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Shopify says lack of carbon offset rules keeps big buyers sidelined

·2 min read
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  • SHOP

Shopify (SHOP.TO)(SHOP) says carbon offsets need tougher standards in order to gain the trust of more large companies chasing net-zero goals.

Offsets offer a path for industries with tough-to-avoid emissions, such as airlines or cement producers, to financially back technologies or projects that lower pollution levels, like direct air capture or planting trees. Critics have raised concerns about the real-world effectiveness of these investments, and the transparency of transactions.

Shopify has committed US$5 million annually to carbon removal since 2019, saying it "intentionally overpays" in order to drive down future prices and improve demand.

Stacy Kauk, director of Shopify's sustainability fund, sees stricter guidelines as key to expanding the pool of big corporate buyers, which she says could help lower costs and make offsets more accessible to smaller businesses.

"Right now, there's a lack of standardization in the voluntary market. You can do whatever you want to meet your net-zero commitment as a company," Kauk told a virtual audience at a MaRS Climate Impact event on Wednesday.

"People are starting to recognize that some of the traditionally accepted offsets may not be in fact providing the climate benefit that they expected them to," she added. "You don't want to have bought offsets from say a forest production project, or an improved forestry management project, that is then subjected to wildfire."

Kauk says it's "difficult for corporate purchasers to get involved now," due in part to the significant burden of vetting the quality of offset investments.

"You don't necessarily have a chief scientist at your company to go and make sure that yes, that process is working," she said. "Where we benefit from standards is it removes that technological acumen that's required right now, and puts in place a trusted review process."

The United Nations' COP26 summit in Glasgow last month saw negotiators reach an agreement after six years of debate on rules for international carbon offset trading. While the deal doesn't impact voluntary markets, it has raised hopes for broader standards.

"Having some standards, and something that companies can trust, is going to enable that demand signal to really take hold in the market," Kauk said.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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