Episode 43 - Ethical Money

Ethical consumption is about bringing your values more clearly into how you spend your money. But what about the money that you’re not spending? The money that you have deposited in a savings account is actually being used all over the world to finance all kinds of economic activity. So, where you put your money – and what happens to it while it’s there – matters.

Mo’ Money Mo’ Problems: Ethical Problems in Banking and Finance

Banks and other financial institutions take money and invest it, with the hope of getting a rate of return so that they can pay interest to customers, provide dividends to shareholders, and generally make a profit. That is a role that is really important, because people and organizations need to be able to access capital in order to invest in stuff that improves productivity, which in turn should benefit everyone.

So, banks and other financial institutions provide an important service that allows capitalism to work. And I don’t mean that as a moral statement of any kind, it’s just functional: in a society where you get resources through transactional exchange, having access to finance is essential and banks facilitate transactions. But because finance carries out this essential function for effectively everything, financial institutions are potentially culpable for a range of ethical problems.

Because financial institutions manage other peoples’ money, they have a fiduciary duty to be responsible with how they use it. That generally means that financial institutions prioritize seeking a return on investment that is either as high as it can be or lower, but more stable. And whether you’re investing retirement savings or you just rely on your bank not to go under, that is important (and not inherently a bad thing).

However, some people argue that financial institutions could achieve a better balance so that ethical practices are brought into decision-making in a more central way. Financial institutions are also a step removed from most ethical harms, so they can be more difficult targets for consumer campaigns.

It would be impossible to develop a comprehensive list of all of the ethical concerns with financial institutions, just because finance touches everything. But it is useful to talk about some of the issues that are the most common targets for consumer pressure. I’ll talk about some environmental, social, and governance problems associated with the financial sector.

After that we’ll talk about what ethical finance is, some of the most common forms that it takes, and debates about ethical finance. Then we will end the episode with some tips about how you can try to bring ethics into your financial decisions. 

Environment

Banks invest in industries that are linked to environmental damage. Climate change is often the focus for activism targeting banking and the environment, but issues like conservation and pollution can feature as well. Banks have provided $2.7 trillion in financing to the fossil fuels industry since the 2015 Paris Agreement

The Rainforest Action Network produces a Fossil Fuel Finance Report, which includes a graphic where you can find information about the top fossil fuel-supporting banks.

o   JP Morgan Chase: $268.59 billion in fossil fuel financing 2016-2019

o   Wells Fargo: $197.91 billion

o   Citi: $187.67 billion

o   Bank of America: $156.92 billion

The fossil fuel divestment movement aims to address climate change by convincing financial institutions and institutional investors to divest from companies that extract fossil fuels. If you are interested in campaigning for fossil free divestment, this website has resources.

There are a number of banks and ethical funds that have committed to divesting from fossil fuels. Some ethical finance aims to promote environmentally friendly projects. One example is carbon offsets, which we discussed in a previous episode.  

Social

Social issues are those connected to the wellbeing of people. Banks have been targeted for financing companies that harm society. This includes things like investment in tobacco companies and private prisons.

Banking and Conflict

The Is Your Bank Loaded campaign grades banks based on their investment in firearms manufacturers. Notably, TD Bank received an F score from this organization.

The organization asks for banks to take a number of steps, including divesting from firearms companies until the US government adopts adequate regulations. Top companies invested $748 billion USD in the nuclear weapons industry. The Don’t Bank on the Bomb campaign reports on the financial institutions that seek to profit from companies that produce key components of nuclear weapons and nuclear weapon delivery systems. You can check out their list of who invests and who divests.

Governance

Governance issues are connected to how financial institutions themselves operate.

Tax Avoidance and Evasion

We talked about tax avoidance and evasion in our episode on tax justice. Tax avoidance and evasion is a massive public policy concern: it is unfair, increases inequality, and makes it more difficult for governments to provide good public service. Banks are some of the biggest tax avoiders and they help their clients avoid tax. Oxfam has reported on the use of tax havens by major European banks. 

