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carbon markets
The New White House Carbon Offsetting ‘Principles’ Lack Teeth
The administration should find the courage to reverse course and acknowledge that carbon offsets are a dangerous and damaging distraction.
Jun 06, 2024
As U.S. President Joe Biden seeks to regain American leadership in the global fight against climate change, his administration has embraced using “carbon offsets” in international carbon markets.
Acknowledging widespread criticism of the reliability of these offsets, on May 28, the administration issued a “Voluntary Carbon Markets Joint Policy Statement” signed by the secretaries of the Treasury, Agriculture, and Energy, among other officials. However, nothing in the statement overcomes the inherent flaws that make carbon offsets a dangerous distraction.
The urgency of the climate crisis means that the planet does not have time to engage in illusory market-based trading schemes that pretend to counterbalance—rather than actually reduce—greenhouse gases emissions.
The Administration’s Policy Statement lays out a set of aspirational “principles” for certification of carbon credits to allegedly ensure they “meet credible atmospheric integrity standards and represent real decarbonization”:
• Additional. The activity would not have occurred in the absence of the incentives of the crediting mechanism and is not required by law or regulation.
• Unique. One credit corresponds to only one tonne of carbon dioxide (or its equivalent) reduced or removed from the atmosphere and is not double-issued.
• Real and Quantifiable. Claimed emissions reductions or removals represent genuine atmospheric impact that is determined in a transparent and replicable manner using robust, credible methodologies. Relevant activities are designed to prevent emissions from occurring, being shifted, or intensifying beyond their boundaries as a result of the activity (‘leakage’).
• Validation and verification. Activity design is validated, and results are verified, by a qualified, accredited, independent third party.
• Permanence of greenhouse gas benefits. The emissions removed or reduced will be kept out of the atmosphere for a specified period of time during which any credited results that are released back into the atmosphere are fully remediated.
• Robust baselines. Baselines for emissions reduction and removal activities are based on rigorous methodologies that avoid over-crediting, prioritizing the use of performance benchmarks…
However, this list of goals highlights why reliance on carbon credits has only produced illusory benefits and counterproductive results.
The Biden administration is not proposing enforcement mechanisms that would ensure these core qualities are reflected in international credit transactions, because such mechanisms do not exist. Without enforcement these “guardrails” are merely a wish list, tantamount to a store combatting shoplifting only by putting up signs that say, “Do Not Steal.”
It is also clear that the amount of money these carbon markets are poised to generate, bolstered by Biden administration support, is enormous. The temptation to game a multi-billion-dollar system that has no enforceable rules is overwhelming and will help keep us addicted to business-as-usual emissions.
At the same time, the urgency of the climate crisis means that the planet does not have time to engage in illusory market-based trading schemes that pretend to counterbalance—rather than actually reduce—greenhouse gases emissions.
Experts who have studied carbon offsets, like Barbara Haya at University of California, Berkeley, have found they are inherently flawed for a host of reasons and cannot be reformed. A clear indication that carbon offsets are unfixable is that virtually all carbon offset projects created to date are built on activities that were already happening, for reasons other than the generally low and volatile price of offset payments. And, to date, no one has even proposed a reliable way to distinguish those activities that would have happened anyway. In addition, since carbon offsets must be based on activities that are not legally required, they create a perverse incentive to delay appropriate regulation.
With forest projects, these problems are compounded by their impermanence, which is heightened by warming-accelerated wildfires. In addition, the integrity of forest projects is easily undercut by demand shifting. If one forest is preserved but demand for wood is not reduced, another forest will be cut.
Together, these factors highlight that the administration’s wish list of guardrails is completely out of touch with the reality of carbon offsets. As California is discovering, reliance upon its highly touted carbon credit market is resulting in far more emissions than an effective regulatory program.
