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(Bloomberg) — Tencent Holdings Ltd. and Contemporary Amperex Technology Co. Ltd., two of China’s most valuable companies, are joining a new initiative intended to bolster corporate demand in the slowing market for carbon credits.
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The technology giant and electric vehicle battery leader will collaborate with firms including Mitsubishi Corp., Vale SA and Osaka Gas Co. under the Action for a Resilient Climate Coalition, a Singapore-based nonprofit launched Tuesday. It aims to help drive the use of high-quality credits with a target for members to jointly buy at least 10 million metric tons by 2030.
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Carbon credit purchases by corporate buyers were about 153.5 million tons of carbon dioxide equivalent last year, the lowest total since 2020, amid concern about potential reputational risks due to greenwashing claims, according to BloombergNEF.
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Demand has fallen further this year as energy companies focus on managing the impacts of the Iran war, BNEF said in a May 1 report.
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“A lack of demand commitment for carbon credits generated from high-quality decarbonization projects is holding back investments into these carbon projects,” said Frederick Teo, chief executive officer of GenZero, a Temasek Holdings Pte.-based investor and a member of the new coalition.
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A carbon credit is supposed to represent one ton of CO2 that’s been avoided, reduced or removed from the atmosphere through projects ranging from reforestation to direct air capture. Demand for such credits stems from companies struggling to deliver the outright cuts to greenhouse gas emissions needed to align with targets to limit the increase in global temperatures to 1.5C.
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Yet the market for carbon credits has come under intense scrutiny in recent years after a series of projects were found to have exaggerated their climate benefits, and some companies have revised climate strategies to end their reliance on the products.
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“Greenwashing has been a very major concern and that has deterred a lot of investors’ participation,” said Ma Jun, president of the Institute of Finance and Sustainability and a former chief economist at the research bureau of People’s Bank of China.
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The new Singapore-based group will partner with the Symbiosis Coalition, a similar effort backed by companies including Alphabet Inc.’s Google, Meta Platforms Inc. and Microsoft Corp., and which aims for collective purchases of 20 million tons of high-quality nature restoration carbon credits by 2030.
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“The carbon market has immense potential to drive necessary climate finance, but it must be built on a foundation of absolute trust and scientific rigor,” said Xu Hao, Tencent’s vice president of sustainable social value and head of climate innovation.
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