Banking and Gender

Banking is an industry with a big gender gap. In the UK companies have to report on their gender pay gap. According to those reports, finance firms pay the average man 25% more than the average woman, compared with a 17% pay gap across all sectors.

What is Ethical Banking/Ethical Finance?

In 2018 there was a total of $12 trillion in US-based assets managed using sustainable, responsible and impact (SRI) investing. This was up from $8.1 trillion in 2016 and from under $1 trillion in 1995. That means that today, about 26% of professionally managed financial assets are managed using some kind of sustainable, responsible, and impact investment.

So, that means that some kind of ethical rule was used in the management of about a quarter of financial products in the US in 2018. And this is a category that is growing every year.

Social finance refers to “the allocation of capital primarily for social and environmental returns, as well as in some cases, a financial return”.[1] It is an umbrella term denoting a variety of approaches in which finance is used to advance environmental, social, or governance (ESG) objectives. It “seeks to align investments with the personal values of investors and to harness the resources and power of the financial sector to improve corporate social and environmental behavior”.[2]

But ethical finance is a big category. There are lots of different kinds of issues we might want to consider in terms of ethical content. Ethical finance usually thinks about ethics in terms of three categories: environmental, social, and governance. When you hear the acronym ESG, that’s what that means.

o   Environment: does it advance conservation, sustainability, or decarbonize?

o   Social: does it improve the rights, dignity, and living conditions of people? Does it make society better?

o   Governance: are responsible governance practices being used? How transparent, equitable, democratic, and accountable is it?

There are three broad approaches to ethical finance:[3]

o   Positive: actively investing in good things – pollution management, renewable energy, water efficiency (carbon offsets)

o   Exclusion (divestment): approaches ethical finance from a negative perspective – so rather than actively funding good projects, this would be eliminating certain investments seen as harmful (e.g., tobacco, gambling, pornography, fossil fuels, arms, private prisons)

o   Holistic: where the company managing your finance looks holistically at the ethics of companies in which they are investing your money (e.g., on human rights, taxation, inclusivity, sustainability) and may express voice once invested in that company

Divestment remains the most common kind of ethical finance strategy.[4]

Another way to frame ethical finance is in terms of approaches.[5]

o   Ethical finance: thinking about a personal moral compass;

o   Responsible investing: focused on financial value, but with certain ESG constraints;

o   Impact: thinking about the outcomes that investments are generating and implications for investor preferences

Historically, SRI has been used to confront environmental concerns, board and hiring diversity, international issues like Apartheid in South Africa and the Vietnam War, human rights, animal rights, labor rights, abortion, tobacco, and, more recently, gun violence.[6] As of 2005 Canada had approximately $55 billion USD in assets under management of SRI portfolios.[7]

Institutional investors play a big role in sustainable, responsible, and impact investment. That includes public funds, corporations, educational institutions, foundations, faith-based investors, healthcare funds, labour union pension funds, nonprofits, and family offices.

Does Ethical Finance Work? The Mission versus Returns Debate

There is some debate concerning the extent to which SRI is, and ought to be, motivated by moral concerns – in contrast to evolving understandings of risk. For instance, the carbon bubble or “unburnable carbon” hypothesis suggests that it makes good financial sense to divest from fossil fuels, irrespective of one’s moral views about environmental stewardship.[8] So, it can sometimes be difficult to identify whether ethical motives actually underlie ethical finance.

Why does that matter? Well, in one sense it doesn’t: climate change doesn’t care whether you divest from fossil fuels because you feel morally compelled to or because you’re worried about stranded assets. But in a broader sense: if all ethical investment is really financially driven, that places severe limitations on how effective ethical investment can be as a tool of social change. Because if it ultimately is about making money, then you should target other companies so that the banks see a different financial calculus when assessing investors. But if you can convince consumers and institutional investors to genuinely accept a trade-off between their rate of return in exchange for ethical values, then that is a huge possible source of change. 

How Can People (Who Don’t Have Scrooge McDuck Money) Approach Ethical Finance?