The administration should find the courage to reverse course and acknowledge that carbon offsets are a dangerous and damaging distraction. Offsets undermine our ability to adopt effective strategies to achieve our climate goals. These include ending fossil fuel subsidies and supporting enforceable regulations. Other key provisions would be transparent polluter-pays carbon pricing, programs to ensure energy affordability during a transition away from fossil fuels, public investments in clean energy transmission and transit, and international agreements with easily measurable results. Effective U.S. leadership would mean developing a national climate law worthy of the moment and building public support for its enactment. This country’s environmental laws have transformed our nation and been influential elsewhere. They should be our inspiration.
We understand that carbon credits seductively offer to harness powerful market forces and raise money for climate-positive projects. However, this siren’s call has all the integrity of a Ponzi scheme. In short, as the U.S. has repeatedly experienced, meaningful reductions in pollution require the inescapable hard work of designing programs with reliably measurable outcomes and enforcing them.
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Africa’s Carbon Deals Must Serve Those Most Vulnerable to the Climate Crisis
Several mega-transactions negotiated recently in tropical forested countries in sub-Saharan Africa place a spotlight on who is missing from these market opportunities—the Indigenous Peoples and local communities that have, against all odds, kept the forests intact.
Mar 08, 2024
Carbon markets have all the allure of a new investment option—mainly, that they have not failed yet. The idea of paying for conservation activities to offset polluting industrial activities, and then trading credits for those activities, sounds like a win-win solution to the climate crisis. But, in practice today, it looks like fool’s gold. That may be why the European Union included “carbon offsets” in new regulations that limit the use of sustainability buzzwords in promotional activities.
Several mega-transactions negotiated recently in tropical forested countries in sub-Saharan Africa place a spotlight on who is missing from these market opportunities—the Indigenous Peoples and local communities that have, against all odds, kept the forests intact. Although these carbon credit deals were announced last year, they have yet to be finalized and, instead, their grassroots opposition has gained traction.
The deals in question exemplify the 95 agreements announced since 2021, according to the consulting firm MSCI. They involve the governments of five countries, which agreed to hand over the development rights to sizable portions of their lands to a single international investment firm, UAE-based Blue Carbon—despite protests from those living on the lands in question.
For carbon markets to work, companies must first respect the tenure rights of all Indigenous and local communities.
These transactions would cover 20% of the land in Zimbabwe, 10% of Liberia and Zambia, 8% of Tanzania, and an undisclosed amount of land in Kenya. Blue Carbon would effectively gain control over the carbon stored in the soils and forests of these lands, which in effect surrenders control over the development rights to these lands.
Blue Carbon also started negotiations to acquire carbon rights with governments in the Congo Basin, the world’s second largest tropical forest, including the Democratic Republic of Congo, Angola, Gabon, and the Republic of Congo.
In the short term, everyone—except for the Indigenous, pastoralist, and local communities who live on and claim these lands—can be expected to profit from these investments. In the long term, however, all will bear their costs.
For generations, these communities have sustainably managed their land and forests and hold primary responsibility for the carbon-rich ecosystems that make up the lion’s share of transactions in the carbon markets. But despite their contributions, they have limited means of ensuring that their rights will not be superseded by foreign investors claiming ownership of the carbon stored in their lands.
In eastern Kenya, for example, the Ogiek people have long faced threats of eviction and expulsion from their territories in the Mau forest—the largest high-altitude forest in East Africa. Recent evictions, with forest rangers destroying villages, have been connected to potential carbon rights transactions. This is despite national laws recognizing communities’ ownership to more than two thirds of this land.
In Liberia, communities worked tirelessly to pass one of the strongest laws protecting community land rights worldwide in 2018. At the time, we estimated that 40% of Liberia’s land had already been handed over in natural resource deals—for industrial palm oil plantations, mining, and timber extraction. The Blue Carbon deal would take an additional 10% from what is left—shrugging off the 2018 law’s protections.
