According to its supporters the idea of a global carbon market can significantly cut carbon emissions around the globe. But critics of the idea say offering polluters the option of having of paying for their carbon emissions is not the solution to the issue of climate change.
As of the month of July, fires ravaged huge areas across North America. In Oregon the Bootleg fire devastated over 400,000 acres of forests. While the trees went up in flames and ash, so did a huge amount of carbon offsets, including those purchased by firms like BP or Microsoft.
The Bootleg fire exposed one of the weaknesses of the carbon offset market: how do we be sure that the carbon reduction projects that we invest in will exist in 10 years and even in 100 years? Since climate change is likely to cause more intense wildfires and longer droughts in the coming years, the issue is whether offsets are efficient instruments that will aid in drastically reducing carbon emissions.
The biggest market for carbon offsets to date will be in debate in November during the 26th United Nations’ Climate Change Conference of the Parties (COP26) in Glasgow. Governments believe that carbon credits as well as an international carbon market, where the credits are able to be purchased and sold, could assist them in meeting their ambitious emissions reduction goals. However, campaigners caution that such a plan gives rich countries an excuse to continue to pollute.
Prior to this conference Future Planet analyses what an effective carbon market could look like and the amount it would cost to be able to reduce global emissions.
A global market
Carbon markets were conceived by economists as a means to boost the ambition of climate change and reduce CO2 (CO2) concentrations in the air through providing incentives for the financial sector to cut emissions.
It is a concept that, when one country pays to allow emissions to be reduced or captured by a different country, for instance through planting trees or setting up renewable energy facilities, it is able to count the reductions in its own goals in the area of climate change. The idea is that for every tonne CO2 emitted by one country and another tonne is stored elsewhere.
Countries can exchange credits, which represent one ton of CO2, against each other on the global market. In theory, this exchange will be balanced and stop the overall increase in carbon emissions – in the event that all emissions resulting caused by human activities are included in the scheme.
The creation of the first global carbon market however, has proved to be a huge challenge. Over the past 30 years, different countries have attempted, and mostly failedto come up with strong regulations.
Its first international scheme goes to the United Nations’ Kyoto Protocol on climate change which was adopted in 1997. Also known under the Clean Development Mechanism (CDM) the carbon market was put into effect in the year the year 2006. In the CDM it was possible for richer countries to reduce their carbon emissions by committing to the development of carbon-lowering initiatives in poorer countries, and calculating the reductions as part of their own goals.
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It was also the first time that Kyoto Protocol also established “cap and trade” plans, which set an upper limit on the amount of carbon emissions allowed from sources that are carbon intensive, like shipping and energy industries and at national, regional as well as international scales. In 2005, the European Union created the world’s first emissions trading system, built around the principle of trade and cap in the year 2005. According to a study for 2020 the system has reduced carbon dioxide emissions by nearly a trillion tonnes in the period between 2008 through 2016.
The CDM On its own, fell apart due to widespread concerns about the efficacy of the environment corruption, human rights and environmental violations. 85 percent of offset projects that were used in the European Union under the CDM did not reduce emissions, as a 2017 study conducted by the European Commission found.
The year 2015 saw 190 nations joined the Paris Agreement and set emissions reduction goals. As per article 6 in the agreement they agreed to set up a carbon market in the world that is voluntary in order to avoid the mistakes that led to the demise in the CDM.
Six years later, nations are still working out rules and are far away from a consensus. Ministers hope to move forward in this regard at the climate summit of COP26 held in Glasgow in November. However, huge differences remain over how to structure Carbon market.
A few believe that the conflicting issue could decide the fate of some believe it could derail the Paris Agreement. “This was the promise that countries made to each to each other,” says Cynthia Elliott Associate on the global climate program for the World Resources Institute. “If they don’t keep their word and they fail to do so, it’s a sign that the Paris Agreement doesn’t have the same importance.”
If it is done correctly If it is done correctly, this mechanism for trading could increase the reduction of global carbon emissions, making it significantly less expensive for countries to reach the Paris Agreement climate goals, according to the advocacy group Environmental Defense Fund. Offset projects could funnel much needed funds to countries that are less fortunate and provide huge benefits to climate change adaptation, giving them financial incentives to improve their forests, as well as other biodiversity hotspots, according to Lennon.
If countries are unable to close loopholes , or to guarantee it will result in significant reductions in emissions, those who campaign believe it will do greater harm than benefit.
One of the biggest issues with the current carbon market mechanism is their “very wide method of crediting” According to Lambert Schneider, a carbon market expert at the Oko-Institut in Freiburg, Germany. Many offset projects are approved without needing to offer very high-quality assurances that they will cut emissions, he claims.
In actuality, the requirements that offset projects must be able to meet in order to be able to capture a certain amount of carbon are very strict according to Grayson Badgley, a fellow in the field of forest ecological sciences in Columbia University in the US.
“The maths has to be flawless, but there are times when the numbers don’t add up, ” says Badgley.
The offsetting program in California as an example, has produced between 20 million or 39 million credits for carbon. However, they did not result in real carbon savings, as per research conducted by CarbonPlan which is a non-profit organization located in San Francisco that analyses the credibility of the carbon offsetting schemes.
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It can raise concerns when organizations whose purpose is to safeguard wildlife and forests, accept credits that permit companies to continue to pollute. A number of US conservation organizations, such as The Nature Conservancy (TNC) and the Northeast Wilderness Trust, have been involved in the carbon offset marketplace, Badgley notes. “What could happen if there wasn’t the exchange of cash for carbon offsets?” He asks. “Was it really in danger?”
This system “allows owners who are already managing their land effectively to get credits for what they had already been doing” According to Barbara Haya, director of the Berkeley Carbon Trading Project at the University of California.
