Episode 33 - Carbon Offsets
What Are Carbon Offsets?
Carbon offsets compensate for emissions by financing emissions-reducing projects somewhere else in the world. So, to take an example from Umair Irfan’s Vox article: let’s say a steel mill wants to reduce its emissions. Rather than waiting years to install new zero-emissions technology, the steel mill could start mitigating its emissions immediately by buying carbon offsets.
Types of projects
Deforestation prevention
Renewable energy projects, biogas projects
Methane capture
Energy demand projects: energy efficiency, like distributing efficient cookstoves
The cost of carbon offsets varies, but typically the price is around $12 USD/tonne of CO2 offset.
For context, a flight from Toronto to Vancouver generates about 0.6 tonnes of carbon. I used the Less Emissions calculator for my upcoming Ottawa – Edmonton roundtrip flight, and it came out to 1.1 tonnes of carbon, which cost $27 CAD to offset through a Gold Standard-certified international offset project (there was a cheaper option available but it was CSA-Standard Certified). The Carbonzero calculator estimated 1.45 tonnes for the same flight path, so I’m not sure what accounts for the difference there.
The average Ontarian uses about 11 tonnes of carbon annually. Half of that total comes from driving a car (2.2 tonnes), home heating (1.7 tonnes), air travel (1.4 tonnes), and eating beef (0.5 tonnes).
As a consumer, you can also buy some goods and services that include carbon neutrality as part of the price.
Who Does Carbon Offset Projects?
It’s a combination of businesses and NGOs.[1]
Who Is Using Carbon Offsets?
Globally, there is about $300 million per year in sales of voluntary carbon credits, trading almost 100 million metric tons of carbon.
The compliance offsets market (the market for carbon credits used to meet legally binding caps on carbon in schemes like the EU’s Emissions Trading System) is much larger, at somewhere between $40 billion and $120 billion.
Heavy emitters lean on carbon offsets more than other industries, because it is more difficult for them to decarbonize without a fundamental change in their business models – so, sectors like agriculture, aviation, and oil and gas.[2] Airlines are among the most vocal sectors on using emissions offsets.[3]
There is over 100 markets for carbon offsets already.[4] A lot of carbon offsets are built for compliance markets – so that companies can meet emissions targets when there is something like a cap and trade system in place.[5] For example, California’s cap-and-trade program allows companies to offset a small percentage of their carbon output with forest preservation projects in North America. The three biggest markets for carbon offsets are China, India, and the US.[6]
Consumers buy offsets, often by clicking the option when buying an air ticket. But others will purchase offsets as part of a commitment to carbon neutrality or to offset big carbon expenses like air fare. Governments also buy carbon offsets. For instance, Norway is the world’s largest supporter of the REDD scheme.
Major Carbon Offset/Credit Schemes
There are at least three United Nations schemes. The largest carbon offset scheme is the Clean Development Mechanism, a program that came out of the 1997 Kyoto Protocol. The Clean Development Mechanism has a poor track record of meaningful reductions in emissions.
Joint Implementation is the other offsetting mechanism under the Kyoto Protocol. It enables countries with emissions reductions commitments to generate Emission Reduction Units (ERUs) and to transfer them to other countries. Joint Implementation is responsible for issuing one-third of all Kyoto offset credits. There are serious weaknesses with JI.
Then there is also the UN Reducing Emissions from Deforestation and Forest Degradation (REDD). And a UN Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) will start in 2021.
There are other government-run schemes, such as the California Air Resources Board forest standard and new tropical standard. Canada is planning to establish an offsets market in the future. And there are a bunch of private carbon offset companies, such as Less and Carbonzero.
Principles of Good Carbon Offset Programs
From a positive point of view, carbon offsets put a price on pollution. Which can be a good thing and is the justification behind carbon taxes and other market-based climate policies.
For carbon offsetting to address climate change, there are several things that offsetting schemes must accomplish: additionality; third-party verification; permanence; avoiding leakage; social and environmental safeguards; and offset limits.
Additionality
It is important that carbon offset projects are effective, but that is not enough. That’s why carbon offsets experts talk about something called additionality. Additionality means asking: would this have happened anyway? Is the revenue from carbon offsetting actually supporting brand new decarbonization efforts? You have to be able to count reductions that wouldn’t have happened otherwise.
