Episode 12: Carbon Offsets—One Quandary After Another [Full Transcript]
A Crash Course in Carbon Offsetting
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Casey: Hi this is Pricing Nature. Are you taking a trip this summer? Maybe for vacation, or to see family? Let’s say you are. You find the cheapest flight possible that doesn’t land you on a red-eye, and hit next… Before you checkout, you see a small checkbox… “Click here to offset your emissions.” It’s just $3.
If you buy an offset, someone somewhere will plant trees or… something. Right? And you figure, if you can’t eliminate your emissions from the flight, you might as well pay to counteract them. What’s an extra $3 to fight climate change?
You might also ask yourself… What happens exactly when a ton of carbon emissions is “offset?” Is the single ton of emissions from my flight counteracted by exactly one ton of emissions reduced somewhere else?
This episode of Pricing Nature is gonna get way into carbon offsets. What they are, how they work, and how we might improve their quality. We’ll also ask, is this a mechanism we should be using?
You could also be asking, what’s the big deal? At the end of the day, what’s one ton of emissions from my flight when the world emits billions of tons every year?
Just like individuals, companies and institutions struggle with these same questions. And a company might emit tens of thousands, even millions of tons of CO2 every year.
The latest IPCC report says we’ve got about three years before global emissions have to start declining in order to hold global warming to 1.5 degrees Celsius. Maybe you're trying to figure out how to remove the climate impact from your company’s footprint—how to decarbonize the company. As you look at your options, several things are going to be really difficult to do without fossil fuels.
There are buildings you need to heat and cool. OK, you can electrify that. But it will take some time… maybe ten years to do. You’ve got energy intensive industrial processes... You figure, in 2032 you’re going to replace your fossil-fueled boiler with one powered by a green fuel. Hydrogen or green ammonia might be available by then. But how do you reduce global emissions in the meantime, over the next 10, or maybe 20 years while you’re preparing for that major fuel switch?
Are offsets a viable option? Can you invest in other people’s emissions reductions to eliminate your impact?
As we speak, the carbon offset market is growing rapidly. In 2021, voluntary purchases of carbon offsets topped $1 Billion. And that doesn’t include offsets purchased to comply with regulations, such as cap-and-trade systems. As of this recording, prices for several types of offsets have quadrupled or quintupled in the last two years alone. As this market grows, it becomes even more important that it is built on integrity. The larger the market, the more ability it has to help slow the climate crisis, and at the same time, the more misled we will be if the market turns out to be built on false promises of emissions reductions. As always on Pricing Nature… the stakes are high.
Casey: Welcome back to Pricing Nature, a podcast from the Yale Center for Business and the Environment, the Yale Carbon Charge, the Yale Tobin Center for Economic Policy, and the Carbon Pricing Leadership Coalition.
I’m Casey Pickett, Planetary Solutions Project Director and Director of the Carbon Charge at Yale
Jacob: I’m Jacob Miller, a recent graduate from Yale College. Back in 2017, I was the first intern with the Yale Carbon Charge.
Maria: And I’m Maria Jiang, a Master’s student at the Yale School of the Environment and Yale School of Management.
Casey: At the end of last season, we started discussing the thorny issue of offsets. Carbon offsets are a mechanism companies, institutions, and individuals can use to counterbalance the carbon emissions they create when they deliver a package, or heat a building, or fly in an airplane.
And they are a way to put prices on carbon. It costs money to buy offsets. And their pricing—often less expensive than other kinds of mitigation work—drives much of their use.
Jacob: There are lots of kinds of available carbon offset projects. You can help eliminate methane emissions from animals on farms and from abandoned coal mines. You can provide funding for more efficient cookstoves to replace inefficient wood- and dung-fueled stoves in low-and-middle income countries. You can help factories switch cheap high emissions processes for more expensive lower emissions processes. And you can pay forest managers to change their practices so they store more carbon in forests, and for longer periods of time.
Casey: We’ll get into some of these project types later today. But first, why is counterbalancing, or offsetting, our emissions thorny? In short, because we can’t be sure that it works yet, to slow and reverse the warming of the planet. However, we may need a well functioning system for offsets if we are to transition off of fossil fuels in time to hold climate change below catastrophic levels.
Much as we want to, we can’t turn off the global economy’s use of fossil fuels tomorrow. And neutralizing our own carbon emissions by investing in projects that reduce emissions elsewhere may be able to help the global economy wean itself off of fossil fuels faster.
Or maybe not.
This is an issue on which people of good intent can disagree, and do. Strongly.
On today’s show, we’ll wade into this debate to help you figure out what questions we should all be asking to accelerate the transition to a zero carbon future.
We’ll strive to answer some of the toughest questions that surround carbon offsets: How do we know that a carbon offset represents a genuine reduction from business-as-usual carbon emissions? How can we make the carbon offsetting system more robust? And should we be using carbon offsets at all?
Jacob: Act I: What are carbon offsets?
Jacob: First, a primer:
Casey: What we think of as a carbon offset is also called a “carbon credit.” That is, a unit that says “I have neutralized 1 ton of carbon dioxide equivalent from the atmosphere.”
Maria: Remember, the atmosphere doesn’t care where greenhouse gasses are coming from… it’s all gonna spread out over the globe anyway.
Casey: What enables a carbon credit to offset emissions, in the most basic sense, is that 1) someone pays someone else to reduce their emissions; 2) the first party counts that reduction for themselves; and 3) the second party reducing emissions would not have reduced their emissions without being paid for it.
Maria: Exactly, like if I’m Company A pumping out 10,000 tons of carbon dioxide every year and trying to get to 0 tons of emissions, but I can only reduce my own emissions by about half, 5,000 tons a year because the last 5,000 tons are way too expensive…
Jacob: And I’m Company B, who could reduce my emissions by 5,000 tons pretty cheaply… if I could find the money…
Maria: Then I might pay Jacob $100,000 to reduce his emissions, but then I would claim them as my own emissions reductions.
Jacob: Wait, Maria - are you paying me $100,000 right now?
Maria: I’m not saying up front, but maybe in some installed payments over the next few years.
Jacob: Okay, I’ll text you my Venmo handle.
Casey: Now, earlier I said a carbon credit neutralizes one ton of carbon dioxide equivalent because we might be talking about other greenhouse gasses like methane or nitrous oxide, but because carbon dioxide is the most prevalent greenhouse gas, we convert other gasses into their carbon dioxide equivalents in terms of their contribution to global warming.
Maria: Some carbon credits are issued for carbon emissions reductions, such as replacing a fossil fuel power plant with renewable energy, or switching from the rice growing practice of flooding fields to intermittent irrigation, which produces less methane than the flooding practice.
Jacob: Other kinds of carbon credits are for “carbon removals'' -- practices that remove previously emitted carbon from the atmosphere. This includes direct air capture, an expensive air filtration technology that pulls CO2 from the atmosphere to be stored underground, and carbon mineralization or enhanced weathering, which accelerates a natural process adsorbing CO2 onto stone.
