Is carbon compensation a real climate solution?

A reforestation assistant measures a newly-planted tree in a field damaged during illegal gold mining in Madre de Dios, Peru, on March 29, 2019. (AP Photo/Rodrigo Abd)

Carbon offsets are often presented as the magic bullet for frequent flight travellers and increasingly turning into a public relations show for high-emitting multinational companies.

Indeed, while the science is clear on the radical reduction pathway needed to stabilise global warming below 2°C, multinational companies like easyJet continue to communicate unashamedly about their claimed “carbon neutrality” or how well they are on track towards it.

In 2018 around $296m was spent worldwide buying cheap credits representing the equivalent of 98m tonnes of CO2 offsets in the “voluntary” market [not to be mistaken with government-led cap and trade markets]. But many critics worry they may, in the end, be similar to medieval “indulgences” under which believers bought a place in heaven. There is a concern about the integrity of certain offsetting practices in the name of climate action. Margaret Kim, chief executive of Gold Standard, a reference carbon certification organisation based in Geneva, said to us in her interview:

Without changes, we risk carbon credit revenue going to projects that may not deliver the climate impact that they intend to; on the other hand, a growing voluntary market may inadvertently de-incentivise countries to raise their own national commitments over time, as the Paris Agreement expects them to.

Read the interview here: Gold Standard's Margaret Kim on how to ensure the integrity of carbon offsetting

Why it’s important. Scientists have issued clear warnings to humanity on the disastrous consequences of unmitigated climate disruption, and facts matter more than ever. Beyond the masterful confusion entertained by major companies on what they are really achieving in terms of carbon reduction, the value of carbon offsetting comes in fact more from the funding streams it directs towards useful community projects than from its measurable impact on climate. In 2017, the European Commission published a damning study of carbon offsets, finding that 85 per cent of the reviewed offset projects under the UN’s Clean Development Mechanism (CDM) failed in the objective of reducing emissions, with a low likelihood that the latter were additional and not over-estimated. Reassurance on integrity and conditions attached is today much in need.

How carbon compensation works. A carbon offset is a reduction in emissions of carbon dioxide or other greenhouse gases made in order to compensate for emissions made elsewhere. In theory, the money paid for carbon credits, referred to as “offsets”, enables a verified climate impact that would not have happened otherwise.

Carbon offsets are not our get-out-of-jail free card
UNEP Environment

To certify an offset, Gold standard considers it must always be:

  • Additional: demonstrates financial need.

  • Real: sets accurate baseline.

  • Measurable: quantifies change with robust methodology.

  • Permanent: not subject to reversal or leakage.

  • Independently verified: by a qualified third-party auditor.

  • Unique: not double counted or claimed.

All that glitters is not gold. Offsets are incredibly cheap for buyers, with an average price in 2018 at $3 per tonne of CO2, 8 times below what the EU’s cap-and-trade scheme charges (Source: The Economist). But also more than 30 times less than the optimal price of 100 euros per ton in 2020 that should ideally increase to 250 euros in 2030 to support the climate goals.

While it remains extremely difficult to guarantee a carbon offset is truely additional and wouldn’t have occurred anyway, the challenge also comes from the permanence required. Considering a tree takes 50 to 100 years to deliver its promise of carbon sequestration, what legal system is sufficiently robust to ensure it really happens over such time span?

As the Economist notes, “the offsets with the hardest-to-measure impacts are also the most popular. Forestry schemes make up half the voluntary market”. But claiming to avoid deforestation does not mean loggers do not just cut down trees somewhere else down the road. Some projects protect trees on unthreatened lands, such as national parks.

Alia Al-Ghussain, from Greenpeace, goes even further:

The big problem with offsets isn’t that what they offer is bad – tree planting or renewable energy and efficiency for poor communities are all good things – but rather that they don’t do what they say on. (…) Offsetting projects simply don’t deliver what we need – a reduction in the carbon emissions entering the atmosphere. Instead, they’re a distraction from the real solutions to climate change.

Avoiding double claiming or double accountancy remains a particularly difficult challenge when the project is led in another country.

Less than 1% of the climate effort needed. In 2019, the voluntary carbon offset market issued, according to Gold Standard, 142 million tonnes Co2e of emission reductions. And the total since its kickoff cumulates at 1.3 billion tCo2e over 15 years.

Carbon offset market progresses during coronavirus | Financial Times

To put things into perspective, the emissions gap estimated by UNEP for 2030 between current policies and what is needed to stabilize the climate at 2°C warming is 15 billion tonnes Co2e. In other words, despite all the claims by companies and other institutions, carbon offsets today represent less than 1% of the effort needed to follow a 2°C trajectory, and 0.4% of the effort needed to be on track for 1.5°C.

UN Emissions Gap Report - How To Get To 1.5°C Path In Graphs - With Paris  Pledges In 2020 And 2025 | Science 2.0

Far from even pretenting to bridge the emissions’ gap, the reality check on carbon offsetting is in itself a plea for accelerated absolute reduction efforts.

Carbon “insets” instead of “offsets”? Carbon insetting is an innovative mechanism to reduce emissions while driving business value. It uses organizational investment to promote sustainable practices and reduce an institution or company's carbon footprint within its own value chain. It forces to take direct responsibility for the reduction of emissions rather transferring the burden to a low-income country.

The bottomline: a question of responsibility. At the end ot the day, carbon neutrality is only meaningful at global level or territorial level, but not at the level of a company. There is no way around an radical reduction of carbon emissions by each and every human organization, as close as possible to zero before mid-century. “Net-zero” emissions will be achieved when any remaining human-caused GHG emissions are balanced out by removing GHGs from the atmosphere in a process known as carbon removal, whether through naturebased solutions or direct air capture and storage (DACS) - which are far from being mature. Damien Friot, an expert in sustainability and carbon measurement, currently director of Ecometrics, lecturer at the EPFL and cofounder of Quantis, concludes:

The value of carbon compensation belongs more to the early stages of climate action. It certainly helps to channel funds towards environmentally and socially useful projects. But it but cannot be a substitute for decisive reduction along science-base targets and the development of natural carbon sinks and direct air capture techniques that will be unavoidable to stabilize the climate.