How can you, as a person that uses money, incorporate ethical practices into your financial decisions? This is a topic that deserves its own episode, but I will try to sketch out some of the basics here.

Choosing Your Bank

The first thing you can do is to find out how ethical your bank is, when it comes to ethical issues that matter to you. And you can also check out how your bank compares to others. You can do that on an issue-by-issue basis by checking out the campaigns mentioned above. Ethical Consumer has done a rating on banks. It is from a British perspective, but there are international banks on there. See where your bank stacks up compared to others in their overall rating. If your bank compares badly, it might be time to look at another financial institution.

Try asking your bank directly about their ethical practices, especially if there is one issue in particular that matters to you. Has the bank divested from fossil fuels? Does it apply any ethical criteria on its investments? Are there specific financial products you can access that do utilize ESG criteria. If you do switch banks for ethical reasons, be sure to tell them! Ethical Consumer has a template letter that you can use.

Many of the large, commercial banks rate similarly on ethical issues. So, you may want to go with a different sort of bank: a credit union.

Credit unions are financial co-operatives owned and run by their members. Credit unions are not-for-profits, so any money that is earned is invested back into the organization, distributed to members, or donated. “Credit unions provide a community-focused approach to day-to-day banking, with an emphasis on meeting customers’ needs rather than turning a profit.”

Although being a cooperative does not necessarily mean that ethical investment practices are being used, credit unions are more likely than corporate banks to incorporate ethical criteria in their decision-making. Canada has approximately 700 credit unions and people’s banks [caisses populaires]. In Canada, you can look for credit unions here.

To join a credit union, you have to buy a share in the credit union. In some cases there may be other requirements – for instance, you may need to be a resident of the province the credit union is in. Credit unions offer narrower credit product selection and their online tools are usually worse, but they typically have higher interest rates on their savings accounts, lower account fees, and better customer service. Credit unions operate democratically, so each member has one vote regardless of the size of investments or deposits. A credit union’s board of director is volunteer-run and elected by members. Commercial banks elect their board of directors through shareholders.

The Global Alliance for Banking on Values (GABV) is a network of banks that are working towards a banking sector that is more transparent and supports economic, social, and environmental sustainability. You can find GABV member banks in your country by going on the GABV website.  Three Canadian financial institutions are GABV members: Kindred Credit Union, Vancity, and la Caisse d’économie solidaire Desjardins [the Desjardins solidarity economy fund] (a partnership between private philanthropic foundations and the Desjardins solidarity economy fund).

And, of course, you can always tell your bank that you want to see them doing more on ethical finance.  

Choosing a Financial Advisor

If you have (or plan to have) a financial advisor, you can find a firm that will incorporate ethical factors.

Start by searching for “financial planner” (or “financial advisor”) and “socially responsible”, “green”, “SRI”, “ESG” or “sustainable investing”. Usually firms that do ethical investing will have this on their website. If ethical criteria are not prominent on the website, it can be a sign that ethics are not central to what the firm does.

But the reverse is not necessarily true: companies may engage in “ethics washing” by marketing themselves as socially responsible without truly incorporating ethics into their investment practices. You can consult the greenwashing guide for more information about funds using greenwash and how to spot greenwash. Or try Ethical Consumer’s guide to ethical investment funds. They also have guides on mortgages and a few other financial products.

By listening to this episode (or reading this research note) you’ve already armed yourself with some of the basics in ethical finance. But it can be worthwhile to read about it a little more – pick the elements that are most interesting to you and make sure you understand the basics. You can also try asking your current financial advisor about ESG or socially responsible index funds. Here is a list of 23 top socially conscious index funds according to Forbes.

Do Your Own Ethical Investing

You can, of course, personally invest in ethical companies by buying shares in ethical companies. But I would not advise this for a large sum of money, unless you are an expert and/or willing to put in a lot of time and effort to learn about investing.

Use Your Voice

Even if you don’t have very much money, like me, you are probably a member of at least one organization that has significant financial assets. Maybe it’s your pension fund, your local schoolboard, your university, or a faith-group you belong to. Get involved with campaigns to make your organizations more ethical investors. Universities and faith groups especially have been very active in the fossil fuel free movement.