Yet, TNC points out there are circumstances where conservation of forests can make use of carbon credits with fairness for example, where the funds are used to enhance the management of forests, which results in more carbon sequestration. In the St John River Forest in Maine TNC purchased 75,000 acres (290 square miles) from the manufacturer of pulp and paper International Paper. For the past 20 years the harvesting of timber on the forest was the main source of revenue for TNC. The reduction in timber harvesting in exchange for carbon credits has allowed the company to retire from the practice of cutting trees, according to an official from TNC.
“Since 1998, the harvesting of timber is the main source of revenue for taxes and stewardship and management of the Upper St John River Forest. In enlisting the forest in the carbon project for forests, TNC made a long-term commitment to modify its active harvesting practices, and to maintain an increased amount of carbon on the land,” The TNC spokesperson states.
The Northeast Wilderness Trust also underlines the distinction between a forest offset plan that has a genuine chance of logging one in which there’s no risk of logging. Trust’s Wild Carbon programme “is dedicated to carbon offsets that are derived exclusively from permanently wild landscapes that were not protected and susceptible to logs prior to our purchase” The trust’s director of operations, Jon Leibowitz.
“It isn’t accurate to say that conservation organizations shouldn’t be involved with carbon market,” Leibowitz says. “Science has shown that allowing forests to continue to grow and the process of storing and sequestering carbon remains one of the most cost-effective and efficient carbon storage and capture mechanisms that are available to us.
“For that reason, all conservation organizations must be able to access carbon revenue in the event that the carbon-related projects they undertake are permanent conservation as well as new conservation,” Leibowitz says. “Done correctly carbon revenue, particularly in the case of forever-wild conservation, can be an excellent tool to keep carbon from our forests in check and allows forests to expand and absorb and store carbon over the next centuries.”
To take carbon sequestration a step further Some of the most stringent programs do not issue offset credits Gilles Dufrasne the policy officer of the non-profit international organization Carbon Market Watch. However, when the offset schemes do issue them, they try to identify projects that will not be able to reduce emissions without offset credit funding. This, in essence, is about ensuring that offset schemes do not sell reductions that would occur in the first place.
Even if a venture actually can capture carbon that wouldn’t otherwise be captured, offset schemes may fail for various reasons. As the Bootleg fire demonstrated that they aren’t able to offer the long-term carbon sequestration they’re often believed to provide. The portion of offsets within the US are covered by the Improved Forest Management protocol, that does not consider the different fire dangers in different regions of the nation and the ways these risks will grow due to climate change, as per Badgley.
“We know that the danger of fires is likely to rise. California’s system doesn’t take into account these hazards,” he says.
There are many ways to ensure that offset programs last however, knowing for certain their sustainability is almost impossible. “What is the rate of deforestation increase in Brazil in 5, or 10 years? We don’t know. Through the years, the baseline has drastically changed,” says Schneider. “The base used for the calculation is always an assumption of the future, and comes with a lot of uncertainty.”
As nations prepare to negotiate new regulations for carbon markets during COP26 on November 26, activists claim it is essential that all forms of fraud and corruption be removed. Two points remain a source of contention regarding double counting, and whether excess credits from the previous CDM system can be carried over to the brand new market for carbon.
The first concern is the double-counting issue. Brazil is seeking to claim credit for offsets it sells to a different country which means that the reductions made would have to be counted two times. In the event that you are in the UK is investing in a program to safeguard Amazon rainforest, for instance Amazon forest, as an instance, Brazil wants to count the reduction in emissions toward the country’s own goal as well as the United Kingdom’s target.
Brazil along with China as well as India as well as India and China, would like to exchange older credits from Kyoto time period onto the market of the future, in order to safeguard the value of investments made in the past. “As the reductions in emissions were already in place in the past the use of these credits does not alter the environment and could undermine the climate goals of countries,” argues Schneider.
For Dufrasne it’s best to not sign any deal instead of allowing exemptions to the double count and carrying over old credits. “You can negotiate with ambition, but don’t talk over the possibility of cheating” Dufrasne says.
The shaky environmental and human rights records of the past market, such as the CDM are also an issue. Numerous carbon offset programs up to now “have not been hygienic for the environment, and have violated rights of the human,” says Erika Lennon Senior attorney at the Center for International Environmental Law Noting that in many instances, developers of projects failed to seek out and obtain approval from local communities.
One such example includes one of the Alto Maipo hydropower scheme in Santiago, Chile, which was vetted by the CDM despite significant environmental concerns and the opposition of local communities that claimed the scheme, which included redirecting water away from River Maipo for 100km (62 miles) to generate electricity, could jeopardize their right to food, water and even life.
“It should not be difficult to protect human rights when it comes to climate change,” says Lennon.
If the loopholes don’t get buffed out and the regulations become more strict it’s not worth creating a carbon market that is filled with ineffective, cheap offsets, according to Haya.
“You cannot do successful mitigation of climate change based on fiction. It’s important to verify that the credits are genuine and not built on lies,” says Haya, suggesting that the establishment of an incentive fund to support mitigation, that companies and nations contribute to and which is more effective in cutting emissions overall.
Even with strict rules, nations can’t count on carbon offsetting on their own to achieve their ambitious goals in the field of climate change.
“We’re in a completely different scenario than we were the time that it was the time that the Paris Agreement was adopted,” Elliott says. Elliott. “Many countries have come up with net zero goals, that put the whole rationaleto market prices to be questioned and suggest that we have to take action that is more transformative.”
A global compensation system will not be “not the primary aspect of global climate action” Dufrasne explains insisting that governments should prioritise implementing regional and domestic strategies to reduce emissions. This will help lead to the reductions needed to put the world on a course towards net zero in 2050. “Governments shouldn’t rely on credit purchases that come from foreign countries but instead focus on cutting domestic spending.”