The Australian bank Macquarie Group Ltd. said it was turning down some 90% of the carbon offset projects it reviews.
Quality concerns were the primary reason cited by a bank official for the high rejection rate.
According to the alarming statement made at the Asia Climate Summit in Singapore, the vast majority of the 110 projects that have been reviewed by Macquarie since February this year fell well below the bank’s standards.
Specifically, the project failed to deliver on certain ‘elements’, including permanence, economics and quality.
One particular issue encountered during the review process was instances of the same land and same projects being claimed by different project developers, typically without the knowledge of local communities.
It is estimated that the global demand for carbon offsets is set to explode over the coming years, with some projections forecasting a 40-fold increase between now and 2050, reading the equivalent of 5.2 billion tons of CO2.
And with prices expected to reach around $120 per ton by mid-century, the appetite for a share of that market is growing just as rapidly.
Macquarie is also eager to be an active part of shaping a carbon-neutral future, but the bank has made it clear that it will not do so at the expense of quality over quantity.
Suraj Vanniarachchy, a vice president at the lender, said so explicitly during the Asia Climate Summit on Thursday: “We are not saying we want to develop 1,000 projects. We probably do one or two good ones.”
And Macquarie is by far not the only one faced with the lacking number of quality carbon offset projects.
Similar concerns have also been voiced by Malaysia’s stock exchange in relation to the launch of its own voluntary carbon market platform.
And another issue that that banks and other financial institutions are coming across is regulatory limits, as different governments are seeking to restrict the amount of exported carbon credits.