Notes

[1] Nicholls, Alex. (2015). Social Finance: Capitalizing Social Impact. In A. Nicholls, R. Paton, and J. Emerson (eds.) Social Finance. New York: Oxford University Press.

[2] Richardson, Benjamin and Peihani, Maziar. (2015). Universal Investors and Socially Responsible Finance: A Critique of a Premature Theory. Banking and Finance Law Review 30(3): 405-455 at p.406.

[3] Money Box Podcast. (1 May 2019). Ethical Investing. BBC Radio 4.

[4] Trinks, Pieter Jan and Scholtens, Ben. (2017). The Opportunity Cost of Negative Screening in Socially Responsible Investing. Journal of Business Ethics 140: 193-208.

[5] Fintech Insider Podcast. (2 October 2020). Insights: ESG and Sustainable Investing – the Ethical Future of Finance. Fintech Insider Podcast.

[6] See, e.g.: Hoffman, A.J. (1996). A Strategic Response to Investor Activism. Sloan Management Review 37(2), 51-64; Tkac, Paula. (2006). One Proxy at a Time: Pursuing Social Change through Shareholder Proposals. Economic Review-Federal Reserve Bank of Atlanta 91(3), 1-20; Vitols, “European Pension Funds and Socially Responsible Investment”; Renneboog, Luc, Ter Horst, Jenke, Zhang, Chendi. (2008). Socially Responsible Investments: Institutional Aspects, Performance, and Investor Behavior. Journal of Banking and Finance 32: 1723-1742.

[7] Renneboog, Ter Horst, and Zhang, “Socially Responsible Investments”.

[8] Lorinc, John. (19 January 2016). The Tragedy of the Horizon. Corporate Knights, http://www.corporateknights.com/channels/leadership/the-tragedy-of-the-horizon-14531832/.

Episode 39 - COVID-19, Wildfires, and the Climate Crisis

In this episode we were joined by past guest Robert Miller to discuss the west coast wildfires and the climate crisis. Below are Kristen’s notes for the episode, and some of the questions we asked Robbie throughout.

West Coast Wildfires

Right now, there are 1,576 active wildfires burning across the western US. There have been 43,785 wildfires in the US this year, which have burned 7 million acres this year. This is over one million more acres burned than the 10-year average. As of September 23, there were more than 30,000 firefighters and support personnel assigned to wildfires.

California has been the worst off. The first, third, and fourth largest fires in California’s history all happened in 2020. There have been at least 26 fatalities from the fires and 7,196 structures have been damaged or destroyed.

But the wildfires haven’t occurred only in California. They have also burned throughout Washington, Oregon, Montana, Idaho, Wyoming, Nevada, Arizona, and New Mexico. At one point, ten percent of Oregon’s population was under an evacuation alert. And pretty well the entire west coast of the US was covered by air pollution advisories over a span of a few days. Wildfire smoke even impacted the eastern part of the continent.

Wildfires do occur naturally, but climate change is extending the wildfire season and making it more intense. That is because warmer temperatures prompt earlier snowmelts and higher temperatures, which result in drier soil and vegetation that is more prone to wildfires for longer periods of time. Also, climate change makes forests more prone to beetle infestations, which in turn makes them more likely to burn.  Leaders at CalFire have even suggested that they no longer have a wildfire season, since California now deals with wildfires year-round.

From 2000 to 2018, wildfires burned more than twice as much land area per year as in the period of 1985-1999. It is projected that a 1 degree temperature increase would increase the median area burned by as much as 600% in some forests. (80% of wildfires are started by people.)

The Metronome building in New York has a digital clock that usually counts down the hours, minutes, and seconds until midnight. Instead, it is currently counting down the time until Earth runs out of its carbon budget. The installation was designed by two artists (Gan Golan and Andrew Boyd). We have 7 years (and 98 days on 24 September) to limit climate change to 1.5 degrees.

