Carbon credit buyers today are presented with many black-and-white dichotomies and urged to pick sides. Reductions or removals? Tech-based or nature-based solutions? Yet these distinctions are nowhere to be found in the scientific literature on climate action, which makes clear we need all these activities to mitigate climate change. As COP30 approaches, companies have an opportunity to move beyond false dichotomies and embrace a climate action strategy that maximizes impact across all available solutions.
One tool to accomplish that is carbon credit portfolios, which blend the right amount of different credits so buyers can more effectively accomplish their objectives to reach net zero. Just like financial portfolios change in response to market conditions, so too carbon credit portfolios change in response to improvements in climate science and accounting. We will never have perfect knowledge of what a portfolio should look like, but uncertainty cannot be an excuse for inaction. If financial investors stopped investing because of uncertainty, the global economy would grind to a halt overnight.
To make carbon credit portfolios work, we must make use of the best information we have today to act boldly, with the expectation that we will adjust our actions over time. Here are a few guidelines for buyers to build a science-based carbon credit portfolio that helps achieve corporate climate goals.
Balance reductions and removals—with room for flexibility
When it comes to reductions and removals, we are balancing two mitigation imperatives in tension with one another. Emissions reductions must take priority in our climate response. The logic is straightforward: when a bathtub is overflowing, you turn off the tap before you mop up the floor. Action on deforestation and methane emissions, for example, represent immediate and urgent priorities.
At the same time, we need to grow our ability to remove unprecedented amounts of carbon from the atmosphere, and we cannot wait, or we won’t get to the scale we need to avoid climate catastrophe. Supply of high-quality, durable removals must increase 30-fold by 2030 and 1,000-fold by 2050 to meet IPCC-aligned pathways. Reaching that scale takes time and effort.
Buyers can balance this by crafting portfolios that include mostly reductions alongside a minority of removals. Over time, the balance should increase the share of removals until the portfolio is nearly all removals by their net zero year. The key is not to get caught up over the specific share of reductions or removals; that is the subject of scientific and policy discussions that continue to evolve. Buyers should choose levels that feel right for their company and then adjust them as we all learn more.
Consider, but don’t obsess over, durability
Different carbon credits have differing levels of durability. Here too, buyers face competing priorities. We need to scale climate action as quickly as possible, and solutions that are most scalable now have questions regarding their durability. Meanwhile, mitigations that have unquestionable durability are in their infancy, operating at small scales, and need time to grow.
Like reductions and removals, buyers should start with a portfolio consisting mostly of credits from solutions that are scaling now, paying less attention to durability, while also including some credits with higher durability. Over time, a higher portion of your portfolio should come from solutions with high durability.
One important note: when thinking of durability, do not assume that certain activity types are “low durability” and others are “high durability.” There are many questions about how different solutions can or should address durability concerns, and the science and policy on this is far from clear. Companies should rely on the best information available, but you should always keep your mind open to new information.
A Guideline You DON’T Need: Nature versus Tech
I won’t give much oxygen to the unscientific and counterproductive “nature versus tech” debates that dominate these conversations. Put simply, the atmosphere does not care whether mitigation is based on nature or technology. So too we shouldn’t care about how mitigation is produced, but instead about if the mitigation is doing the job it was intended to do. Keeping this in mind, as well as the fact that we need to activate and maximize every tool available to avoid climate catastrophes, both nature and tech solutions are important.
If companies follow the above guidelines, portfolios will end up correctly balancing nature-based and technology-based solutions without you having to spend energy worrying about this issue.
Guideline 3: How to Manage and Communicate Your Portfolio
Effective portfolio management requires disclosure of the balance between reductions and removals; regular recalibration as science, market conditions, and technologies evolve; and metrics for evaluating effectiveness of different interventions. Above all, just as in financial markets, it requires humility before the vast amount that we do not know, and willingness to adjust as conditions change. No financial portfolio ever succeeded by establishing fixed rules and never adjusting them in response to change. Carbon credit portfolios should follow the same path.
Guideline 4: Consider not Going it Alone
Some buyers may have in-house expertise while others don’t. Just as in financial markets, a variety of groups and initiatives are forming to help companies create and manage portfolios. One emerging example of effective portfolio management is the concept of the Permanence Trust: a third-party entity that takes on the liabilities associated with the durability of mitigation and manages those liabilities on behalf of buyers. There are many emerging examples in the market, including emissions liabilities management, buffer pools, and others.
Your duty as a buyer is not to figure this out on your own, but instead to establish common-sense principles for your portfolio, communicate those transparently, and above all take action. If relying on a third party helps you move faster, do it. Not every person manages their own financial portfolios; so too, there is no need for buyers to manage their own carbon portfolios.
A portfolio approach to corporate mitigation strategies is an essential tool companies can use in your own net zero strategies. If you take anything away from these guidelines, it should be this: you do not have to—nor should you—do this alone. The market is full of experts in the emerging science, accounting, and policy dynamics that continue to maximize its climate impact. Be part of the solution—and don’t wait for perfection to act.