Maria: Carbon can also be removed from the atmosphere by trees and oceans. If done well, planting new trees can draw down more carbon because trees sequester carbon in their roots, branches, and trunks, and in the surrounding soil. Oceans can remove CO2 through kelp and plankton growth.
Casey: This difference between reduction and removal credits proves important. Reductions are more difficult to measure, but also more readily available as carbon credit projects, and considerably cheaper than removals. At least for now.
Jacob, do you want to briefly explain the carbon crediting process?
Jacob: Sure! Renewable energy project developers, forest managers, farmers, and a host of other entities can take reduction or removal actions, and then get them reviewed by a third party organization to verify if the action did what it purports to. With that verification in hand, they can apply to a carbon registry, which issues carbon credits and holds them so they can be sold on a carbon market. Then companies, organizations, or individuals can buy these credits and “retire” them when they want to counteract their own carbon emissions.
Casey: Retiring a carbon credit is a little like ripping up a dollar bill. Once it’s ripped up, it can’t be reused.
Jacob: And when you retire a carbon credit against your emissions, that’s known as offsetting. The majority of purchased carbon credits go towards offsetting emissions, which is what we’ll focus on in this episode.
But Casey, what about other uses? What if a company wanted to buy carbon credits like an asset class, to speculate on the price rising?
Casey: They can do that. Just buy and hold without retiring. Once the credits are retired, they can never be resold. That’s it. But until they’re retired, they can be traded over and over, kind of like a dollar bill or a stock on the stock market.
Jacob: What if a company wanted to mitigate more emissions than it was responsible for?
Casey: They’d buy and retire more credits than they need. If my organization emitted 10,000 tons of carbon dioxide equivalent last year, I could buy and retire 20,000 tons worth of carbon credits, and then I’d have offset my 10,000 tons of emissions and contributed an extra 10,000 tons of reduction toward our global mitigation targets.
Maria: Would you really?
Casey: Good question.
Jacob: Can you two hold that question for a little while?
Casey: Sure, I can live with that.
Jacob: I think we’ve wrapped our primer. Let’s do the theory next and then get into the critiques.
Maria: Let’s get into it!
Casey: Sounds good.
Jacob: The theory behind using carbon credits to offset emissions rests on three key benefits. First, cost: Some carbon mitigation projects are expensive and some are not. Carbon credits enable people and organizations to invest in less expensive reduction and removal projects than they’d have access to if they were limited to their own facilities and sites. And in a world with limited financial resources, cost savings allow things to happen that just wouldn’t otherwise.
Maria: Second is redistributing resources. People in high income countries have burned most of the fossil fuels causing climate change through our intensive use of internal combustion engines, steel, cement, carbon-intensive agriculture, and heating and air conditioning buildings. However, many of the burdens of climate change, and many argue lots of the potential future emissions growth, will be in low-income countries. Carbon credits are a method to transfer funds from high- to low-income countries to help pay for mitigation in an equitable way.
We spoke to Suzi Kerr, chief economist at Environmental Defense Fund, or EDF, about the benefits of using carbon credits to reduce global emissions:
Suzi Kerr: “I think crediting has a huge role to play going forward….
At the moment, we're very focused on reductions in North America and in Europe, but the really big emission reductions are going to have to happen in the developing countries. And we don't have mechanisms that are going to enable that. (if you can get the countries who are richer and have more stringent targets, so have higher costs of mitigation…) you can get them to fund the poorer countries who might have a lot of opportunities to mitigate, but they don't have the resources to do it… then you could as much as double mitigation for the same cost.”
Jacob: Mitigating twice as much carbon for the same cost. This leads to the third benefit of carbon credits—they could enable us to cut emissions much faster. We’re in a race: can we get the global economy off of fossil fuels in time for the planet to return to safe operating limits? Mitigation projects often rely on existing technologies that are ready for use today, but require more funding to be implemented at scale.
Maria: Hang on, Jacob. I get the point about helping scale up existing technologies. But what about technologies that are still in development, such as green ammonia, or direct air capture which is still prohibitively expensive. How can carbon credits help there?
Jacob: By providing a market signal. If innovators and companies are confident people will buy, they’ll keep working on the technology. The theory is, the market will pull technology along till it’s ready.
Maria: Got it. So the carbon markets could encourage the development of new technologies and therefore speed global carbon mitigation.
Casey: In theory, carbon credits should help us achieve more emissions reductions than we could achieve otherwise, because they facilitate fast, low cost mitigation. And it can often move money from high to low-income countries…
Maria: It’s a pretty similar theory to the economics of cap-and-trade. Or the global emissions trading scheme created by the Paris Agreement’s Article 6. Channel resources to the lowest hanging fruit first, to make the largest impact as quickly as possible.
Casey: And the theory continues: the prospect of selling carbon credits encourages farmers, miners, factory owners, etc., to change their operations. So, their emissions reductions and removals are counteracting the emissions of the organizations and individuals that purchase the credits.
Some experts we’ve spoken to say we need a robust carbon crediting system to have a chance of holding global temperature rise to 1.5 or 2 degrees Celsius. By reducing the costs of mitigation, carbon credits can mobilize private investment in projects that reduce or remove greenhouse gas emissions. Projects that wouldn’t exist if not for the saleable carbon credits they produce. For more on this, we talked to Yale professor Brad Gentry, who teaches at the Yale School of Management and the School of the Environment.
Jacob: Brad Gentry studies how private investment can support climate change mitigation :
Brad Gentry: “If we don't have private investors putting money into things that reduce emissions or remove carbon, we're never gonna get the amount of money we need. And so then the question is what are the acceptable, or what are the meaningful vehicles for doing that?
If you invest in a different industrial process, a different energy process, and that will reduce emissions or remove carbon, then we should reward you for that. And that would attract more investors into that arena.”
Casey: Carbon credits provide an opportunity for companies and individuals who want to reduce the carbon emissions in the world, but need an alternative to directly reducing their own emissions.
Jacob: And why do we need alternatives to reducing our own emissions?
Casey: It could be too expensive to reduce emissions at home, or too disruptive, or perhaps the necessary technologies don’t exist yet.
Maria: Exactly, for many entities, reducing emissions down to zero is almost impossible in the short-term, so they buy carbon credits to fill the gap between their carbon emissions target and what they’re actually emitting.
Casey: That’s definitely the situation at Yale. As we reduce our own Scope 1 and Scope 2 emissions, we don’t want to disrupt our operations so much that we hobble our mission of research and education. For example, to make our buildings massively more energy efficient, we have to move researchers out of labs and move students out of dorms. To retain and attract faculty and students, we can only go so fast with our limited building stock. And we plan to switch to zero-emissions fuel in our power plant; but the technology isn’t ready yet.