The Climate Movement in 2020

The global day of climate action will have just happened when we release this episode, so we thought this would be a good opportunity to reflect on where the climate movement is at and where it needs to go in 2020 and beyond.

Last year, it felt like a moment for climate activism. The global climate strike drew large crowds in countries around the world, climate change leapt to the top of political agendas, and climate groups like Fridays for Future, Extinction Rebellion, and the Sunrise Movement all had a lot of momentum. When I look at 2020, it really doesn’t seem like there is that same momentum.

There are still 3,133 strikes planned around the world for 25 September 2020. But that’s a lot less than the 5,668 in September 2019.

What are some of the biggest accomplishments of the climate movement to-date, in your view?

What are some of its biggest weaknesses?

Impact of the Pandemic on Climate Activism

There definitely is climate activism happening – earlier in September 300 Extinction Rebellion protesters were arrested in London at climate protests. 13 were arrested for blockading Rupert Murdoch-owned News Corp (which publishes the Sun, the Times, and the Daily Mail in the UK). That prompted a big debate over there about protests tactics and the freedom of the press.

But activism has been much more muted this year. To what extent is that a result of the pandemic, versus other things?

Do you think climate activism will be able to regain the momentum it had in 2019? How?

Racial Justice and Climate Activism’s Whiteness Problem

Can you tell me a bit about the links between climate change and racial justice?

Climate change is a racial justice problem, so in theory climate activism and racial justice activism should go hand-in hand. But in practice, not always. Do you think climate activism has a whiteness problem?

A Green Recovery?

People have talked a lot about climate gains as a silver lining of the pandemic. Which is kind of gross from the point of view of respecting human life and suffering. But it’s also overblown: even with stay at home orders, we are on track to emit 92% as much carbon as last year.  

One major question is whether governments will prioritize a green and just pandemic recovery, or if austerity will win the day.  

Bill Gates had a really depressing fact in a recent article:

“As of last week [article came out August 4, 2020], more than 600,000 people are known to have died from COVID-19 worldwide. On an annualized basis, that is a death rate of 14 per 100,000 people. How does that compare with climate change? Within the next 40 years, increases in global temperatures are projected to raise global mortality rates by the same amount – 14 deaths per 100,000. By the end of the century, if emissions growth stays high, climate change could be responsible for 73 extra deaths per 100,000 people. In a lower emissions scenario, the death rate drops to 10 per 100,000. In other words, by 2060, climate change could be just as deadly as COVID-19, and by 2100 it could be five times as deadly.”

Worldwide, 71% of people agree that climate change is as serious a crisis as COVID-19. Canada and the US had some of the lower figures for this, but still over half agreed.

One possible sign of hope for a green recovery is the sudden prevalence of “build back better” in documents on pandemic recovery. The UN and OECD have used this language, as has the Joe Biden campaign, the Government of the United Kingdom, and the Government of Canada.

Canada’s Throne Speech and Climate Change 

In Canada, the government released its Throne Speech on Wednesday 23 September. The Throne Speech sets out government’s priorities and it was seen as the document articulating how Canada will handle pandemic recovery.

The government pledged that “Climate action will be a cornerstone of our plan to support and create a million jobs across the country.”

Key initiatives:

• The Government of Canada committed to legislating a goal of net-zero emissions by 2050. Which, notably, is the commitment that the Green Party campaigned on in 2019.

• The Government also said that it would invest in retrofitting homes and buildings; disaster resilient infrastructure; public transit; zero-emissions vehicles; zero-emissions technology companies; and urban parks.

• The government also pledged to plant 2 billion trees and reaffirmed its commitment to ban single-use plastics.

• But it also said that it would “support” several polluting sectors, including oil and gas, during the transition. 

What did you think about the government’s commitments on climate change in the throne speech, Robbie?

Given that Canada has missed its Paris Accord targets so far, do you think the net-zero commitment matters on its own? Or will it all come down to the quality of the measures that they introduce in the budget?

Final notes:
Robbie mentioned a photo of wildfire smoke meeting hurricane Paulette, here it is!
Are we running out of names for our tropical storms? Yup! This is the second time (ever) we’ve had to move to the Greek alphabet because we ran out of letters.

