Dutch carbon credit trading companies and Leaving Fossil Fuels Underground (LFFU): The Voluntary Carbon Market mechanisms, Strategic perceptions, and Societal impact
Abstract: In 2020, the Voluntary Carbon Market (VCM) and compliance markets facilitated the combined retirement of approximately 3095 million metric tons of CO₂ equivalent (MtCO₂e) in carbon credits. However, global emissions totalled 50.1 GigaTons (GT) CO₂e in 2020 making this number small in relative terms. However, the small scale of carbon credit markets could create higher integrity of credits leaving carbon credits more as a complementary rather than a central solution to LFFU. Therefore, carbon credit markets’ effectiveness in reducing fossil fuel reliance remains uncertain. Furthermore, despite efforts to phase out fossil fuels, carbon trading mechanisms may enable continued emissions rather than supporting Leaving Fossil Fuels Underground (LFFU). This research addresses the following knowledge gaps: a) the role of carbon credit markets and (b) trading companies in Leaving Fossil Fuels Underground (LFFU); Lastly, c) a lack of analysis on the Voluntary Carbon Markets (VCM). The main research question of this thesis is thus: How do carbon credit market mechanisms and trading companies support or constrain society in leaving fossil fuels underground?
In answering, this thesis applies institutional development theory, inclusive development, and transition pathway analysis. The synthesis of these theories aids to assess the resilience and limitations of carbon credit markets in addressing LFFU. This case study focuses on the Netherlands as being one of the highest per capita CO₂ emitters, with per person around 34% higher than the EU average. This study employs 17 semi-structured interviews to evaluate how these actors influence carbon credit market policies and market structures. The results conclude the following: a) there is significant variation in the quality and types of carbon credits, making it difficult to assess which projects genuinely support the goal of Leaving Fossil Fuels Underground (LFFU); b) how market actor perceptions and interests maintain the status quo and resist to systemic change; c) without structural change, the global carbon credit market lacks the capacity to fully achieve LFFU.
However, EU regulation through the Carbon Removal Certification Framework (CRCF) could bring structural change. Therefore, this study argues that in order for carbon markets to be able to successfully change society they must not reduce GHG to zero but rather be able to effectively communicate the social value of reducing emissions to an extent that their influence causes society to make the transition to renewable energy sources.