Rethinking Additionality: Paving the Way for a Green Transition with Carbon Markets
In the second article of a six-part series on carbon markets and their role in transitioning to a green economy, the focus is on rethinking additionality. Additionality is a key concept in carbon markets, referring to the idea that projects funded through carbon credits would not have happened without this financial support. However, the current approaches to assessing additionality are not conducive to driving the broader imperative of sectoral transitions.
The article suggests a shift in focus towards a more forward-looking and inspiring objective. Rather than solely considering whether a project would have been built without carbon finance, the focus could be on the adoption of new technologies and practices across entire sectors. The goal would be to ensure that these innovations gain enough traction to operate independently without the need for carbon finance in the future.
One approach to this reimagined additionality is the concept of positive tipping points (PTPs), where innovations become economically sustainable on their own. By identifying PTPs and leveraging insights from diffusion of innovations theory, carbon finance can be used as a tool to drive sectoral transformation.
While this proposal holds promise, there are considerations and challenges to address. Not all projects generate economic value beyond the sale of carbon credits, and some may require additional interventions in the future. Developing standardized methodologies for assessing additionality across sectors will require upfront investment, differentiation based on sector specifics, regular reviews, and transparency to ensure integrity.
The article emphasizes the need to design carbon markets for a future where carbon finance may no longer be necessary. By rethinking additionality and adopting a forward-looking model, carbon markets can play a crucial role in catalyzing sustainable sectoral transitions. David Antonioli, a net-zero transition consultant, explores this topic in more detail in his recently released report, “Financing the Transitions the World Needs; Towards a New Paradigm for Carbon Markets.” Each chapter of the report will be released weekly through July 9.