Check out our other episodes on COVID-19:
Kristen and Kyla React to COVID-19
COVID-19 and Inequality with Alix Jansen
Ten Unexpected Effects of COVID-19
Art, Artists, and COVID-19

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.

1. 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). 

2. Reduce the carbon impact.

3. 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.

Episode 19 - Personal Behaviour Changes and the Climate Crisis

This episode we were joined by Robert Miller, a progressive activist and organizer based out of Edmonton, Alberta. One of the groups he works with is Extinction Rebellion. Since this was an interview episode, a research note is a bit tricky to do. So, what I’ve done here is just include the prep notes that I did, to give a sense of themes.

Belief and the Climate Crisis 

Johnathan Safran Foer in We Are the Weather writes about the psychological difficulty that humans experience in truly believing climate science. What he means by that is that many of us know the climate science, but we don’t really believe it – not enough to really change the way that we live in the ways that the climate crisis demands.

One of the threads throughout the book is this question that he raises around his grandmother’s decision to leave her village when the Holocaust was beginning. And the decision of family members who stayed. All of them had access to the same knowledge, but there is something different going on when it comes to really believing it and acting on that belief.

And we see this a lot with the climate crisis, I think: this idea that we are in the middle of the greatest crisis that humankind has ever faced, that we know we have a decade to take radical leaps to prevent runaway climate change.

And yet my life goes on more or less as normal. And I think that’s the way it is for a lot of people. So, I guess my question is: how can we get people to really believe in climate change, in the deep-seated way that we needed to?

Climate Anxiety and Climate Grief

One idea is that we can’t really conceptualize the climate crisis until we acknowledge its ability to kill us. That’s a pretty heavy thing to accept.

Do you experience climate anxiety? How do you deal with it?

Of course, the other side of climate anxiety is climate grief – coping with what we’ve already lost and what we cannot save. I think for me at least, climate grief is harder to cope with than climate anxiety.

What would you say to people that are just starting to confront climate grief, or to even realize that climate grief is a thing?

Which Personal Behaviour Changes Are Best?

Nearly two-thirds of global emissions are linked to direct and indirect forms of human consumption. So, in theory at least, there’s a lot that we can personally do to address the climate crisis.

What, in your view, is the single most important personal behaviour change people can make to address the climate crisis?

Eating a plant-based diet

We’ve talked on the podcast before about the environmental benefits of eating a plant-based diet – whether that means going fully vegan or becoming a ‘flexitarian’ or ‘reducetarian’. By one suggestion, a climate-sensitive flexitarian diet would mean eating about 1.5oz of meat daily (or, about three hamburgers worth per week). And just a reminder from our previous episodes that the world is an animal farm – about 30% of the earth’s land mass is used for animal agriculture or animal feed. Emissions from food production could surge by 87% by 2050.

Robert, you’ve been vegan for a while. Was it the climate crisis that motivated you to become vegan, or something else? What advice would you give to someone who cares about the climate, but who is intimidated about the prospect of going vegetarian or vegan?

I just want to quickly highlight some of the other personal behaviour changes that are often recommended:

Reducing your food waste

GHG emissions associated with food loss and waste is as much as 8-10% of all global emissions.

Composting

By the time this episode comes out, we’ll have already released the zero-waste episode. In that episode we talked about how organic waste is the majority of garbage people throw away. Composting can help us fight climate change because landfilled organic materials produce methane, a super potent GHG.

In an episode on biogas, we talk about the potential for turning food waste into energy!

Driving less, cycling, walking, and taking public transit more

In 2010, the transport sector was responsible for over 25% of global energy demand.

Having kids?

There is one last lifestyle change that I want us to reflect on a bit, and that is having children. A lot of people worry about bringing children into a world that is quite likely going to look a lot worse in a generation than it does today. Others have concerns that producing more humans contributes to the increases in consumption that are causing the climate crisis. What are your thoughts on becoming a parent in the climate change era?

What’s wrong with fighting the climate crisis with personal behaviour changes?

