Since it is still impossible to completely reduce greenhouse gas emissions, companies rely on carbon credit in order to achieve their carbon neutrality objective. Despite the ambient skepticism about the effectiveness of the system, the banks want to place themselves in the role of broker.
For example, the Bank of Montreal last summer bought Radicle Group, a developer of carbon credits that helps organizations measure and reduce their emissions. In September, TD Securities announced the creation of the Carbon Advisory Services unit. The company has also invested $10 million in the Terres boréales project led by the Nature Conservancy of Canada.
“The past 12 to 18 months has seen a greater integration of the carbon market,” said Managing Director of Carbon Advisory Services, Andrew Hall. We see that its growth has been very, very rapid. I expect this trend to continue. »
For its part, the Canadian Imperial Bank of Commerce is seeking to establish the foundations of a new technological platform for the voluntary carbon market called Carbonplace with other banking institutions.
In 2008, the Royal Bank of Canada launched “its global capacity for trading greenhouse gas emission rights”. According to her, carbon credit represents an important part of all commercial transactions. This market is expected to experience strong growth.
The Carbonplace project covers a wide variety of projects ranging from cleaner cookstoves to peatland conservation. The value of trade exceeded US$1 billion in 2021, a modest volume compared to systems already in place, such as the one in Europe which manages several hundred billion dollars.
The voluntary carbon market could reach $50 billion by 2030, predicts consulting firm McKinsey & Co. Former Bank of Canada Governor Mark Carney spoke last year of a scale of $100 billion. by the end of the decade.
Mark Carney is currently the United Nations Special Envoy for Climate Action Finance. He was one of the key figures behind the creation of the think tank Taskforce on Scaling Voluntary Carbon Markets in 2020, whose objectives were to provide solutions to the increase in demand.
In March, the group changed its name to Integrity Council for the Voluntary Carbon Market. It focuses its attention more on the credibility of the market than on its growth.
According to the Royal Bank, standardization will be important to build credibility and drive growth. TD Bank, for its part, still places its trust in the four verification standards already in place for years and in its own ability to analyze a project.
“We will be very selective in determining who we do business with. We’re going to make sure we’re using the best books available,” said Amy West, Managing Director and Global Head of ESG Solutions at TD Securities.
She adds that the institution will focus its efforts on sectors it knows well in North America. She hopes to instill trust and transparency in the system.
Opponents
The very concept of a voluntary carbon market does not have only supporters.
“Basically, this legitimizes and authorizes the permanent extraction of fossil fuels,” laments Kate Ervine, an associate professor at St. Mary’s University in Nova Scotia.
According to her, companies that present compensatory projects are not necessarily reliable, particularly in terms of financial or environmental results. This trading system is a distraction from what is really urgent: a direct reduction in greenhouse gases.
“Banks interested in this market want to provide their customers with an instrument from which they can profit. It has nothing to do with climate change. »
The Greenpeace group has never hidden its opposition to the voluntary market. Its Canadian head of the Nature & Food campaign, Shane Moffatt, even speaks of “greenwashing” about it. “It’s an obstacle to emission reductions,” he says.
The system only finds favor in its eyes if bona fide companies make serious reduction efforts but struggle with short-term problems. Otherwise, it’s just a simple panacea.
But the banks seem well aware of this. Thus, for the Net Zero Emission Banking Alliance, which brings together many international and Canadian institutions, says that offset credits should only be used in places where solutions are not possible from a technical or financial point of view. .
They are only a complementary way to achieve carbon neutrality.
“We will not achieve carbon neutrality without carbon offset credits. This system will not be effective until it is permanently in place. It should be complementary, measurable, verifiable and transparent,” said Levent Kahraman, Co-Head of Global Markets, BMO Capital Markets.