Additionality is the biggest measure of quality in a carbon offsetting project.[7] Clean energy projects have low additionality. Renewable energy projects already generate renewable energy certificates and they already have subsidy support. Although clean energy projects are the lowest quality type of carbon offset project, they are the biggest category of carbon offsets.[8]
You can much more directly claim additionality for reforestation projects (tree-planting).[9] Energy demand projects also have high additionality – that is things like clean cookstove distribution and energy efficiency projects.[10]
Some offset providers guarantee emissions savings, which essentially means that if the emissions savings don’t occur or if they turn out not to be additional the provider would make up the loss with another project.
In 2015 a French study found that 37% of REDD projects overlapped with existing protected lands like national parks.
Measurement and Third-Party Verification
Like with any social or environmental standard, you want to ensure that the standards are being verified by third-party auditors. Measuring emissions savings can be tricky. Some projects are much more difficult to measure than others. A methane capture project simply involves installing a sensor at, say, a coal mining operation. For forestry projects, you have to use satellite imagery to make sure that tree is still standing year after year. That’s difficult and expensive to do.[11]
Permanence
Permanence means: if you reduce the carbon with this project, is it going to stay sequestered? This is one of the main critiques of reforestation offsetting projects. Forests could be cut down or destroyed before emissions reductions have been generated. If you cut down a tree before 100 years, all of that carbon gets released into the atmosphere.[12]
Avoiding Leakage
Leakage refers to a situation where emissions reductions in one area result in greater emissions somewhere else. For example, forest protection somewhere could lead to logging somewhere else.
Social and Environmental Safeguards
Carbon offsetting should have safeguards to ensure that the project isn’t harming communities or undermining other environmental objectives. Without these safeguards, carbon offset projects can have negative impacts on local populations. For instance, a windfarm project displaced local farmers and didn’t generate the expected amount of power. And a 2015 green dam project in Guatemala was linked to the killing of six Indigenous protesters, two of which were children. That project is funded by the World Bank and will produce tradeable carbon credits.
Problems with Carbon Offsetting
The biggest problem with carbon offsetting is that a lot of projects fail to meet the principles described above. In particular, most carbon offset projects fail to meet the standard of additionality. But here are a few other common critiques.
Measurability and Pricing
Measurability issues can drive up the price of a carbon offsets project. As a result of measurability issues, reforestation projects – which are some of the potentially most effective projects from a sequestration perspective – are largely left out of carbon offset schemes.
Is this a Racket? A Scam?
Opaqueness of pricing of carbon offset projects undermines the legitimacy of the whole market. Companies have an incentive to choose a baseline scenario with inflated emissions, and that has occurred.
There is also evidence of fraud, exaggeration, and double-counting. In some cases, projects never get carried out – such as the example of a tree planting project in Panama. The carbon offsetting market continues to improve. While a decade ago, carbon offsets were a “wild west”, today there is a bit more structure.
Still, though, emissions reductions are overestimated in about 85% of offsets projects. Only 2% of projects have a high likelihood that emissions reductions are additional and are not over-estimated.
Moral Hazard
The climate advocate George Monbiot famously compared carbon offsets to indulgences in a 2006 Guardian column. His point was basically that carbon offsets make consumers and businesses complacent about the need to reduce our consumption. From that article:
“Any scheme that persuades us we can carry on polluting delays the point at which we grasp the nettle of climate change and accept that our lives have to change. But we cannot afford to delay. The big cuts have to be made now, and the longer we leave it, the harder it will be to prevent runaway climate change from taking place. By selling us a clean conscience, the offset companies are undermining the necessary political battle to tackle climate change at home. They are telling us we don't need to be citizens; we need only to be better consumers.”
One thing that I think is pretty funny about this comparison is the fact that the Vatican used carbon offsets to declare itself the “first carbon-neutral sovereign state” in 2007. (Of course, the project they paid for never actually got done, so…)
There is also a cheeky site called CheatNeutral that pokes fun at carbon offsets by allowing you to be infidelity neutral by funding someone else to be faithful.
Some people have taken aim at these analogies. David Roberts at Grist has said the following about the indulgences comparison:
“If there really were such a thing as sin, and there was a finite amount of it in the world, and it was the aggregate amount of sin that mattered rather than any individual's contribution, and indulgences really did reduce aggregate sin, then indulgences would have been a perfectly sensible idea.”
But there is still the question of whether people (and businesses) use offsetting as a way to avoid changing other behaviours.
Reliance on Capitalism/Market Solutions
This argument is basically:
“Look, I think that we should save forests. Totally agree that we should save forests. I just don’t think that we should use capitalism to save forests. I don’t understand why everyone wants to use capitalism for everything.”[13]
Incrementalism
Carbon offsets can’t actually reduce emissions. At best, all they do is cancel out emissions that have already been produced. That can be a good thing, but when you take into account time horizons it is actually a big problem. Some offset projects – tree planting, for instance – can take decades to have emissions saving effects, if they ever do. And given the lock-in effects of climate change, not to mention the risk of run-away climate change, it might all be too little, too late. Carbon offsets have been around for decades, yet emissions are still increasing.
