How trading CO2 could save the climate

According to its advocates an international carbon market would significantly cut the carbon emissions of the world. However, critics argue that providing polluters with the option in paying to cover their carbon emissions is not the solution to the issue of climate change.

As of the month of July, fires destroyed huge areas across North America. In Oregon the Bootleg fire caused the destruction of nearly 400,000 acres worth of forest. When the trees were engulfed in flames as did a significant amount of carbon offsets, which included those purchased by companies like BP as well as Microsoft.

The Bootleg fire exposed one of the shortcomings of the carbon offset market: how do we be sure that the carbon reduction projects that we invest in will exist in 10 years or even 100 years? Since climate change is likely to cause intensified wildfires as well as prolonged droughts over the next couple of decades, it is important to determine whether offsets are efficient tools that could assist us in drastically reducing carbon emissions.

The biggest market for carbon offset currently under debate in November during the 26th United Nations’ Climate Change Conference of the Parties (COP26) in Glasgow. The government believes 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 allows rich nations the right to continue polluting.

In advance of this year’s conference Future Planet analyses what an effective carbon market could look like and the amount it would cost to be able to reduce world’s carbon emissions.

A global market

The carbon market was conceived by economists to help increase climate goals and decrease CO2 (CO2) amounts in our atmosphere. This was accomplished by offering an incentive for financial gain to reduce emissions.

The concept is that in the event that one country pays to allow emissions to be reduced or captured in another country, such as through planting trees or setting up renewable energy facilities, it is able to count the reductions toward its own goals in the area of climate change. The goal is to ensure that for each tonne of CO2 emitted by one country and another tonne is stored elsewhere.

Countries are able to trade credits, each of which represents one tonnes of CO2, with each other on the global market. Theoretically, this trade should 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 an international carbon market however, has proved to be a daunting task. For more than 30 years, different countries have tried, and generally failedto come up with strong regulations.

Its first international scheme goes to the United Nations’ Kyoto Protocol on climate change that was signed in 1997. The scheme is known by the Clean Development Mechanism (CDM) This carbon market went in the year 2006. In the CDM the richer nations could cut their emissions by committing to the development of carbon-lowering initiatives in poorer nations, and then incorporating the reductions in their own goals.
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It was also the first time that Kyoto Protocol also established “cap and trade” programs, which establish limits on the total amount of carbon emissions allowed from carbon-intensive sources like shipping and energy industries on a regional, national or international level. It was the European Union created the world’s first emissions trading system, built around the principle of trade and cap in 2005. According to a study for 2020 the system has reduced the carbon emission by over 1 trillion tonnes in the period between 2008 through the year 2016.

The CDM On its own, was wiped out due to the widespread concern about the efficacy of the environment as well as corruption and human rights violations. Eighty percent of offset programs implemented under the European Union under the CDM didn’t reduce emissions, as a 2017 study conducted by the European Commission found.

As of 2015, more than 190 nations have signed the Paris Agreement and set emissions reduction goals. As per Section 6 of the climate agreement they agreed to set up a carbon market in the world that is voluntary in order to avoid the same mistakes that led to the demise of CDM.

Six years later, countries continue to work out rules, and are far from a consensus. Ministers hope to progress on the issue during the climate summit of COP26 at Glasgow in November. However, there are still deep disagreements on the structure of the market for carbon.

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 meet this obligation and they fail to do so, they will not be able to meet the requirements of the Paris Agreement doesn’t have the same importance.”

If it is done correctly If it is done correctly, this mechanism for trading could nearly double the reduction in 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 can channel needed funds to countries that are less fortunate and bring huge benefits for climate change adaptation, giving them the financial incentive to restore their forests, as well as other biodiversity hotspots, according to Lennon.

If countries are unable to plug loopholes or ensure an environment that will result in actual reductions in emissions, advocates believe it will do greater harm than benefit.

The dangers

The biggest issue with the existing carbon market mechanisms is their “very wide way of doing crediting” According to Lambert Schneider, a carbon market expert at the Oko-Institut in Freiburg, Germany. Many offset projects are approved without needing to prove that they reduce emissions, he claims.

In reality, the requirements an offset project must satisfy to be able to effectively 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 precise, 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 to 39 million credits for carbon. However, they haven’t resulted in actual carbon savings, as per an analysis conducted by CarbonPlan an organization that is a non-profit located in San Francisco that analyses the credibility of the carbon offsetting schemes.

It can raise concerns when organizations whose purpose is to safeguard wildlife and forests, accept credits that allow businesses 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 money in exchange for carbon offsets?” he asks. “Was this forest truly in danger?”

This system “allows owners who are already well-managed with their land to earn credits for the work they had already been doing” According to Barbara Haya, director of the Berkeley Carbon Trading Project at the University of California.