So as we work on decarbonization, offsets can be a helpful bridge.
Maria: Yeah, so in Yale’s case, buying credits to offset today’s emissions is a way to make sure money is continually flowing to decarbonization somewhere, even when it’s hard to do at home.
Jacob: Right. And I guess there’s also the issue of access.
Maria: What do you mean by that Jacob?
Jacob: Well, as an individual, even if I use a metal fabrication companies products, how can I help that company switch to using gases that warm the climate less? Or how does an IT company help a big pig farm capture the methane from its manure lagoons? Carbon credits give that access.
Casey: Then you’ve got some sectors of the economy where carbon-free alternatives don’t even exist yet! A common example is aviation. We’re not going to have long distance electric planes any time soon, the batteries are just proving too heavy. And zero-carbon fuels are still super early in development.
Maria: I am skeptical, I see that point. Offsetting is a way for hard to abate sectors, such as the aviation industry, to contribute to global decarbonization while continuing to operate.
Casey: Alright, so to recap. A well-functioning carbon market can help companies, institutions, and individuals meet their carbon reduction goals and contribute to global mitigation efforts.
Maria: Carbon credits could be a key tool in reversing climate change by allowing us to reduce and remove carbon emissions faster and less expensively.
Jacob: They mobilize private funding for carbon projects, and can channel funding to clean technologies, and to low-income countries with growing energy needs.
Casey: When used as a way to mitigate difficult to decarbonize emissions and invest in underfunded projects, carbon credits seem potentially crucial to global decarbonization efforts. But there are big questions about how to be sure a carbon credit is doing what it should do.
Maria: Right… like who decides how many tons of equivalent CO2 a project reduces? And who makes sure that a carbon credit isn't used twice?
Jacob: And in the case of credits that are issued for emissions “reductions…” We can't predict the future, so how can we say we've "avoided" emissions? Who knows what would have happened under “normal” circumstances?
Casey: To answer these questions, we’re going to need to shift gears a bit. We’ve got five letters of the day coming up to guide us through Act II. It’s like a whole week’s worth of Sesame Street.
Jacob: [Kermit voice] What makes a high quality carbon credit?
Casey: Complete with one chaos muppet… and one order muppet!
Casey: You know, Bert and Ernie. Order muppet and chaos muppet. Kermit and Miss Piggy.
Jacob: Dr. Bunsen Honeydew and Beaker?
Maria: So which of us is which Casey?
Casey: Well one of you keeps us on schedule and the other one was recently found inserting foghorn sounds into an episode… I’ll let you decide who’s chaos and who’s order.
Jacob: Let’s head to Act II:
Act II: What makes a high quality carbon credit?
Jacob: The use of carbon credits to offset emissions has been a source of controversy… Let’s dig into why.
Casey: The main concerns revolve around the “quality” of a credit, and whether the existence of a carbon credit market takes pressure off of companies and institutions to decarbonize their own operations.
Jacob: Let’s stick with the first concern for now -- what does it mean for a carbon credit to be high-quality? We’re not talking about how shiny it is, that’s for sure.
Casey: Well, to understand whether or not a carbon credit is of high quality, we can use the acronym “PAVER.” Each letter specifies a trait of a trustworthy carbon credit. P for permanent, A for additional, V for verifiable, E for Enforceable, and lastly, R for real. There are several variations on this acronym, but this one is clear and easy to remember, so we’ll stick with “PAVER” today.
Jacob: Permanent, Additional, Verifiable, Enforceable, and Real. PAVER. Can you two define each of these traits?
Maria: Let’s start from the top: P is for Permanent. Permanence means carbon reductions or removals will last a long time, conventionally that’s set at 100 years. Because that’s about the timeframe we have to stop the climate catastrophe.
Casey: Yeah, and to be clear, 100 years is somewhat arbitrary. It doesn’t correspond to some scientific climate or atmospheric measurement. 100 years is just the current, standard convention of what counts as permanence for several different methodologies.
Maria: For as long as carbon dioxide is in the atmosphere, it acts like glass in a greenhouse. When it’s kept out of the atmosphere, it doesn’t. A direct air capture project is considered very permanent, because it takes the carbon dioxide it captures and stores it in a way that keeps it out of the atmosphere on a geologic time scale. The main way is by trapping it in stable geological formations underground where it’s unlikely to fizz back into the atmosphere.
Casey: Compare that geologic carbon storage time to what you get from a forest carbon project, where the CO2 is trapped by the process of photosynthesis -- for a forest carbon credit to represent quote permanent storage, you need to ensure that the forest won’t burn down in a wildfire, or get eaten up by invasive insects.
Casey: Exactly. Hard to guarantee the health of forests these days.
Maria: What if a wildfire does happen? We simply can’t guarantee the future.
Jacob: With that in mind, practitioners are thinking about whether using 100 years as a standard for permanence is the best approach.
Casey: We spoke to Zack Parisa from Natural Capital Exchange, or NCX. NCX is trying to help solve the permanence challenge in forest carbon crediting with a concept called a “ton-year.” A ton-year represents one ton of CO2 sequestered for one year. Add several ton-years together to equal one ton stored for the standard 100 years:
Zack Parisa: “If one ton for 100 years held out of the atmosphere is valuable to society, then how much carbon for how long, if I were to remove a larger amount, perhaps for a shorter period of time is equally valuable to society? Because what is also true is there is urgency to removing carbon from the atmosphere. The curves that I look at indicate that what happens over the next decade really matters.”
Casey: The goal at NCX is to increase the number of landowners that delay their timber harvests or forgo them entirely to sequester more carbon in the near-term. And to scale up this market, NCX finds it is easier to develop short-term contracts with landowners than long term contracts…
Zack Parisa: “It turns out that not many landowners are excited about the prospect of signing a multi-generational contract, especially if it's saddling, next generations with some obligation, particularly when that obligation is not necessarily something you can make in good faith -- forests are dynamic systems.
…Fires, tornadoes, hurricanes, happened, you know, pests and pathogens, those things happen. And so can you guarantee that that forest is going to remain standing for a hundred years? You can't…
But it turns out many, many landowners are willing to work with small or shorter term contracts, perhaps a year, perhaps five, perhaps 10, something along those lines. And so there is the potential for dramatic scaling when we work with shorter term contracts…”
Casey: Even without disease or wildfire or natural disaster, it can be challenging to guarantee 100 years of a carbon reduction or removal simply because that’s a long time scale for humans to be making guarantees to one another. Governance systems can change, businesses can go bankrupt, contracts can dissolve. NCX’s ton-year accounting system allows them to create shorter term contracts and still approximate the amount of quote “permanently” stored carbon, even though any individual ton may not be stored for 100 years.
Jacob: This is a really interesting approach, Casey. Are there any risks to using this accounting system?
