Use of carbon credits in legal cases causes controversy

The controversial practice of purchasing carbon credits to compensate for ecological damage has been endorsed by China’s supreme court, in a legal interpretation around forest-related civil disputes released on 13 June, effective two days later. 

The interpretation supports carbon credits’ use to fulfil liabilities for ecological harm in exchange for commutation of sentences, and also acknowledges their legality as collateral. The issuance of the opinion is branded by the supreme court as the judicial system’s answer to the carbon peaking and carbon neutrality goals announced by President Xi Jinping in September 2020.

The first case using the purchase of carbon credits as alternative compensation appeared in March 2020, when a local court in Nanping, Fujian province, dished out a more lenient sentence in an illegal logging case after the defendant purchased 40,000 yuan (US$6,000) of carbon offsets. In recent months, a cascade of rulings saw local courts in Guizhou, Sichuan, Shaanxi, Jiangxi and Fujian provinces making their local “firsts” in adopting the same model, sometimes in collaboration with local procurator’s offices, in forest-related cases and beyond. 

In May, another court in Fujian allowed the defendants to purchase 100,000 yuan (US$15,000) of “marine carbon credits” to compensate for ecological damage in an illegal sand mining case. Some local judges even expressed interest in exploring carbon credits’ application in cases related to wild animal poaching, in order to offset the damages to biodiversity.

In reports of such experiments, it is often unclear what particular carbon credit products were brokered by the courts. Often they are simply referred to as “carbon credits” without details on whether the product is in the national China Certified Emission Reductions scheme.

There are also hard questions from legal experts as to how the purchase of carbon credits can serve as “compensation” for past damage when the defendants, now owning them, can only offset future emissions. The use of carbon sequestration as a shorthand for ecological restoration, regardless of the wider damage to ecosystems and biodiversity, is also questioned by conservationists.

Read China Dialogue’s recent coverage of the reboot of China’s national carbon credit market