Raising the bar on carbon offsets

Carbon credits vary greatly in quality, so why are they accounted for equally?

Climate change is the greatest challenge of today. Businesses, Governments, and individuals are all scrambling to play, or appear to be playing, their part. The carbon offset market will play an important role in rapid decarbonisation over the coming decade and is expected to grow 15-fold to $50bn by 2030. Done well, using quality carbon credits, offsetting is a powerful way of genuinely supporting projects that remove carbon and build the clean energy infrastructure to avoid further emissions.

But, the current carbon accounting and offsetting system towards net zero fails those who are taking the most genuine action (often at a much higher cost) — putting quality projects, and those businesses that support them, at a competitive disadvantage.

Currently, the voluntary offset market is under-regulated and relies on a patchwork of different verification standards from different bodies to ensure quality. Among other things, this leaves us with a huge disparity in both the value of a credit per tonne of carbon and the climate impact and co benefits it has. What’s more, these do not directly correlate — a more expensive carbon credit does not necessarily mean that it is more effective in mitigating climate change (i.e. better quality). Finally, there is no requirement for buyers of carbon offsets to share any of the information on where or how the offset is being used. So alongside being a noisy, unregulated and inconsistent marketplace, there is often no visibility over the process to help the end-consumer easily identify whether the action taken by the business they are supporting is genuine.

To solve this, what I propose is a simple star rating system of one to five stars, which rates the quality of an offset on four key criteria:

1) Additionality

This means that the activity associated with the carbon credits would not have happened without the market to sell them. Additionality is essential to a quality carbon credit and, whilst it seems like a binary thing, evaluating it is complex. A low star rating would mean the carbon might just be a catalyst to help make the project economically viable, where it was potentially going to still happen with slightly lower returns.

For example, investing in renewables is cost-effective, regardless of any revenue from offset sales and in some places this activity could be required by law. Of the wind, solar and other renewables available in 2020, 62% were cheaper than the cheapest fossil fuel option. Fundamentally, for an activity to be additional the opportunity to sell carbon credits must play a decisive role in the decision to implement it. But, even here a high degree of subjectivity comes into play and the project developer can easily argue that this is the case regardless.

The Carbon Offset Research and Education programme advises that additionality is best thought of in terms of risk: how likely is a project to be additional? To rate additionality, then, we should be looking at criteria such as:

• Is there existing regulation in place in the country or region to encourage the activity?
• Is there a financial incentive to the activity without the need for carbon credits?
• Is there existing or alternative funding in place to support this activity?

2) Permanence

For every tonne of carbon emitted, between 20–35% of it will stay in the atmosphere for thousands of years. This means the carbon reductions that a credit is associated with should ideally reflect a similar level of permanence. In practice, this makes ‘true’ permanence extremely hard to measure or guarantee. We could, for example, find a well managed and secure forestry project that protects existing trees and plants new ones — which strengthen the ecosystem and will continually absorb carbon — but, if some or all of this forest burns down in 10 years, then the carbon captured is re-emitted. We’ve seen this particular risk accelerate lately with pine forest fires, and this risk will increase 750% for every 1 degree of global warming. Some species are more resilient to forest fires but usually sequester carbon slower, so the economics are more difficult to make work in the current voluntary carbon market.

A common standard for permanence is to ensure that this carbon will be kept out of the atmosphere for at least 50–100 years, with most offset programmes operating buffer reserves to cover any offsets that are reversed.

Again, then, to rate the quality of an offset’s permanence, it is best thought of in terms of risk. This should be rated on criteria such as:

• Is this project going to be an asset to future generations in 2050 and beyond, long after carbon accounting is finished?
• Does the project have a clear, well enforced plan to mitigate the risk of carbon reversal?
• What type of forestry? Are we growing Pine which has a high likelihood of forest fire and low long term sequestration rates after a very high first 30 years?

3) Biodiversity

My hero is Sir David Attenborough, and I praise the work WWF are doing globally. So it’s no secret this is my personal favourite category. Alongside the recent Cop15, there is a growing acknowledgment that we need to do more to protect the planet alongside just reducing emissions to limit global warming.

Carbon offset programmes generally have environmental and social safeguard policies to reduce the risk that projects have any detrimental effects on local communities and ecosystems. Some go further than this and require their projects to demonstrate social and environmental co-benefits, like the Gold Standard. Some projects even have additional standards to certify their co-benefits, like the Climate, Community and Biodiversity Standards.

The quality of an offset’s biodiversity benefits, then, should be rated on criteria such as:

• Does this project do anything to build biodiversity into the project? For example, does a forestry project focus on restoring whole ecosystems, providing and protecting those spaces not only for Carbon, but for the flora and fauna to thrive?
• Does the project engage and educate local communities, to make the benefit to biodiversity sustainable and long lasting for generations?
• Are the co-benefits themselves certified or at least verified (or ideally owned) by organizations like WWF?

4) Social Benefits

As with biodiversity, good quality offset programmes generally have policies in place to limit the risk of detrimental social impact and encourage or demand social benefits. The quality of a social benefit should be determined on much the same criteria as biodiversity. Additionally, though, we need to ask questions of the social benefits such as:

• Are we creating liveable wage employment and education to deploy projects like solar farms, and caring for the less privileged, or are we simply buying cheap land, displacing communities, and bringing in contractors from afar?
• Are we providing clean water at the same time as restoring our forests, or are we taking water away from communities to establish the growth of these trees — what is being done to mitigate any casualties along the way?
• Are we providing free access so that humans can go to these places and reconnect with nature, walk through it, de-stress, and remember how it’s nature that provides everything we need to live, to enjoy life, and to heal?

At CarbonClick we are raising the bar on transparency, which brings a unique opportunity to showcase these co-benefits with every click of the offset button.

But we need this system to go beyond voluntary offsetting at the point of sale. The world needs these factors to be included and disclosed whenever a company claims “Net Zero” or “Carbon Neutral” (terminology practicality is something I’ll write another blog about), so that we create a level playing field for the businesses taking genuine climate action and limit any chances of greenwashing (accidental or otherwise). If we create transparency around this, it will drive support and the economics required for the higher quality projects to become feasible, thrive, and even bring co-benefits by funding the likes of WWF to add further value to these projects. Then we unlock tangible, meaningful progress with climate change, social injustice, and biodiversity.