Casey: Well, I guess I worry about its longevity. What if a natural disaster wipes out timber stocks and drives up the price of timber? The market for forest carbon credits could collapse if landowners decide not to renew their contracts in favor of the more profitable timber market.
Jacob: So there’s risk in relying on a series of short-term contracts. If landowners stop signing contracts, then we would have gotten the ton-years we got, but if the system doesn’t keep attracting landowners to sign new contracts, the benefits would dry up pretty quickly.
Casey: Yeah. Although there's also risk in relying on long-term contracts. As Zack Parisa pointed out, this is urgent. We need to scale up forest-based carbon mitigation projects today to help avoid climate catastrophe tomorrow. And if landowners are reluctant to sign long term contracts, that's a major barrier. That's why the ton-year idea seems worth exploring to me.
Jacob: Alright with that, let’s go to the next letter in PAVER, “A”...
Casey: “A,” is for additional, meaning a project would not have happened without the ability to sell carbon credits.
Jacob: You’re saying, in a parallel universe where the carbon credit market doesn’t exist, the project would never have happened. Because the primary motivation for the project is to make money selling credits.
Casey: Exactly. We spoke to Anastasia O’Rourke, Managing Director of the Yale Carbon Containment Lab. She explained that there are several ways to test that a project is additional:
Anastasia: “…One of them is… If a regulation or a compliance body is making you do this action then we assume there's a rule of law and you're going to follow the law. And so that wouldn't count because it's already by law you have to do that practice. “
Casey: To give an example, landfills emit methane, a potent greenhouse gas, and for landfills over a certain size, the EPA requires that this methane be captured and destroyed.
Jacob: And for a smaller landfill, where methane capture isn’t required, a project that goes out of its way to capture landfill methane might be eligible for carbon credits?
Casey: Yep. That voluntary methane destruction could be considered additional. If it passes the other tests.
Jacob: Got it. What’s the next test?
Anastasia: “There's what's called a common practice test, which is like, this project is considered additional if it employs practices that are not otherwise or predominantly used by that particular industry or that particular sector. This is going to be quite regional. It's going to be quite industry specific and you've gotta be able to show, well, this is common practice that we do this: we make these products, we do forestry practices this way. And now we're going to do it this other way, which is really much better for the environment and better for climate and generating these extra emissions reductions or removals. And so it's considered additional in that case.”
Casey: Let’s take our landfill methane capture project. If it became industry norm to capture and destroy landfill methane, because landfill managers were conscious of the environmental and public health benefits, then those emissions reductions would not be considered additional.
Jacob: But a landfill methane capture project in a region where nobody is capturing and destroying their methane could be eligible for credits, because it’s going against standard industry practice, at least in that region.
Jacob: So we’ve got the regulatory test and the common practice test. Now Casey, are there any other additionality tests we can use?
Casey: There are several, but let’s hear about just one final test:
Anastasia: There's another one called a financial barrier test. So that's where the project is additional if it leads to higher costs or lower profitability that would have otherwise occurred without the carbon revenues. Basically the project really wouldn't have been financially feasible to do. You wouldn't have done it anyway. And so therefore if you do do the project, you know, it's counted as additional.
Casey: Let me give an example: Certain technologies, such as direct air capture, are extremely expensive, so they wouldn’t be profitable without a carbon credit market. But a solar plant or wind farm would, in many cases, be a profitable investment on its own. So solar and wind projects, at least in the US where the projects tend to be profitable, are widely considered non-additional.
Jacob: And then you’ve got some cases in between, right? For example, going back to landfill methane capture. The methane could be burned to generate electricity and destroy the methane. And that electricity could be sold. If the revenue from the electricity sales more than covers the cost of setting up the methane capture system, then it’s hard to say those emissions reductions are truly additional, right? We could expect someone to do that project regardless of whether or not they can sell carbon credits?
Casey: The financial barrier test basically says, to be additional, the carbon project has to be a money loser without carbon credits, and a money maker with. If it’s not, it doesn’t pass the test.
Jacob: Sounds logical.
Casey: Yeah. And it is logical from one angle. But from another, it’s kind of weird: the more financial sense a project makes without carbon credits, the less additional it would be. Kind of a brain twister for everyone who’s been focused for decades on how to make efficiency and renewable energy projects make business sense.
Jacob: It is kind of counterintuitive.
Casey: Let me play devil’s advocate. People do things for lots of reasons. Maybe a municipal government is voluntarily implementing a landfill methane capture project because it has a positive effect on public health and the local economy. If that’s reason enough to do the project without the credits, does it become non-additional?
Jacob: This seems like a perfect use for the financial barrier test. Even if the landfill operator wanted to capture methane, it would be hard if the project didn't do better than break-even. The financial barrier test acts like a razor, telling us where it's most likely additional and most likely not. Additionality is a spectrum, not a binary, and we should support projects more additional and not those less additional..
Casey: Yeah that makes a ton of sense. Let me just carry the devil’s advocacy forward a little bit more. Should we really care if the landfill operators installed the methane capture system because there was money to be had in the carbon credit market or because they were responding to concerns from local residents? Or because they have environmental concerns themselves? Do we have to know what’s in a person’s heart to know if the credit they created is additional?
Jacob: No, I don’t think we need to know what’s in a person’s heart. I think the financial barrier test deals with that concern.
Casey: Yeah, you’re probably right.
Maria: Casey, are you saying, like, so what if in buying carbon credits you pay someone to do something they were already going to do?
Casey: Simply raising the question for debate. I’m fascinated by this one. We have far too few resources flowing to projects that reverse climate change… If a carbon project is real and permanent, how much does the additionality of the credit really matter?
Maria: Well, Casey…I’d say it matters… a lot. We talked earlier about how low-cost emissions reductions allow us to decarbonize more and faster. If we’re spending money on projects that would have happened anyway, we’re wasting money that could be spent on other projects.
Casey: That’s a strong point.
Maria: I’m going to pile on with another argument from earlier. It’s also an accounting issue. If companies try to offset their emissions with projects that probably would have happened anyway, they’re kidding themselves, and us. We can’t bend the curve on climate change with actions that are already baked into the curve.
Casey: Those are very compelling arguments. Here’s the concern that sticks with me: If we focus too much on additionality, we may limit the amount of investment going to these projects. To some degree, we need to flood the zone with investments in carbon mitigation projects. It’s a balancing act -- what has a more negative impact on climate: strict rules around additionality that limit overall investment? Or lax rules that weaken the mitigation power of each dollar spent but increase overall investment?
Maria: I find the question unsettling. But I agree we need to strike some kind of balance.
Maria: There are a million tough questions to ask about additionality. It is by far the trickiest requirement of a good carbon credit. There’s a lot of subjectivity in assessing what “would have happened under normal circumstances.”
Jacob: And every kind of project has different additionality pitfalls.
But there’s one kind of carbon credit project that has struggled quite publicly on additionality: forest carbon.
