Before This Is Why We Can’t Have Nice Things was a Taylor Swift song, it was a punchline to a Paula Poundstone joke from the 1980s about how, as a kid, she once knocked a Flintstones glass off a table, making her mother say, “That’s why we can’t have nice things.”
It is an evergreen line that apparently even applies to the world of carbon offsets, those absolutions that companies and people such as Taylor Swift buy when they burn fossil fuels and contribute to the heating of the planet.
A new study from Kyoto University suggests the notorious flaws of the carbon credit market are partly the result of a handful of huge companies buying up the shakiest available products. If not for them, maybe there would be more demand for better offsets. Maybe we would have nice things.
The top 20 players in the market between 2020 and last year — a list of companies that includes Shell, Delta Air Lines and Chevron — bought mostly “low-quality, cheap offsets,” the study showed. Specifically, 87 percent of their offsets “carry a high risk of not providing real and additional emissions reductions.”
It is the latest embarrassment for a once-burgeoning market that has begun to shrink under scrutiny and lawsuits. Last month, the Science Based Targets initiative (SBTi), a group that oversees corporate decarbonization, declared carbon offsets “mostly ineffective.”
Most of the money spent by the top 20 companies in the market went to forestry and renewable energy projects, the study showed. That does not sound so bad at first. Trees absorb carbon dioxide from the atmosphere and store it in their branches. Renewable energy replaces fossil fuels. What is not to like?
For one thing, it is very difficult to figure out how much any particular forestry project truly affects the world’s carbon budget. These projects often sell absolution on the basis that trees are not being cut down. However, what if the trees were never going to be cut down in the first place? Should you really get credit for a thing not happening?
What if, as my Bloomberg Opinion colleague Matt Levine has discussed, the only way your forest looks as if it is measurably saving carbon is if a reference forest — the Goofus to your Gallant — chainsaws all of its trees? How much carbon was really saved in the process?
Another problem with trees as carbon storage devices is that they are prone to catching on fire and releasing all of that carbon back into the atmosphere, along with toxic smoke that spreads for thousands of miles. The more the planet warms, the more vulnerable these trees are to wildfires. Southern Oregon’s 2021 Bootleg Fire swept through a forest run by a timber company called Green Diamond, which sold carbon credits to Microsoft Corp and others.
It burned trees storing 3.3 million metric tonnes of carbon dioxide “equivalent to the greenhouse gases produced through the course of a year by more than 700,000 cars driving 11,500 miles,” Oregon Public Broadcasting said.
Even if trees avoid wildfires, they might live a century or so at best before dying and releasing their carbon back into the air as they decay. The carbon produced by Shell’s products or Taylor Swift’s private jet would stay in the atmosphere for many hundreds of years longer than that.
As for renewable energy credits, again, good luck figuring out exactly how much one company’s financial contribution to any one wind or solar farm affects the global carbon balance.
As the Kyoto study said, the capital raised by carbon offsets is not typically the deciding factor in whether clean energy projects get built. Instead, they usually make sense when they can sell a bunch of electricity.
Now that the cost of building and maintaining clean energy is on par with, or cheaper than, the cost of dirty power plants, renewable projects are the norm, not the exception, around the world. As with the trees that were never going to be chopped down, why should someone get credit for solar power that would have been built anyway? Little wonder the Integrity Council for the Voluntary Carbon Market, an independent watchdog, recently found that 263 million renewable credits, nearly a third of the whole market, failed to meet reliability standards.
Another big issue with our 20 offset-market whales is that the credits they buy tend to be for projects that are too old to truly make any new contribution to solving the world’s carbon problem. Three-quarters of their credits were from projects that began before 2016, which the study suggests is the loose industry maximum age for credibility. Meanwhile, most of the renewable energy credits were tied to projects in countries that already had lots of clean energy, suggesting the companies were not encouraging development that would not have happened anyway. Most companies in the study also bought the cheapest offsets, shunning pricier projects such as carbon removal.
Forestry projects do have higher sticker prices than renewable energy, but there are tricks to finding bargains, including buying in bulk, the study said.
Any offset is likely far cheaper than greening a company’s business practices and supply chains. However, that is what it would take to truly get the world on a path to zeroing out its carbon emissions to avoid catastrophic global heating. There might be room for carbon credits in a net zero world. However, today’s self-regulated market is not fit for this purpose. It encourages the proliferation of low-quality offsets that risk companies bathing their pollution in pleasing green.
As my Bloomberg Opinion colleague Lara Williams has written, it also fosters ancillary evils, including sexual abuse and other human rights violations.
Not long before it declared offsets mostly worthless, the SBTi also said it would let companies offset their Scope 3 emissions, which include those of customers — a potential boon to the fossil fuel industry. This could be disastrous if global efforts to reform and regulate the market do not hone it down to high-quality credits.
Such a market could grow to US$1 trillion, Bloomberg New Energy Finance has estimated. This would be a nice thing, but only if we let ourselves have it.
Mark Gongloff is a Bloomberg Opinion editor and columnist covering climate change. He previously worked for Fortune.com, the Huffington Post and the Wall Street Journal. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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