges you see Shreya in ensuring the accuracy and integrity of carbon credits? And how can these challenges be addressed? What have you seen so far in your career?

Shreya: Based on my career I mean, there's a lot of literature out there open for public right now. So I would say overstated baseline and emission reductions is like the biggest elephant in the room. Which accompanied by poor monitoring and verification, if you are saying something and which is not backed up by data is definitely questionable.

Then, another issue that I saw with the growing, land-based projects was the issue of double counting. Where same land parcel could be part of more than one project. So, I mean, double counting goes on very different levels, but this is probably the simplest example that I can give right now.

And, also, the local community education seems to be what is impacting the credibility of carbon right now, carbon projects rather. They have very little understanding of the project and as an auditor I see that as the integrity question also, because if they don't understand the importance of doing certain things, it's very difficult for them to follow that practice.

Sudha: How do you ensure it is sustainable Right? And it continues with their buy-in and not just keeping them on the sidelines. So you are an auditor. I mean, what is the role of auditors in verifying the quality, of these carbon credits and what are the key aspects of a robust carbon auditing process?

Shreya: Definitely. So I think, I wouldn't say these carbon audits is something new that has incorporated in the system, and few people may question that auditing has always been there, so how, how does it add value then? With it's existence, the quality has been low but I think it is always driven by the requirements. So whatever the ask is that becomes part of the checklist of the auditor. So if the ask is elaborate, then the checklist will be elaborate. And audits are very important to identify if the projects are real, if they're measurable, and if they're verifiable.

So I think auditing is very important and the important aspects of auditing, I would say that the baseline assumptions like you would say that before the pre-project scenario, like what was happening before the project came into be, and how has a project modified that practice, which is going to lead to emission reductions.

And ground truthing. So the physical site visits where the ground truthing also happens.

Sudha: That's very interesting because when I came for the Planet Dialogue Cognishphere event, I just read up on I think is it Verra where they had done a lot of double counting and they were called out for lack of transparency, et cetera.

Shreya: That's true. So Verra is a registry, it's a voluntary carbon registry based out of the US which is the largest in the world. So Verra takes up about 60% of the total carbon projects share. And there have been certain malpractices which have been highlighted for the projects. Like, I wouldn't say Verra’s malpractices, but the projects that had over hyped up there, numbers in terms of impact on the community's, impact of land and they will have inflated baselines also. So if I can give you an example.

There is avoidance of deforestation projects where, a company goes and say like, okay, this forest, no intervention is going to degrade because of all these factors. And there's a rate of deforestation that is presented which becomes the basis of their emission reduction calculation.

In certain cases, it was found that those rates were taken very high. It was presented that these forests are going to degrade in the next five years, if not intervened. So they led to inflated emission reduction. So those kinds of projects came into being, I mean, like every market there are bad players, but, I think Verra can take some of that blame by letting these projects go through you know, not having enough reviews.

But times are changing now all the registries have increased their scrutiny. I would say that there is more transparency in the market, so all the project documentation are available for public view on the registries now.

Sudha: That's very, very interesting and this is something we can speak about for a long time.

But let’s proceed to the next question. So, regulation across the world is like evolving and changing so rapidly and most organisations are still on the learning curve. Do you believe there is need for standardisation and if yes, where are we on that journey? Like on ESG reporting there's so much call for standardisation because companies are having to do a GRI, you do BRSR, you are doing something else SASB, and TCFD what is the process for standardisation? Are we trying to make it easier for people or more complex?

Shreya: That's very difficult question [Laughter] and I can just give you my opinion which might be in agreement with some of the industry people and may not. But I do think that there's no one size fits all approach or solution, because when it comes to regulations given the diversity of the country, the geographies, the capabilities and priorities, they're so different.

So how can we have one thing that is the most important you know, globally. So I think, that way standardisation may not work in the global scenario, but that said, a common ground is essential for building trust and, interoperability, like you said, are we making it easier or difficult?

So in order to make it easier we should all speak in the similar language. It's not like, each registry having its own terminology and making it more confusing, it is only going complicate matters. If a project can be named project in all the registries, that would make a project developer's life much easier, and easier for the buyers to understand.

But, I could think of recent times we have frameworks like I-C-V-C-M or Carbon Principles and we have voluntary carbon market initiatives, claim codes, which are kind of setting the priorities and the common principles that should be part of every standard.

Sudha: That makes a lot of sense. Shreya, you've worked in the carbon markets right from the start of your career. Right? So can technology be used to increase transparency and traceability and efficiency of these markets?

Shreya: Yeah, I think technology has come long way into, helping projects, how they report.

And now in the last five years we've seen this increased interest in nature-based projects, which were very complicated. But with technologies like satellite monitoring and when we talk about double counting and traceability. There are blockchain for registry traceability you know, carbon credits, like how do you tell if something which has been retired does not enter the market again. So, blockchain has also come into play for easier monitoring and verification. There are digital monitoring MRB platforms right now that are available. And there's certain companies that are specializing and have AI driven anomaly detection models.

So I would give examples of these land-based projects, again nature-based projects. So there are companies which can just through satellite images can differentiate an eligible piece of land from an ineligible piece of land, which required a huge amount of manpower to assess earlier.

Sudha: Wow. that's amazing.

Shreya: Yeah, so I like to believe that the carbon market is going through the growing pains right now. And I think with technology definitely is going to help it. And there are a lot of players which are focusing on integration of technologies into providing solutions, and I think which are going to help in integrity and accountability.

Sudha: Yeah. I think technology as an enabler, in this process is a great opportunity. We spoke about the carbon registry inflated claims, double counting, reporting, and this has sort of undermined the integrity of carbon markets and reduced public trust.

 The rhetoric from the US on climate change, of course is not helping. They've rolled back so many things and other countries have seen and they're doing the same. How can we increase trust and make people see that what is being done currently is genuine climate action