Casey: For a forest carbon project, the additionality question is: what would have happened to this forest without the revenue from the carbon credits? Would all the trees have been harvested? Would the forest have been managed to hold more carbon in the soil?
Jacob: Forest carbon is actually the most commonly used type of carbon credit…but it has developed a bad reputation in the world of carbon crediting. One report out of The University of California, Berkeley, found that around 80% of the forest carbon credits used as offsets in the California Cap-and-Trade market were non-additional.
We spoke to Charles Canham, a forest ecologist from the Cary Institute, who told us the story of a forest carbon project he was involved with that grappled with this question of additionality:
Charles Canham: “We were approached by a company that brokers these kinds of deals…
They presented the revenue that we would generate from this really well-managed working forest. And it was an enormous sum of money.
Jacob: The forest was offered a lot of money because it would have generated a lot of carbon credits.
Charles: “And I kept looking at it thinking this doesn't make sense to me.
Someone was offering us an enormous amount of money to continue to do the good management we were doing. We were even told we wouldn't have to change our management at all. And that this would guarantee, in many ways, the future of the forest.”
Jacob: The problem with this particular carbon crediting project was that Dr. Canham didn’t think the forest was really sequestering the amount of carbon it was being credited for.
As he dug into the world of forest carbon credits, he discovered that, at the time, verifiers were calculating the carbon stored in a forest using a methodology built on suspicious logic. To measure how much additional CO2 was being sequestered in the forest, verifiers used a baseline scenario which assumed the forest would be clear-cut and sold as timber for various wood-based products, such as paper, furniture, and building materials… even if the forest managers had no intention of clear-cutting their forest.
Charles Canham: [31:34] “So here's the way this works out. If that’s your baseline, and in reality your forest is just going to slowly continue to add 2% a year over what it has now… You don’t just get paid for that 2%. It's actually about two tons of offset credits per year is a pretty good rule of thumb for Eastern forest, for instance. You get paid for the difference between the two you're adding and the 15 to 20 each year you could have been releasing to the atmosphere as CO2.
So in effect, you're paying the land owner not to liquidate, but then you, as the purchaser, the industry you're then immediately emitting all of that carbon to the atmosphere. And so you have in fact made the worst case come true. The land owner didn't emit it, they didn't liquidate the forest, but the industry claimed those credits and released into the atmosphere 10, 20 times what was truly being added to the forest, and claims that there was no net increase in the atmosphere… and that is just plainly false.”
Casey: Now, of course, companies don’t literally release emissions to the atmosphere once they buy carbon credits. But I take Charles Canham’s point that purchasing carbon credits reduces the pressure on a company to decarbonize… and if the credits are based on a flawed methodology, the climate might actually be worse off than if the company didn’t try to offset its emissions in the first place.
Jacob: We might be better off if the company’s leaders just sat around feeling bad about their climate impact?
Casey: Yeah, maybe. If they didn’t believe incorrectly that they’d offset their emissions, then they might feel a greater need to reduce their own emissions the next year.
Maria: While focused on forest carbon, what Dr. Canham shared is a demonstration of how any carbon crediting scenario can go awry. Luckily, these concerns have become more widely understood, and the world of forest carbon credits is evolving. For example, carbon credit registries are working on adopting stricter, more accurate baselines.
Jacob: And some practitioners in the forest carbon space are developing new methodologies and new technologies to make forest carbon credits more viable. For example, Natural Capital Exchange is using what’s called remote sensing…
Casey: Sounds technical.
Jacob: It’s actually pretty straightforward! At NCX, they take on-the-ground measurements of tree species and sizes in sampled locations, and they compare that data to satellite imagery of the forests they’re monitoring. Very basically: If they know the amount of carbon stored here from on-the-ground measurements, and the satellite image looks like this, then other areas that look like this will be storing similar amounts of carbon… I know that sounds like eyeballing it, but there’s good technology and math behind it… It’s much cheaper than sending forest ecologists into every single acre that’s being monitored, so they can get far more measurements of the carbon stored in individual acres of forest over time.
Zack: “That's sort of the power of satellite imagery and remote sensing data analysis… we're basically just lowering the cost to get higher quality information, higher resolution of information to make these sort of nuanced, hopefully nuanced and informed decisions.
Jacob: By improving the quality of their data, NCX can strengthen additionality approximations with more accurate baselines. And it also enables them to keep track of landowner activity, to ensure nothing is being harvested that should be preserved.
Casey: Forest carbon makes for rich narrative: Everyone wants to put forests on their brochures—which appears to be a major driver of forest carbon credit purchases—but it’s not always clear the projects are delivering the emissions reductions they claim.
Jacob: I think I know what you mean, but could you elaborate?
Casey: When I dug into US-based forest carbon projects a few years ago, I found similar concerns to Charles Canham’s—for projects claiming to protect forests against destruction, or to manage them better, it was hard to believe they would be destroyed, or managed poorly, without the carbon credit project. I got the sense the projects I was looking at were in forests that were already well-managed in no danger.
Jacob: So we can’t trust them, en masse. But we do need them?
Casey: Yeah. Outside of the US, deforestation is a major issue in tropical forests: like in the Amazon; and Indonesia. If carbon credits could help protect forests there, it would be a huge blow against carbon emissions and global warming, and a stroke for biodiversity protection.
Jacob: It’s a quandary.
Casey: That’s what we should name this episode: Carbon offsets: One quandary after another.
Jacob: So let it be written, so let it be done.
Jacob: Alright so far, we’ve done P for Permanence, and A for additional. Let’s move onto “V.”
Casey: V, means ‘verifiable.’ This means a project must be reviewed by a third party for permanence, additionality, etc., to determine whether credits should be issued and how many. There are several different standards used to verify a credit, and the methodologies differ.
Jacob: Okay, we went into this a bit earlier. Remind us why verification is so important?
Casey: Here’s Anastasia O’Rourke again from the Yale Carbon Containment Lab:
Anastasia: “So you're buying a product that seems esoteric at times....You just don't really see it with your own eyes. You have to really trust that the providers who are selling you, that product, have done all of the work that they've, that they say they're doing.”
Jacob: And how does the verification process work?
Anastasia: “So how it works is that registries are the groups that are overseeing these markets and they release standards for different project types. And then a different group of third party verifies come in and check that a project meets the standards. So to check that, they might go onsite, they usually check all the documentation and check that the math was done well, make sure all the contracts are in place and appropriate. And then every year that project usually issues a set of credits and those sorts of documents and verification process is checked yearly.”
Casey: A lot of trust is required in the purchase of a carbon credit. It’s done almost entirely sight unseen. The verification process gives carbon credit buyers the confidence that what they’re purchasing is the real deal.
Maria: In this system, who’s verifying the verifiers?
Jacob: Who’s watching the watchmen?
Casey: There’s an answer.