A growing body of research directly connects strong Indigenous and communities’ land rights with lower rates of deforestation and forest degradation, which are significant contributors to global carbon emissions. The United Nations’ most recent report on climate change emphasizes community rights as a bulwark in climate change mitigation and adaptation. And the Kunming-Montreal Global Biodiversity Framework emphasizes the importance of respecting these rights in efforts to stave off rapid biodiversity loss.
In a world where tropical deforestation has yet to be tamed— we lost 50% more tropical forest in 2022 than we did 20 years ago—we cannot ignore the potential of carbon markets to improve conservation outcomes. But their benefits must reach the communities who are the primary custodians of these lands.
These carbon deals have been negotiated without meaningful community participation. And the lack of transparency on the terms and conditions of the contracts hides the implications for people and nature.
For carbon markets to work, companies must first respect the tenure rights of all Indigenous and local communities. They need to ensure access to objective, complete, transparent, and locally adapted information about the transactions and the lands they cover. The communities’ rights to free, prior, and informed consent must be upheld, and their effective and meaningful participation in the design, implementation, and monitoring of all transactions should be mandatory. Importantly, those who are impacted by these deals should have access to effective remedy.
These conditions should apply to carbon credit deals just as they apply to all natural resource concessions. Carbon markets must serve the interests of those who are most vulnerable to climate change, not those who created the crisis to begin with.
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Rich Nations Pursue Self-Serving Climate Solutions
Developed countries have long exhausted their ‘fair share’ of the world’s ‘carbon budget.’
Dec 05, 2023
Many in the wealthy West have misrepresented the causes of global warming, offering false solutions while claiming the moral high ground. This distracts attention from how they became wealthy while emitting greenhouse gases.
Tragedy or Farce?
Growing greenhouse gas (GHG) emissions in the industrial age have caused global warming, with their accumulation continuing to accelerate despite being close to exceeding 1.5°C of warming and its associated tipping points.
This is sometimes depicted as due to the failure to sustainably manage the atmosphere as a shared resource. The ‘tragedy of the commons’ refers to a community’s inability to manage a common resource sustainably.
One popular example is of individual herders benefiting by grazing more of their own animals on a limited piece of commonly shared land. Such selfish behaviour will eventually exhaust the grazing pasture, the shared common resource.
Even if the Global North achieves ‘net-zero,’ its cumulative emissions alone would still be thrice its 1.5°C ‘fair share.’
To address ‘tragedy of the commons’ claims, mainstream economists have advocated assigning property rights to more directly experience the negative ‘externalities’ or consequences due to excessive use of the limited resources owned.
Developed countries have long exhausted their ‘fair share’ of the world’s ‘carbon budget.’ Climate scientists identified 350 parts per million (ppm) of carbon dioxide as the upper limit to stabilize the climate to prevent disastrous climate change.
Apportioning this carbon budget as quotas among the world’s countries has been described as allocating emission ‘rights.’ The Global North used up this quota in 1969, then overshot its 1.5ºC quota in 1986, and 2.0ºC quota in 1995!
Such quotas refer to the maximum accumulated carbon emissions, fairly shared among all countries, to ensure world temperatures do not rise over the preindustrial age average by more than 1.5°C or 2.0°C in 2100 respectively.
Even if the Global North achieves ‘net-zero,’ its cumulative emissions alone would still be thrice its 1.5°C ‘fair share.’ By contrast, at ‘net-zero,’ the Global South’s accumulated emissions would only use half its 1.5°C fair share.
Hence, the claim that developing countries lack ‘ambition,’ compared to the Global North, by not pursuing the same climate policies—such as carbon pricing—is misleading.
The European Union’s Carbon Border Adjustment Mechanism (CBAM) makes such claims. It is not only onerous but also profoundly biased. The E.U. has been the world’s second-largest GHG emitter historically, long exceeding its ‘fair share’ of using the atmosphere as a carbon sink.
European Solution, Others Pay
Likely free riding poses a related problem. If GHG emissions are sufficiently penalized, global warming mitigation costs can be passed to individual GHG emitters.
