Carbon Offsets: A Modern Indulgence

Source: History Extra (2021).

In the Middle Ages, indulgences were sold by churches to lay Catholics as a form of remission of the punishment of sins. Despite its wide popularity, the practice was heavily condemned as the Catholic Church back then was corrupted and abusing it as a money-making enterprise. Similarly, carbon offsets have been criticised by experts nowadays. To achieve “carbon neutral”, companies calculate how many tons of carbon are being emitted, purchase the equivalent amount of carbon credits, and call it a day.

Carbon offsets are everywhere, a $2 billion industry projected to grow as the world incorporates them to fulfil international climate pledges. For instance, some of the world’s largest companies, including Apple, Grab, Disney, and Amazon, rely heavily on carbon offsets to reach their ambitious carbon goals. Even fossil fuel companies like Shell claim to emit net zero carbon soon, thanks to carbon offsets. The intention of carbon offsets is benign, but it has flaws.

How did a good idea go wrong?

At the heart of carbon offsets is that a company can emit greenhouse gases in one part of the world and offset it with the purchase of carbon credits which support activities in another part of the world that reduce or avoid the equivalent amount of carbon emissions. But if that activity, for example, forest preservation, would have happened anyways, this might have become somewhat of a mirage. In other words, the company gets its offsets and complies with regulations, but no additional carbon has been avoided or removed from the atmosphere.

Research has shown that the “additionality” of many carbon-offsets projects was unlikely. One study done by Dr. Cames et al. (2016) at the Institute for Applied Ecology (Oeko-Institut) shows that 85% of the projects that the Kyoto Protocol initiated are unlikely to be additional as they are not effective in coping with climate change.

A more recent study on wind power projects in India by Raphael Calel et al. (2021) estimates that at least 52% of approved carbon offsets projects would have been built regardless, a significant misallocation of resources.

Yet, it does not end there. A nine-month investigation by The Guardian on Verra, the world’s leading standard for climate action and sustainable development, found that more than 90% of rainforest offset credits Verra endorse are likely to be bogus and do not represent genuine carbon reductions. They also found that 98% of the forest projects are not permanent, which means they could be reversed by logging, fire or other disturbances.

According to the finding, Verra did not independently verify or monitor its forest carbon offsets but relied on the project developers' self-reporting or assessment from a Verra-appointed third party. This means that the projects are not guaranteed to reduce emissions or protect forests, as the developers claim, presenting incentives for them to overstate their impact and understate their risks.

Verra’s verified carbon standard has issued more than 1 billion carbon credits which are being used by Disney, Shell, Gucci and other large corporations. The Guardian exposed how large corporations use Verra’s forest carbon offsets to greenwash their emissions and avoid taking real actions to reduce their carbon emissions.

Understanding Net-Zero: A Misinterpretation of Responsibilities

One common misunderstanding revolves around the concept of 'net-zero emissions'. It may seem logical to assume, "If our goal as a civilisation is to achieve net-zero carbon emissions, then every single company should strive for net-zero emissions." However, this line of thinking demonstrates the fallacy of division, where one assumes that what is true for the whole (our global society) must also be true for each of its parts (individual companies or countries). This fallacy can lead to an oversimplified interpretation of the global net-zero target. While the Paris Agreement sets out a collective goal for the planet to reach net-zero emissions by mid-century, it doesn't imply that every individual entity, whether a corporation or a country, must also reach net zero independently. The path to net zero should be charted according to different entities’ diverse emissions profiles, capacities, and responsibilities.

Historically, developed countries and large corporations, particularly those in high-emission industries like fossil fuels, manufacturing, and aviation, have a larger share of responsibility in mitigating climate change. They have contributed the most to greenhouse gas emissions and are better equipped with the resources and capacity to implement substantial change. As such, they should lead the charge in emission reductions and investments in green technologies.

On the other hand, for some entities, particularly those in developing nations or smaller businesses, achieving net zero could be challenging due to limited resources and other pressing socio-economic concerns. In these cases, carbon offsetting might be a practical tool, albeit not a comprehensive solution.

In sum, the route to net-zero emissions is not a one-size-fits-all approach. A uniform application of the net-zero target and over-reliance on carbon offsetting risks create a 'pay-to-pollute' model (like an indulgence) rather than genuine changes, such as environmental-friendly innovation. True climate action requires a tailored, equity-focused approach, with the heaviest emission reducers leading the transition and implementing substantial changes in their operational and manufacturing processes.

What does the expert say?

In the 30 years since carbon offsets were invented, they have yet proven to work. Take it from Dr. Mark Trexler of The Climatographer, who has worked in the realm for more than 30 years and was hired by the World Resources Institute in Washington DC to work on the first carbon offset project in 1988.

Carbon credits were invented to serve two objectives mainly. The first is to mitigate carbon emissions, and the second is to reduce the cost of curtailing carbon footprints for companies and countries. Unfortunately, Dr Trexler says, costs ended up getting “the biggest seat at the table” instead of climate change mitigation. He argues that there is downward pressure on the cost of carbon offsetting projects because many buyers are unwilling to pay more for high-quality offsets with genuine environmental impacts. He also says that some sellers offer cheap offsets that are not verified, which undermines the market's integrity.

What can we do about it?

A paper by Dr Trexler and Laura H. Kosloff published in October 2019 argues that carbon offsets, despite full of challenges such as low quality, lack of transparency, and insufficient demand for high-quality offsets, are crucial tools for addressing climate change. The paper proposes improving carbon offset quality and transparency by creating a scoring system with a 0-1000 confidence continuum. It uses a range of indicators such as additionality, leakage, permanence, verification and co-benefits as the scoring basis.

The authors claim that this scoring system can make a difference on the demand side. If buyers have the information on the scores assigned to each offset, say 200 or 600 scores, they would likely purchase the offsets with higher scores (due to authority restrictions, public pressure, etc.). Project developers would hence be incentivised to bring higher quality products to the market, justifying higher prices. However, some buyers might still not care about the quality of offsets they buy as long as they comply with their emissions goals. Market regulators could set a minimum required score on offsets, e.g. 500 onwards, to ensure only high-quality offsets are being purchased.

Conclusion

The concept of carbon offsets, which allows individuals and corporations to offset their carbon emissions by funding projects that reduce greenhouse gas emissions elsewhere, has been compared to a modern-day Catholic indulgence. Carbon offsetting is indeed a good idea, but it has some serious problems and pitfalls, and some corporations are exploiting the system to avoid taking responsibility for their emissions or to make a fortune out of it.

While carbon offsets may provide a temporary solution to the urgent problem of climate change, they may not address the root cause of the issue, ie. our unsustainable carbon-intensive lifestyles. Moreover, the effectiveness of carbon offset projects is often difficult to measure, and there are concerns about the potential for fraud and double-counting. Therefore, it is important to recognise the limitations of carbon offsets and prioritise systemic changes to reduce carbon emissions at the source, such as transitioning to renewable energy sources and implementing more sustainable practices. Ultimately, true environmental stewardship requires more than just paying for “Indulgences”; it requires a fundamental shift in the way we live and interact with the natural world.

Prepared by Francis Lau

Additional readings and references:

https://climatographer.com/wp-content/uploads/2019/10/2019-Trexler_Fixing- Carbon-Offsets.pdf

This Timber Company Sold Millions of Dollars of Useless Carbon ... https://verra.org/verra-response-guardian-rainforest-carbon-offsets/

Now we know the flaws of carbon offsets, it's time to get real about climate change (theconversation.com)