Low-Hanging Fruit
Offsets are cheap in part because there are lots of ways to reduce emissions very inexpensively. We could refer to these as quick wins. But what happens when the low-hanging fruit of emissions savings are used up?
Carbon Offset Certification Schemes
One way to ensure that you are buying carbon offsets that adhere to the principles set out above is to get offsets that adhere to a respected certification standard.
Voluntary Gold Standard
Voluntary Gold Standard (VGS) -certified offsets are audited according to the rules set out in the Kyoto Protocol. The Gold Standard is the highest global standard for carbon offsets. It’s the standard that the David Suzuki Foundation recommends using if you are going to buy carbon offsets.
Voluntary Carbon Standard
Voluntary Carbon Standard is the world’s most widely-used voluntary emissions certification program.
Other Third-Party Verification
Here are a few other third-party offset verification standards:
CSA Standard-Certified Canadian Offsets
Green-e
American Carbon Registry
Climate Action Reserve
Climate, Community, and Biodiversity Standard
Verra
Rainforest Alliance
Should I Use Carbon Offsets?
For people and businesses, carbon offsetting should be a final lifeline: it should be something you do after you have done everything reasonable to reduce your emissions.
For example, the sustainable shoe brand Allbirds has a three-step approach to carbon neutrality.
Measure emissions across the supply chain, including product end of life. They include a carbon score with all of their shoes. For instance, the runners that I bought this year from them have a footprint of 9.0 kilograms of carbon (which is below the average of 13.6 kilograms for running shoes generally).
Reduce the carbon impact.
Offset anything that’s left.
That is generally the way companies should approach offsets. (As a quick note: while Allbirds is well-rated for environmental sustainability and animal welfare, Good On You has pointed out serious weaknesses in its labour practices.)
You should be extremely skeptical of any company that is using offsets as the main approach to sustainability. For example, a BBC investigation calculated that in order to offset the annual emissions of Ryan Air (which is positioning itself as the greenest airline), you would need to plant enough trees to cover 12% of the UK.[14]
As an individual, I would liken carbon offsets to donating to charity. It doesn’t get you out of your core ethical responsibilities, but you can use it to improve your overall moral contribution. Buy carbon offsets only where there are no feasible green alternatives (e.g., important long-distance air travel).
You can justifiably use carbon offsetting as a way to cut your overall footprint or as an incentive to be greener – like a self-applied carbon tax. But you may as well just donate to your favourite environmental group. In the episode, Robert makes the good point that our society’s obsession with measurement can get in the way of impact.
The real criticisms with carbon offsets come from businesses that use flawed offsets programs to meet government emissions standards.
Which Carbon Offsets Should I Buy?
Buy certified offsets, preferably from a standard with a registry of projects. Less.ca has several options for certified offsets and you can see the projects associated with them. This was also the top-rated offset program in a David Suzuki report (though it’s over a decade old now). Make sure the project is registered – that ensures that offsets are only sold once. Another suggestion is to choose projects that specifically help the world transition away from fossil fuels.
Endnotes
[1] Switched On Podcast. 19 May 2020. When Enough’s Not Enough, Try Carbon Offsets. Switched On Podcast.
[2] Switched On Podcast, “When Enough’s Not Enough.”
[3] Switched On Podcast, “When Enough’s Not Enough.”
[4] Switched On Podcast, “When Enough’s Not Enough.”
[5] Switched On Podcast, “When Enough’s Not Enough.”
[6] Switched On Podcast, “When Enough’s Not Enough.”
[7] Switched On Podcast, “When Enough’s Not Enough.”
[8] Switched On Podcast, “When Enough’s Not Enough.”
[9] Switched On Podcast, “When Enough’s Not Enough.”
[10] Switched On Podcast, “When Enough’s Not Enough.”
[11] Switched On Podcast, “When Enough’s Not Enough.”
[12] The Energy Gang Podcast. 2019. The Problem with Carbon Offsets. The Energy Gang Podcast.
[13] The Energy Gang Podcast, “The Problem with Carbon Offsets.”
[14] BBC Panorama. 11 November 2019. Can Flying Go Green? BBC, https://www.youtube.com/watch?v=mPhOS4uXkmM&feature=youtu.be.