The E.U. has the world’s oldest and largest Emissions Trading System (ETS). It functions by capping carbon emissions and auctioning GHG emission quotas to companies, who can trade such emission ‘rights’ among themselves.
The ETS claims to be raising costs or penalties for GHG emissions to reduce them by 55% by 2030. Thus penalizing emissions especially threatens energy-intensive industries which emit more GHGs.
In response, some industries threatened to move abroad to less environmentally regulated countries. The E.U. gave free quota allocations to GHG emissions-intensive industries to gain political acceptance by cutting the costs of such transitions.
This is partly why the ETS can only claim credit for a mere 0% to 1.5% in annual GHG emissions reductions, failing spectacularly to reduce emissions rapidly.
Can Carbon Taxes Save Us?
To reduce GHG emissions by 55% by 2030, the E.U.’s new CBAM policy package promises to gradually phase out free ETS allocations.
To protect the profits of the E.U.’s GHG-emitting industries, importers will be required to pay higher prices. These are supposed to incorporate carbon taxes, to deter high GHG-emitting imports, especially from developing nations.
Developing countries’ exporters are required to pay carbon prices on their exports at rates determined by importing countries. Such measures are said to be fair, ostensibly by ‘levelling the playing field,’ but will actually mainly burden developing country exporters.
An UNCTAD study shows how CBAM discriminates against low- and middle-income countries. It found CBAM will only reduce worldwide carbon emissions by 0.1%!
The CBAM will thus get developing countries to pay E.U. members for their GHG-emitting exports. Such ‘carbon taxes’ may even be used to help finance the E.U.’s own green transition or for purposes unrelated to climate.
Ostensibly to address global warming, the new rules are very protectionist. The WTO dispute settlement tribunal may not approve them if it is allowed to function after years of being blocked by the U.S. But the outcome is uncertain as this would be the first time a climate measure would be so tested.
Freeriding?
Historically, rich nations have emitted many more GHGs. On a per capita basis, this is still the case today. Despite such huge differences in GHG emissions, and ignoring developing countries’ limited means, rich nations want to impose the same rules and requirements on them.
As Elinor Ostrom has shown, communities worldwide have avoided the ‘tragedy of the commons’ historically. They governed shared resources to meet current needs while sustaining them for future generations.
Many communities devised arrangements to prevent the exhaustion of common or shared resources. But many of these were subverted by colonialism to favor foreign powers at the expense of those ruled.
The urgent action now needed to address the climate crisis has become the new pretext for rich nations to insist everyone must sacrifice equally.
CBAM also contradicts the U.N. Framework Convention on Climate Change (UNFCCC) principle of ‘common but differentiated responsibilities’ (CBDR). CBDR refers to the different responsibilities of developed and developing countries for causing the climate crisis and addressing it.
Recognising CBDR, the UNFCCC’s Kyoto Protocol put the primary burden for mitigation on developed countries. Rich nations rejected and undermined CBDR, delaying climate action by decades. Most Western nations made little effort to meet their obligations while accusing others of freeriding on them.
Of course, this ignores rich nations effectively freeriding on developing countries for centuries through colonialism, domination and exploitation. And the urgent action now needed to address the climate crisis has become the new pretext for rich nations to insist everyone must sacrifice equally.
Self-Serving Solutions
Most developing countries urgently seek—but cannot get—affordable climate financing. They prioritize climate adaptation, rather than mitigation, which is what most of the limited climate finance resources from the Global North is earmarked for.
To be sure, claims of ‘carbon leakage’ have been very moot. The transition anxieties of high-emission industries are best addressed by targeted policies to rapidly decarbonize these industrial processes.
Rich country subsidies have bypassed the distributional equity and political problems posed by carbon pricing or taxation. For instance, U.S. President Joe Biden’s Inflation Reduction Act (IRA) subsidies promote renewable energy and electric vehicles by lowering their costs to consumers.
Surely, by now, the world has learnt how to better cooperate to save ourselves.
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