Casey: The International Organization for Standardization. Known as ISO. Of ISO 9000 fame? ISO provides oversight and accreditation for all kinds of things: food safety, IT security, quality management, the list goes on. In the US, the American National Standards Institute (ANSI), which rolls up to ISO, provides accreditation for the most reputable groups that verify carbon credits.
Jacob: Oh ya. Well who accredits ISO and ANSI?
Casey: You know, my kids just got old enough to start saying, “Your mom” to each other to answer tough questions. And it’s not ok. We have shut that down real fast. Totally inappropriate. But at times like this, the phrase does come to mind.
Jacob: Casey, aren’t you supposed to be the adult in the room?
Casey: Yeah. I am. No, I’m just telling you what my KIDS say. I’m not saying it. Totally different.
Jacob: Good luck getting the ISO accreditation for adulthood.
Casey: Oh, I already have it, so…
Jacob: I just called them, it’s been revoked.
Jacob: So that about does it for verification. What about the letter “E”?
Casey: E and R are quick. Don’t blink. They’re both going to fly by.
Jacob: My eyes are pasted open.
Casey: I just got a flashback to A Clockwork Orange… E is for enforceable, which means that there’s no double counting. One carbon credit is for one ton of reduction… An owner of a carbon credit can either sell it or retire it. Once a credit is retired, it’s like cashing a check. You can’t cash it twice.
Maria: We discussed this issue in our Episode on Article 6, where Brazil wanted to sell credits and claim them for itself.
Jacob: A credit can be traded, as in, sold to someone else, but it can’t be retired twice. It’s a simple concept. You may not sell a cookie you’ve already sold to someone else. And you can’t sell a cookie you’ve already eaten. And maybe most importantly, *sad* you can’t eat a cookie you’ve already sold. But with an intangible good like a carbon credit, where the value is kept in the form of paperwork, it’s not so simple in practice.
Maria: Enforcing this one credit, one ton rule is a major role for carbon registries. They track each credit to ensure it has only one owner at a time and that once it is retired, it is never used again.
Casey: Okay, that’s E. Anyone blink? I hope you caught it all. P-A-V-E. That brings us to… pave. What’s next?
Jacob: The last letter is “R,” for “real.” Not like, for real. It stands for “real.” But also, the last letter is “R”, for real. Sorry. This might sound vague… and it is. It means that every credit has to actually be a reduction in greenhouse gasses through an accepted calculation methodology. It’s basically a catch-all term for… not fake.
Maria: In 2007, for example, the Vatican was presented with forest carbon credits to offset their emissions, but the trees were never planted.
Jacob: Seems obvious, doesn’t it? But where there’s money, there is sometimes bad intention.
Casey: And that wraps up R, which wraps up PAVER. Are we still blink-free? Did you make it to the end?
Jacob: My eyes are burning, Casey.
Casey: Take the paste off…
Maria: There’s one letter not in the PAVER acronym that’s crucial to consider, too. And that’s the letter ‘J’ for Justice. While developing a carbon credit, it’s not only important to make sure that it’s legitimate, but also that pollution isn’t being exacerbated in marginalized communities or land rights aren’t being infringed upon. Several carbon registries require local community consultation in order for a project to be eligible for carbon credits.
Casey: To be clear, incorporating justice is not new to carbon credit development, but we want to be explicit about its importance. We touched on this issue in Episode 6 about the Left’s take on carbon pricing… The California cap-and-trade system might have enabled continued concentration of polluting power plants in low-income neighborhoods.
Maria: Right, and land sovereignty for indigenous peoples is another example of injustice around carbon credits. Kristen Lyons, a fellow at the Oakland Institute, told us how carbon credit development can threaten both biodiversity and indigenous rights:
Kristen Lyons: To give you specific examples of this, during the time that green resources Northern Uganda site was actively selling carbon credits…
Maria: Green Resources is a forest products company that was using its land to generate carbon credits…
Kristen: “It was important from the perspective of the company to keep activities out that would disrupt maximum productivity and that would disrupt any kind of way in which they wanted their plantation to grow.
The purpose is to grow trees that can maximize carbon sequestration quickly, and so those conditions are not necessarily conducive to creating a diverse ecology. So we see one diverse landscape replaced by industrial, mostly monocultural landscape.
It wasn't possible for people to cultivate food crops or to graze animals, anywhere within or around the plantation forestry set up, and we heard many accounts of people having their animals confiscated, of crops being destroyed.
So these kinds of landscape uses were seen as a threat to the maximization of productivity of these trees as carbon stores. So, you know, these things make economic sense, perhaps they make economic sense, but they don't make livelihood sense. In terms of diverse ecologies, they don't necessarily make sense in terms of the ways in which we live as mixed species, including, you know, increasingly precarious landscapes in the context of climate change and lots of competition about how growing populations ensure viable access to land in order to not just eke out an existence, but to survive and thrive.”
Maria: While it’s important to have stringent measures around permanence and realness and additionality, sometimes… these restrictions conflict with local community needs. And sometimes, carbon credits can threaten local people’s access to land, and therefore food and economic prosperity.
Casey: If you remember from our first episode this season, we explored injustices linked to carbon crediting. The Kyoto Protocol’s Clean Development Mechanism, or CDM, was designed to funnel climate investments into low-income countries. But safeguards for protecting the rights of local communities have been slim in many cases. For example, hydro dam projects funded by international development banks led to flooding and displaced communities who were never involved in the siting and governance of these projects.
Jacob: So while carbon credits might be trying to do one good thing… reduce our overall emissions and prevent climate catastrophe… they could be creating other problems, as well. So how do we avoid that? How do we build safeguards to make sure that local communities are included as part of this process?
Maria: Here’s Kristen again with some ideas:
Kristen Lyons: “There are frameworks that that should guide, the ways in which projects, carbon offset projects work with indigenous communities …
…obviously issues of consent, ensuring that all relevant indigenous communities are engaged and give consent, or have the opportunity to withhold consent.
…the importance of effective governance and this includes equitable governance. Ensuring benefit sharing across communities and across indigenous communities from any economic or other benefits that might be realized from carbon offset projects.”
Casey: PAVER, and the role of justice, point the way to high standards for creating carbon credits. But are standards always good? Are there any trade offs?
Maria: Casey, what do you mean? What’s the tradeoff for setting high standards?
Casey: To some extent, the more complicated or difficult we make it to create carbon credits, the lower the incentives are for a developer or landowner to pursue a carbon project. High standards often take more time. Costs will rise, and we’ll either have fewer projects, or the credits available will be more expensive.
Maria: What do you propose?
Casey: I wish I had a solution. I’m just pointing out that improving the impacts of projects, whether they are justice related or biodiversity related, doesn’t occur in a vacuum. This is why some people who look at carbon credit projects are skeptical of inexpensive credits. The presumption can be, rightly or wrongly, that they must be cutting corners somewhere.
