By Lorne Milne
For years, the carbon offsetting industry has been marred with problems, particularly to do with greenwashing to the extent that many consider the term offset to be a dirty word. In principle, the concept is straightforward; individuals or companies neutralise the carbon they were responsible for putting into the atmosphere while simultaneously reducing their emissions. In writing this blog, I hoped to shed light on some of the problems plaguing the industry and propose how I believe we go forward from here.
The terms carbon offset and carbon credit are used interchangeably. A carbon offset generally refers to the reduction of greenhouse gas (GHG) emissions or the removal of carbon from the atmosphere. A carbon credit is a transferable financial instrument validated by governments or independent bodies representing the removal of one metric tonne of CO2 or an equivalent amount of other GHG. The offsets available today are largely emissions reductions and while necessary, are insufficient to achieve net-zero as no carbon is removed from the atmosphere. This is why we must consider carbon removal as it washes carbon directly from the atmosphere. Carbon removal offers a range of choices from nature-based solutions to technologically-mediated processes, but the carbon must be stored. I understood trees to be natural sequesters of carbon so why not consider afforestation projects?
A Bloomberg investigation into Nature Conservancy, the largest environmental non-profit in the Americas, was conducted to assess the impact of their offsets. Bloomberg assessed the $1 million the company received from JP Morgan to preserve a forest in eastern Pennsylvania, as well as a six-figure sum paid by Disney to protect the city of Bethlehem’s forests, and the vast sums BlackRock paid to stop deforestation in Albany. In each case, the forests were discovered to have never been threatened by deforestation in the first place. Yet the projects were all accredited by Verra, the world’s leading carbon credit standard who claim to only certify offsets where ‘carbon reductions and removals are additional to what would have happened under a business-as-usual scenario.’ The corporate funds, therefore, had a negligible impact on reducing emissions and represent a serious misallocation of capital. Incidentally, this also brings into question the true agenda of both the Nature Conservancy and Verra. UC Berkeley’s Center for Environmental Public Policy commissioned a study to examine the extent of leakages, whereby emissions reductions in one state or country contribute to increased emissions elsewhere. By examining four-fifths of California’s emissions credits, they discovered leakages to be far worse than even they predicted with emissions reductions falling by as much as 82%.
The truth remains that a single tree will absorb, on average, 4 tonnes of carbon over 40 years. If it burns down - as we’ve seen most prominently in the Amazon, California and Australia - all that carbon is released back into the atmosphere. Trees may also have grown naturally in those project areas so the offsets don’t provide any additionality. Moreover, if the carbon credits bought did contribute to forestation where a palm oil plantation was, the reduced supply of palm oil will drive the price up making it more likely that trees will be cut down elsewhere to plant more palm oil trees. All this considered, the most severe estimates suggest it would take around 22 acres worth of trees to absorb the emissions produced by an average European citizen in their lifetime. Multiply that by the population and you get almost 10 billion acres: almost a third of the world’s total landmass. Add in the United States and three-quarters of the world’s landmass would be required to be covered by trees. With no practical way of planting enough trees to combat the problems caused by burning fossil fuels - we must also seek alternative solutions. Efforts to restore ecosystems and habitats should be for the benefits and values they create, not solely for carbon offsetting.
On the other hand, technologically-mediated solutions offer more permanence. An example is Direct Air Carbon Capture and Storage (DACCS). DACCS is the process of capturing CO2 directly from the ambient air and generating a concentrated stream of CO2 for permanent sequestration. That sequestration can be done in materials - carbon utilisation - or in other locations, such as in geological formations underground. Currently, BeZero Carbon is the only platform that provides AAA+ rated carbon offsets at a supremely accessible price point. The price of $64/tonne dwarfs the market par of approximately $600/tonne but their offsets are only at pre-purchase stage and won’t become active until 2025. However, pre-purchasing their offsets will help to finance the development of DACCS facilities worldwide and contribute to the consolidation of a market for permanent carbon removal.
Another high impact permanent solution is mineralisation, whereby the metal oxides in soft rock like olivine and basalt react with CO2 to produce carbonates. The reaction is most effective when exposed to sea or rainwater weathering but crucially the carbonates are permanently locked away. I discovered GreenSand, a Dutch company which already offers permanent carbon removal through enhanced weathering of olivine, which implies crushing the mineral so it has more exposure to carbon and absorbs it at a faster rate than in its current conditions. For an almost 1-to-1 weight ratio of olivine to carbon, that mineralisation costs $150/tonne. With increased demand, they hope this will halve in the next year alone but for that to occur, far more market exposure is required. The immaturity of the market is underpinned by the fact other early movers like Vesta and Heirloom are not yet selling their offsets as further R&D is required. These markets will prove vital in getting to net zero but the premium must come down before they’re made accessible. A precedent exists which indicates this is possible.
In the renewable energy industry, a lack of R&D ensured the premium paid for consuming renewables remained unsustainably high for decades. Energy companies spend just 0.3% of their revenue on research and development, percentages dwarfed by the 13% and 10% respectively spent on R&D by the pharmaceuticals and electronics industries. This is indicative of a policy gap.
But what if the gap between policy and carbon offsets was bridged? Denmark proved this was possible in the 70s with their attempts to transition away from importing oil. They initiated a policy that saw R&D support paired with a feed-in tariff and later a carbon tax. The policies put in place facilitated R&D at a scale never seen before in the wind renewables industry, so much so that the cost of wind turbines halved in fourteen years. States like Spain took note and subsequently followed suit. Today, Denmark receives half its energy from wind and is the largest exporter of wind turbines worldwide, raising the possibility that states could pursue a similar policy with permanent carbon removal solutions.Hence, directing offsets towards innovative technologically-mediated processes like DACCS could well be a solution.
Multinational corporations tout their support for nature-based offset projects as a mechanism for slashing their footprints; however, a lack of industry transparency means these impacts have limitations and are often negligible. Efforts to restore ecosystems and habitats should be for the benefits and values they create, not solely for carbon offsetting. Eventually, offsets should come exclusively from carbon removals, but emission reductions will remain crucial for decades to come. The private sector has a huge role to play in combating climate change and if corporations are as serious as their rhetoric, they should consider directing offsets towards higher impact, more permanent solutions. Offsetting must transition away from a box-ticking exercise if we are serious about net-zero.
Lorne Milne is a Graduate Intern with Green Angel Syndicate, one of the largest active angel syndicates in the UK and the only one specialising in the fight against Climate Change. For regular updates follow Green Angel Syndicate on LinkedIn and Twitter.