Some articles say that lifestyle changes are the only answer to the climate crisis, while others say that we can’t address climate change through personal behaviour. So, who’s right?

Themes within this: inefficiency (there’s so much we cannot personally control); personal behaviour changes are way easier for some than others; and climate justice, environmental racism.

Do We Need Mandatory Rationing?

A lot of people have used wartime rationing as an example for how personal behaviour can address the climate crisis. For instance, Bill McKibben has said, “it’s not that global warming is like a world war. It is a world war. And we are losing.” The suggestions along this line usually include stuff like marshaling extraordinary public investment to build solar panels, wind farms, electrified public transit, tree-planting et cetera. It could also include meat rations and, more controversially, retreat and re-wilding.

What are some of the benefits and drawbacks of taking a wartime approach to the climate?

As we get closer to 2030, are we running out of other options?

The Green New Deal

One thing that I’ve started to hear a lot in climate discussions is how we need to focus on the opportunities of decarbonization as well as the costs. We often hear this in the context of the Green New Deal.

What is the Green New Deal, in a nutshell? What are some of the benefits that we could achieve from acting collectively on the climate crisis, aside from averting catastrophe?

Learn more about the Green New Deal for Canada.

How to Promote Collective Action Changes

Political scientists love to talk about climate change as a collective action problem. Basically what that means is that the benefits of addressing climate change are diffuse (and mostly in the future), while the costs are specific (and mostly in the present). So, there are huge incentives to free ride, which makes collective action difficult. Or, to put it in the slightly flashier language of journalist Oliver Burkeman: “If a cabal of evil psychologists had gathered in a secret undersea base to concoct a crisis humanity would be hopelessly ill-equipped to address, they couldn’t have done better than climate change”.

We hear this narrative a lot in Canada from climate delayers: that Canada is a small part of the world’s global emissions and we can’t take on climate change, so why bother. What would you say to that?And what about the idea that the world still needs oil, so someone has to supply it? What does collective action on climate look like, from your perspective?

How Can You Support Collective Action?

Vote!

Vote for the candidate that has the best climate stance. If you live in America, the Sunrise Movement identifies Green New Deal champions. What should someone do if they don’t see sufficient climate policies reflected in any of their major parties or candidates?

Sign petitions, write your MP, your MPP, your councillor

Petitions are helpful for advocacy groups, because it helps them talk to politicians. When an advocacy group meets with an MP, it’s a lot easier to get his attention when you can show that people in the constituency care about that issue. The Citizens’ Climate Lobby has good tools for talking about the climate crisis.

Go to climate rallies

Protests make issues visible, and crowd-size matters. Activists often talk about the idea that non-violent revolutions have, historically, usually been successful when they mobilize 3.5% of the population. (From Erica Chenoweth’s research). In September 2019, roughly that percentage of Canadians participated in the climate strike. Do you think anything has changed as a result of recent climate strikes? And if not, why not?

Donate to or volunteer with a climate group of a climate champion candidate

There is a lot you can do with your time as a climate action volunteer: door-knocking, calling, pamphleting, flyering, postering, et cetera. Let’s say a listener is interested in helping out, but showing up at protests isn’t something they’re comfortable with. What would you say to them? What are some helpful ways they could get involved?

Become a citizen climate scientist

If science is your jam, there are ways to get involved as a citizen scientist.

Bring up climate change in your social circles, even if it’s awkward

This is where I think personal behaviour can spur social change, too. Any tips on how to raise the climate crisis with climate agnostics in a way that won’t alienate them.

Personal Behaviour Changes ARE Collective Action Changes

That is why acting matters, even if it is small. Because “the most contagious standards are the ones that we model” (JSF). So be the person at the protest, even if there are only a few hundred people there – even if there are only a dozen people there. Try to reduce your carbon footprint. Go flexitarian, or reducetarian, or vegetarian, or vegan. The people who love you will notice. And when they change, even just a little, it matters.

Also mentioned in the episode:

Wet’suwet’en Solidarity
350.org
Fridays For Future Climate Strikes