Maria: But the more expensive a credit is, the fewer companies will buy.
[At the same time] Casey: Which would stink. Maria: Which would be great!
Casey: Exactly. Depending on the value you think permanent, additional, verifiable, enforceable, real, and JUST carbon credits deliver on climate change, you might see the availability of inexpensive credits as a good or a bad thing.
Jacob: Now that we’ve established what distinguishes a high-quality carbon credit from a low-quality one, let’s understand how companies and individuals can improve the crediting system we have. And when we should use carbon credits, if at all?
Let’s move onto…
ACT III: How should carbon credits be used?
Jacob: We’ve outlined several areas where developing a high quality carbon credit could be tricky. And we’ve also highlighted how important carbon credits could be in order to accelerate investment into carbon reduction or removals… In this act, we’ll get into how organizations are using and thinking about carbon credits.
But first, Casey, Maria, does everyone agree? Is using carbon credits always an appropriate strategy?
Casey: Some of our interviewees say no—Here’s Kim Hellstrom, a strategy lead for global sustainability at H&M, on using carbon credits for H&M’s climate commitments:
Kim Hellstrom: “So the net zero standard says in order to reach net zero, you have to reduce 90% of your emissions and then you have to do high quality removal of the residual 10%. That's how to get to net zero.
When you do these cheap offsets… it can even be negative in some parts if it's the wrong type of trees, you're planting in the wrong place. So, yeah, we're not getting anywhere close to offsetting. We were not part of any discussion with offsetting.”
Maria: Alex Barron, a professor of environmental science and policy at Smith college, found in research published in 2021 that universities are relying heavily on carbon credits to achieve their climate goals:
Alex Barron: “We were looking at the schools that have announced that they have achieved carbon neutrality… When you look at the data from what they did in their neutrality year, which is admittedly just a snapshot of what they did in the year that they announced, you find actually very little reduction in what are called scope one emissions…”
Maria: Scope one emissions, these are emissions from directly burning fossil fuels, such as for campus heating.
Alex: By far, the largest share of emissions reductions came from offsets. And to me as a policy practitioner, that's a troubling pattern because for us to get as a country, and as a planet to carbon neutrality, we have to be addressing this long lived fossil fuel infrastructure that needs to be replaced with something that doesn't emit CO2 to the atmosphere.
And so, there needs to be a clear strategy for schools to address those emissions that they have on campus and not just offset them because it doesn't take a whole lot of math to demonstrate that that approach of just offsetting all your emissions is not scalable to the entire planet.”
Maria: If we think about this… theoretically, we could only ever offset 50% of our emissions through carbon credits, right? Because if we wanted every single person, company, or organization to get to net-zero purely by paying someone else to offset their emissions… we’d need a whole other planet .
So reducing our own emissions is critical. We don’t have another planet. At least not yet…
Jacob: Okay Elon.
Casey: But for many organizations, only reducing their own emissions is not the most efficient or effective way to get to net-zero. Doing so could cause major disruptions to the mission of the organization or it could cost more than the organization has available to spend. And there are still plenty of good climate projects that require funding, which couldn’t be executed without selling carbon credits.
Jacob: Right. Even if carbon credits can’t fulfill our climate goals in whole, they can serve as a transition solution.
For the times when we do find ourselves in tricky to decarbonize situations and are looking to take climate action now… What’s the right path forward? And if we decide to purchase a carbon credit, how do we make sure we’re buying high quality?
Maria: Let’s dig into your questions with an example, Jacob. Casey, you helped manage Yale’s carbon offsets program, So tell us, when you were looking to buy carbon credits for Yale University… What did you all do first?
Casey: Well, it was a big team. Anastasia O’Rourke and Brad Gentry, from earlier in the episode, played big roles. Our first step was to understand the carbon credit landscape. What projects exist… and where? We looked at forest carbon, landfill and agricultural methane, and industrial gas substitution.
Jacob: And how did you decide on what kind of projects to go with?
Casey: Over time, we narrowed it down to methane reduction projects. First, because the measurability of emissions reductions is so strong…
A landfill collects methane from under the landfill’s surface barrier, pipes it to meters that measure it precisely, then to a turbine where it’s burned.
And once you destroy a cubic foot of methane, it’s destroyed. That’s the second reason we’ve focused on methane. The reductions are 100% permanent. So in PAVER, methane destruction performs highly on permanence–P–and verifiability–V. It’s a similar deal with agricultural methane: collect it, measure it, burn it, and it’s gone.
Maria: Where did you go to find credits?
Casey: There are a number of retailers that aggregate and sell carbon credits, and we met with several of them, reviewed project types, asked tough questions, and then selected the retailers we wanted to work with.
Then to select credits to buy, we read the verification reports, researched for any published news on the projects, then had the team rate the project using the PAVER acronym as an initial check, but also going deep into environmental justice and other metrics.
Jacob: That’s a pretty in-depth process…
Casey: And it didn’t end there. Every year, we go back to the retailers we’ve developed relationships with to review a new portfolio and go through the whole process with any new projects we’re considering.
Maria: So if you are interested in purchasing carbon credits, you’ve got to do your research, Understand the types of projects available and how they are created, measured, and verified.
Jacob: There are a lot of checks and balances to the carbon credit creation process. But even then, there are poor quality credits out there. And it’s still tricky to understand the ins and outs of absolutely everything. Here’s Anastasia O’Rourke again:
Anastasia: “With all of these things, the devil's in the details and it takes a fair bit of expert knowledge about say forestry practices in a certain region to be able to really understand what's going on.
If you're not an expert in say forestry practices in Pennsylvania, which you know there’s some people who are, but not many, then you could look at the standard, you could look at the certification, and you could look at the verification body and say, this all seems great. This is highly legitimate, there's a lot of different groups involved, a lot of checks and balances. But the fundamental core of the practice, and what's really changing there, can be questioned.
Jacob: Even if it’s impossible to be an expert on everything, it’s important to do as much due diligence as you can. And we won’t try to provide everything you need to know, but we’ve linked some useful resources in our show notes.
So Casey, Maria. What’s the verdict on using carbon credits?
Casey: Well, Jacob and Maria, you know how Harry Truman asked to be sent a one-handed economist?
Casey: Well. He was sick of being told, on the one hand…on the other hand… And after this episode… I feel very two-handed.
Jacob: Yeah, what should listeners make of all this? What should companies do? On one hand (you’re welcome, President Truman) the moral hazard issue is very real. If offsetting your carbon emissions becomes too respectable, too comfortable, people and companies will rely on it too much, and will take pressure off themselves to reduce their emissions.
But what about the other extreme? Many of these projects are solid: permanent, additional, verified, not double-counted. If we stigmatize carbon credits, we might starve good carbon reduction projects of money they need.
If we underfund crucial, inexpensive projects, especially in low and middle income countries, we will slow our progress to a zero carbon economy. Just when we need to be accelerating it.
