Why ‘Carbon Offsets’ Don’t Do All That They Promise

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Why ‘Carbon Offsets’ Don’t Do All That They Promise

1. What are carbon offsets?

A carbon offset is a promissory note to remove a certain amount of greenhouse gases from the air to compensate for emissions occurring elsewhere. The goal is to protect the atmosphere while allowing economic activity to continue. The general term “offset” was popularized long before climate change took center stage: The Clean Air Act of 1970, passed by Congress in 1970, stated that high-volume emissions would only be permissible if the polluter reduced emissions in other locations. While offsets have historically centered around the planting or protection of trees, which absorb carbon dioxide while growing, the use of the term has since been applied to a variety of sustainable efforts globally.

Most of the discussion on the subject revolves around so-called voluntary offsets, purchased by companies, organizations or individuals trying to meet self-imposed goals. Offsets are rare in the far larger compliance markets, in which polluters buy offsets to meet national or international regulatory requirements. Most such trading involves “carbon credits” granted by a regulatory body for cutting emissions over and beyond set targets. Offset transactions typically involve developers who come up with offset proposals, registries that validate whether the carbon savings are real and brokers who match offsets with buyers.

3. How big are the markets?

The size of the compliance market in 2019 was $44 billion, according to the World Bank. The most famous examples of compliance offset initiatives are cap-and-trade programs that limit a company’s carbon emissions unless they buy emission allowances from another entity that has not met its limit. The voluntary market is far smaller: about $300 million in 2018, according to Ecosystem Marketplace. BNEF analysts estimate that there are 2,750 voluntary implemented carbon offset projects verified with the four major registries. These projects have an emissions reduction capacity of 359 million tons of carbon dioxide equivalent per year, larger than France’s emissions. The actual market for offsets reflects a much lower number of actualized carbon reduction. In 2017, total carbon offset issuances removed only 47.1 million tons of carbon dioxide equivalent.

4. What kinds of projects are involved?

The most familiar kinds of offsets, called “sequestered emissions,” are projects that either protect or expand forests, restore deforested areas or involve tree planting on other types of land. Done properly, these projects can reduce atmospheric carbon, provide a range of other benefits to local communities and promote biodiversity. More recently, a small number of companies are offering offsets based on machines that capture carbon dioxide from the air. Other projects fall into the category of “avoided emissions,” such as a renewable energy project that replaces an otherwise carbon-spewing power plant, or projects that capture emissions of carbon from oil and gas refineries or methane produced from farm waste.

5. Are offsets effective?

It depends. A growing number of environmental scientists are raising doubts. The first problem is whether promised reductions are actually happening. Many certification bodies cut corners, which means the carbon savings may not bear fruit. Walt Disney Co. planned to offset their cruise emissions by reforesting the Alto Mayo forest in Peru. Starting in 2009, Disney poured millions of dollars into conservation efforts for the forest. While deforestation in the region is slowing down, disputes between the Peruvian government and local farmers over land rights have raised ethical questions. There are other doubts about offsets as well.

Assuming the certification process is watertight, the effectiveness of an offset project comes down to “additionality,” or the measure of how much extra good a project provides relative to that project not occurring. Projects that lower energy use or nature-based projects like reforestation tend to show higher additionality. Others, such as solar power deployment or biogas production, have lower additionality, because there’s a good chance these projects would have been developed even without the money from the offsets market.

7. What are the alternatives?

Scientists argue that companies’ first priority should be to cut actual emissions wherever possible, and only rely on offsets for the emissions that cannot be cut. Big technology companies are leading the way. Apple Inc. has promised to cut all of their emissions by 75% by 2030 and then offset the remainder. Unilever, for example, plans to manufacture 100% of their products using renewable energy by 2030 showing that greener business models are possible, and only start using offsets when monitoring and verification is a lot stronger. But for companies in other industries, the choices can be tougher. Airlines that have no alternative to burning jet fuel and oil and gas companies do not have the option of drastically reducing emissions without making major changes to their business model or investing heavily in alternative technologies.


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