Carbon Offsets as a Service

by Christian Bolorinos

---

Posted on June 21, 2020

---

Currently our world is looking into an uncertain future. And by this I don’t mean the pandemic, which by comparison is trivial and predictable. I’m talking about global warming. One of the most promising ventures to tackle this is carbon offsets, so I’m going to take a look at this service.

The term was first used in the 1970’s by US policymakers, and has ballooned over the past few years into a 10 billion dollar industry. Most of this has been through the Clean Development Mechanism (CDM) of the United Nations Convention on Climate Change. This service was set up to provide governments with a way to artificially reduce their carbon emissions. In a nutshell; the CDM quantifies the amount of carbon emissions that certain technologies might save, and allows countries that go over their target to invest in those technologies. The customer in this scenario is a government. The product: permission to claim they are meeting their carbon emissions reduction targets even when they are not.  

On the surface, this seems like a reasonable exchange. If, in the long run, these strategies are effective; money invested in renewable energy can, in many cases, reduce the total impact of global warming. 

The problems that carbon offsets solve is not just the cognitive dissonance of customers, businesses and government entities (though it is, undeniably that). Through funneling revenue into reforestation and renewable energy technologies, carbon offsets are helping solve the biggest problem humanity is facing right now: Global Warming. With such monumental advantages, it’s difficult to criticize this industry. Upon closer inspection though, carbon sequestration has caused some serious problems as well. 

One of these is corruption and/or incompetence. Carbon offsets services have, in many cases, lacked transparency and under delivered on their promises. Let’s go back to the CDM. On close scrutiny their results have been mediocre at best. In fact, one study claimed that 85% of their projects contributed little or nothing to slowing down global warming. Through systemic corruption, much of the funding provided by the CDM has done little else than fatten the wallets of administrators. As a result, the CDM has lost integrity (an indispensable ingredient in this service), and is unlikely to be a major player in the industry for much longer.

Another problem is that sometimes the efforts invested in can be thwarted. Let’s say you plant 1,000 mangroves in Brazil to offset the amount of carbon that those mangroves will absorb in their lifetime. Then, a few months later, there is a forest fire that reduces them to ashes (and of course C02). What then?

Additionally, to reverse global warming we will likely need not only zero, but negative emissions. The CDM, and other services that offer renewable energy and deforestation, are not solving this problem. They allow us to reduce our emissions at best, and to justify them at worst. 

However, a promising technology is emerging that seems to get around all three of these criticisms. Carbon sequestration; which means that some plants are sucking CO2 out of the sky, turning it into a solid and putting it back in the ground. This takes the service out of the realm of the hypothetical, and into a very logical and mutually beneficial transaction. It reduces the potential for corruption by making the supply chain much shorter. The money goes to powering the plants that pull the CO2 out of the air. Without hypotheticals, unknown elements or middlemen, this service is far more transparent. The captured carbon is much more quantifiable (it can be measured and weighed). Not only that, but this service could allow us negative emissions. A country running on 100% clean energy, for instance, could run carbon sequestration plants, and thus reach a negative value for their net CO2 emissions. Unfortunately, the bulk of carbon offsets are still given in deforestation and renewable energy efforts, as the carbon sequestration industry remains in its infancy; underfunded, comparatively expensive and poorly understood. 

Overall, carbon offsets are an innovative service. They have managed to put a price on inaction, and to provide tangible results for that price. The industry has serious problems, but there are also promising new models that manage to get around these problems. I think this industry has tremendous potential, and will likely be one of the larger contributors to cutting our emissions.

---