Maria: Yeah, it’s a lot to think about.
Jacob: And there’s even one more argument I’ve heard in favor of carbon credits… People and companies saying, “We can't do much while we wait for technology to mature enough to meet our 2050 target.” Carbon credits are a way to have an impact now, when we need it the most.
Casey: We don’t have data on this, but my sense is there are plenty of companies and organizations in the position you describe: they know they need to act on climate change, have made net-zero commitments, but lack a plan for getting there, and are offsetting their emissions as a first step.
Jacob: But do we think that’s an appropriate way to achieve a net-zero commitment?
Casey: That’s actually a great way to conclude this episode. But first, let me clarify what we mean by net-zero commitment.
Jacob: Please do, I often hear the phrase used interchangeably with carbon neutrality, but they’re not quite the same, right?
Casey: Right. They are often thought of as synonyms, but some organizations hold the phrase net-zero emissions to a higher standard than carbon neutrality. As we’ve said, carbon neutrality means avoiding, reducing, or removing as many tons as you emit. Two organizations have offered strict definitions for achieving net-zero emissions. The Science-Based Targets Initiative, and a group organized by Oxford University that put out the Oxford Principles for Net Zero Aligned Carbon Offsetting. My colleague Peter Boyd and I have an article in GreenBiz proposing a higher standard as well, but Oxford and Science Based Targets have clearer, simpler presentations.
Jacob: What do they propose?
Casey: The key thing is that how you use offsets affects whether you should get credit for achieving net zero emissions.
Jacob: How so?
Casey: They both say before an entity invests in carbon credits, they should prioritize emissions within their value chain, meaning direct greenhouse gas emissions—driving a car or operating a power plant—, emissions from purchased energy—like electricity or steam heat—, and upstream and downstream emissions—from your suppliers, workforce travel, or people using your products.
Jacob: OK, so reduce your own emissions first. And by how much?
Casey: The Oxford Principles just say, prioritize them. But the Science Based Targets Initiative gets specific. They ask entities to eliminate their emissions entirely, or reduce them to a level such that if every organization in the world, or in your sector, did the same, we could achieve global net zero emissions fast enough to hold climate change to 1.5 Celsius.
Jacob: So, first you have to reduce your emissions down to a residual level.
Casey: Yeah, around 10% compared to current.
Jacob: And then you can use carbon credits to mop up those residual emissions?
Casey: Exactly. But not just any carbon credits. They say you need to use carbon removals to effectively neutralize your remaining emissions.
Jacob: So they’re taking a more aggressive approach.
Casey: Yeah. The Oxford Principles say something similar: That we should shift to using carbon removal credits by mid-century.
Jacob: Do either of these groups see a role for carbon reduction credits?
Casey: They do. In the near-term, to help entities across the world decarbonize. The Science Based Targets initiative says along the way to meeting your net zero target (by 2050 or preferably, far sooner) you should mitigate carbon beyond your value chain, which can be done either through direct investment in mitigation projects or through high-quality carbon credit purchases.
Jacob: Got it.
Casey: And it’s based on the science of climate change. The Science Based Targets Initiative is certifying that organizations that comply with their standard have climate goals and plans in keeping with IPCC science, and again if everybody held themselves to that standard, we should be able to deliver the Paris Agreement goal of holding global temperature rise to 1.5 Celsius.
Maria: So, even if they’re encouraging us to prioritize our own emissions reductions, they’re not suggesting ignoring carbon credits entirely.
Casey: They are not.
Maria: Do they have advice about how we can all support a more robust, effective carbon credit market?
Casey: They do. Oxford is all about the PAVER values, though they don’t use that acronym, and stresses that carbon credit projects should avoid negative unintended consequences to people and the environment.
Jacob: Hm, what else do they suggest?
Casey: And they suggest entities be transparent about their emissions, how they count them, their targets, and their uses of carbon credits.
Jacob: How about ways to push the market toward high-quality credits in a way that helps deliver the Paris Agreement Goals?
Casey: Oxford suggests buyers use long-term agreements to stabilize the market and encourage new mitigation projects. And they recommend working within your industry, and through government policy, to build commitment and demand for a carbon credit market that adheres to a strict definition of net zero emissions.
Jacob: Given all we’ve discussed, the final two questions on my mind are: how should individuals use carbon credits? And how should companies use carbon credits?
Casey: Here’s what I propose: That everyone, people and companies, reduce their own emissions as much and as fast as possible… and then use carbon credits to neutralize the last little bits you can’t get to yet. For individuals, I recommend buying carbon credits as a donation toward mitigation. More money for carbon mitigation projects is a very good thing. But once you have bought them, don’t assume you have counterbalanced your emissions. You may have. You very likely counterbalanced some. But without getting into the weeds on projects and methodologies, for now at least, you can’t be 100% sure how much. If you like, you can do what I do and buy triple the amount of your emissions. Then you can be pretty confident.
Maria: And if you’re flying, and you’re presented with the option to check a box to offset your emissions once, then it might make sense to look for an independent carbon credit retailer, so you can see what you’re buying and also to buy extra credits. We’ve linked a few of these retailers on our website, pricingnature.substack.com.
Jacob: And how about for companies?
Casey: For companies I recommend something different. I suggest they get their hands dirty.. See what kinds of projects you can invest in directly to get off the ground, rather than through the carbon markets. Projects you make happen are very likely to be additional, but remember to ask tough questions like Charles Canham did with that forestry project.
And if you use carbon credits, study them. Have a team look carefully at project types, make sure it makes sense: read the project reports, visit projects if you can. Really kick the tires on anything you buy. Let’s propel this market forward by demanding high quality, and learn to know what that is.
Next time on Pricing Nature, we’ll talk about an even more controversial way of putting a price on carbon. It’s a new climate policy idea developed by a civil engineer / geo-hydrologist, made famous by a science fiction author, with growing public interest. What if we paid people and companies directly, with a brand new currency, to reduce and remove carbon emissions? Could we shift the direction of the global economy toward observing our planet’s natural limits? Join us mid-summer for a two-part episode on the idea of a carbon currency.
Thanks for joining us. If you like what you’re hearing, we’d be grateful if you’d sign up for our newsletter on our website, pricingnature.substack.com. And if you rate and review us on Apple Podcasts, or follow us on Spotify, it helps introduce the show to other listeners.
Casey: This episode was written by Casey Pickett with substantial help from Jacob Miller and Maria Jiang. Sound engineering by Jacob Miller. Original music by Katie Sawicki. Thank you to all of our guests. You can find more info about each of our experts on our website, pricingnature.substack.com. Finally, special thanks to the Carbon Pricing Leadership Coalition and the Tobin Center for Economic Policy for their partnership, and to Ryan McEvoy, Stuart DeCew and Heather Fitzgerald for making this episode possible.