But, TNC points out there are circumstances where forest conservation could use carbon credits with fairness for example, when they 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 harvesting timber at the forest was the main source of revenue for TNC. Reduced timber harvesting as a trade carbon credits enabled 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 on forests, TNC made a long-term commitment to alter its current harvesting practices to ensure the highest amount of carbon on the land,” The TNC spokesperson declares.

The Northeast Wilderness Trust also underlines the distinction between an offset program in which there is a real possibility of logging, and one where there’s no risk. 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” according to the trust’s director of operations, Jon Leibowitz.

“It is not 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 the same reason conservation groups must have access to carbon revenues for as long as the carbon-related projects they undertake are permanent and not new,” Leibowitz says. “Done correctly carbon revenue, specifically when it comes from forever-wild conservation, can be an effective tool to keep the carbon within our forests in a secure manner 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 in the first place Gilles Dufrasne the policy officer of the non-profit international organization Carbon Market Watch. When the offset schemes do issue them, they seek to identify projects that will not cut emissions without offset credits’ funding. This, in essence, is all about ensuring offset schemes do not sell reductions that are likely to occur in the first place.

Even if an initiative is able to capture carbon that would not otherwise be captured, offset schemes may fail for various reasons. As the Bootleg fire demonstrated it, offsets may not provide the carbon sequestration that they’re commonly believed to provide. A portion of offsets within the US are covered by the Improved Forest Management protocol, which fails to consider the different risk of fire in different areas of the country , and how they will increase due to climate change, as per Badgley.

“We know that the danger of fires will increase. California’s system does not take into account those dangers,” he says.

There are ways to ensure that offset programs last however, knowing for certain their longevity is virtually impossible. “What is the rate of deforestation will be like in Brazil in the next five to 10 years? There is no way to know. In the past, it has drastically changed,” says Schneider. “The basis used is an assumption of the future, and comes with a lot of uncertainty.”

New rules

As nations prepare to negotiate new the rules of carbon markets at COP26 this November environmentalists claim it is essential that all forms of fraud and corruption be removed. Two topics remain in dispute about double counting and whether credits that are not used up in the previous CDM system can be carried over to the brand new market for carbon.

The first is the double counting issue. Brazil is seeking to claim credit for offsets it sells to a different country and the reductions made would get counted twice. In the event that you are in the UK is investing in a program to protect rainforests in the Amazon forest, as an instance, Brazil wants to count the reduction in emissions towards its own targets and the United Kingdom’s target.

Brazil along with China as well as India as well as India and China, would like to sell older credits from Kyoto time period onto the new market to preserve the value of investments made in the past. “As these reductions in emissions have had already been achieved in the past and are not a result of these credits, they does not alter the environment and could undermine the climate goals of countries,” argues Schneider.

For Dufrasne it’s best to not sign an agreement at all, rather instead of accepting exemptions for double counting and carrying forward old credits. “You can negotiate with ambition, but you shouldn’t bargain over the possibility of cheating” As he puts it.

The shaky record on environmental and human rights of the past market, such as the CDM remain an issue. Numerous carbon offset programs have to date “have not been hygienic for the environment and violated rights of the human,” says Erika Lennon who is a senior attorney with the Center for International Environmental Law noting that in a lot of instances, developers of projects failed to get approval from local communities.

One such example can be found in one of the Alto Maipo hydropower scheme in Santiago, Chile, which was approved by the CDM despite significant environmental concerns and the opposition of local communities, who claimed that the scheme, which included redirecting water out of the 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 ensure human rights are respected when it comes to climate change,” says Lennon.

If the loopholes don’t get buffed out and the rules are made more strict it’s not worth to have a carbon market worldwide that is flooded with low-cost, ineffective offsets, according to Haya.

“You can’t achieve effective climate mitigation based on a fiction. It is essential to ensure the credits are genuine or else the market is founded on a lie,” says Haya, suggesting that establishing an incentive fund to support mitigation initiatives, which businesses as well as countries contribute to in order to be more effective in cutting emissions overall.

Even with strict regulations, nations cannot depend on carbon offsets alone to reach their ambitious goals in the field of climate change.

“We’re in a completely different place than the time that it was the time that the Paris Agreement was adopted,” Elliott says. Elliott. “Many countries have come up with zero net targets which put the entire [logicfor market-based economics to be questioned and suggest that we must do something much more radical.”

A global compensation system has no place in the global compensation scheme. It is “not the most important aspect of global climate action” Dufrasne explains and he suggests that nations be able to prioritize adopting regional and national policies that aim to cut emissions. This will result in cuts that will put the world on a course towards net zero in 2050. “Governments shouldn’t rely on borrowing that come from foreign countries but instead focus on cutting domestic spending.”