Right topics, wrong emphasis: the Carney Taskforce on carbon offsetting misses the mark

by Eli Mitchell-Larson

Carbon offsetting is once again booming, driven by a flurry of net zero commitments from businesses and institutions. But controversy over offsetting persists. The Mark Carney-led Taskforce for Scaling Voluntary Carbon Markets (the "Taskforce") is among the highest profile efforts attempting to offer clarity, and a recently-released consultation document previews their blueprint for a functioning offsetting market. Is it likely to work?

The Taskforce succeeds in identifying some of the challenges (e.g. opaque markets make quality determinations difficult) and proposing some solutions (e.g. better enabling project finance) but is almost entirely silent on the $100 billion question: can we build a voluntary market with offsets that really deliver for the climate?

Each carbon credit is meant to definitively represent 1 ton of CO2 emissions reduced, or 1 ton removed from the air. But since their inception, offsets have been plagued by questions as to whether these atmospheric impacts are real, with studies showing upwards of 80% of credits to have been "non-additional", that is they cannot be said to have occurred purely as a result of the offset purchase. Others have pointed to instances of uncertain impacts or outright fraudulent claims with specific carbon project types. The history of voluntary offsetting has been one of sporadic success amidst sustained failure. In terms of the certainty of their atmospheric impact, offsets range from bulletproof to Swiss cheese. These problems are solvable, but doing so will require acknowledgment and concerted effort by all stakeholders, including the Taskforce.

Image: Petr / Adobe Stock

Many carbon offsets rely on storing carbon in living biomass. Improved safeguards to ensure proper accounting and reporting of the actual atmospheric carbon outcomes achieved, alongside the integrity of ecosystems, are critical.

The recently released Oxford Principles for Net Zero Aligned Carbon Offsetting (of which I was an author; views in this piece are my own and are not meant to represent those of the other authors) attempted to cut through the quality debate by asking the question in a different way: when can offsets be used to claim net zero emissions, i.e. when can a company "declare victory" in its fight against climate change? Placing offsets in the context of a specific claim opens up the possibility of different tiers of offset quality. Perhaps not all offsets need to offer the same degree of confidence in their carbon outcomes, particularly when some offsets deliver other "co-benefits" to nature or society. But claiming "net zero emissions" has a specific and non-negotiable meaning. The use of offsets (rather than absolute reductions in a firm's actual emissions) to deliver such a claim will need to be defined and vigorously enforced. While the Taskforce's scope is broader than the question of net-zero alignment, this remains the key unaddressed consideration, since nearly all of the likely market participants they envision will eventually attempt to make such claims.

Of the Taskforce's many recommendations, just two address whether carbon credits actually deliver what they are supposed to: a reduction or removal of CO2 from the atmosphere. While the others are well-wrought, their usefulness is entirely dependent on whether the first two are carried out effectively. Without credible offset quality principles as a solid foundation, we risk building another market on hot air and empty promises. Conversely, high-quality offsets will build long-term confidence and lead to more enduring growth of the voluntary carbon markets. Before expectations build for a large, liquid offsetting market, and before more resources are spent devising and preparing for such a market, we need to go back to basics and build the standards and infrastructure required to deliver credible carbon benefits.

It's worth noting that many of the Taskforce's recommendations (e.g. implementing spot pricing and futures contracts) are well-understood, easily replicable from other industries, and have a substantial profit motive driving their deployment. In contrast, the first two - to establish and enforce Core Carbon Principles (CCPs) - are not well understood, have few successful precedents, and lack well-funded champions who have only the planet's best interest in mind. Who designs these Core Principles matters greatly. The Taskforce's snapshot of the current state of voluntary carbon markets lists quality standards as the most mature element of these markets, confusing age with effectiveness. The relevant standards may have been around for some time, but this does not mean that they are adequate.

To make an impact and achieve what previous attempts at voluntary standard setting did not, the CCPs will need to balance being:

  1. Significantly more stringent than existing standards - There are deep issues with offset quality across many carbon project types. A reboot, with significant input from non-conflicted parties, is necessary to instill confidence and avoid another crisis of faith in the efficacy of offsets.
  2. Easy to certify against - Carbon projects already face significant costs and time-to-certification in existing verification programs. Meeting the CCPs must not significantly add to this burden, and would ideally reduce it.
  3. Widely adopted - The danger with voluntary standards is that someone can always make another one, diluting the adoption of the others. The webcomic xkcd pokes fun at this proliferation risk: where once we had X quality standards, we now have X+1. However, compromising the stringency of the CCPs in order to maximise their adoption would be fatal. The Taskforce must acknowledge that strict CCPs to ensure that claimed carbon benefits are real is a non-negotiable point, even if adopting such a position limits the scalability of voluntary carbon markets.

'Standards', xkcd.com, Creative Commons License.

But the Taskforce remains silent on the possibility that if the CCPs fail to enable delivery of promised atmospheric impact, we may need to press pause on some forms of voluntary carbon offsetting while we sort out quality issues (note that the activities themselves, for example improving a factory's energy efficiency or regenerating agricultural land, can and should still be scaled up in the meantime through other mechanisms such as direct regulation or voluntary payments without receiving carbon credits in return). Ideally we can rapidly scale the voluntary carbon market in such a way that it continues to make room for all possible participants, both suppliers of every conceivable carbon offset type and purchasers of every size, industry, and degree of genuine climate ambition. However, our North Star must remain net zero global emissions. If the only carbon offsets the private sector will purchase at scale on a voluntary basis are of too low quality to ensure real climate benefits, such products are not yet ready to be scaled up.

Since the effectiveness of the Taskforce's other recommendations is predicated on the success or failure of its Core Carbon Principles, it's critical that they be given the focused attention they deserve in the Taskforce's final phase. Getting this right will require ideas from all quarters, but I'll close with three specific contributions:

  • Clarify taxonomy to include long-lived storage - Fossil carbon, once emitted, becomes a part of the linked ocean-atmosphere-biosphere system essentially in perpetuity, so in the long-run any remediation of these emissions needs to be equally permanent, or at least persist for centuries (rather than decades) to buy time. The Taskforce mentions the need to shift from avoidance and reduction offsets toward carbon removals, which mirrors the findings and proposals in the Oxford Offsetting Principles. However, this additional shift toward increasingly durable or permanent reductions or removals is equally critical. Given the Taskforce's admission that most carbon projects will continue to be "avoidance and reduction" in the near-term, and their expectation that all credits, whether reduction or removal, be cleared using a common contract (implying fungibility), it becomes even more important that buyers be able to determine whether the offsets they buy offer durable climate benefits that are compatible with sustained net zero emissions. The CCP taxonomy of additional attributes can make such distinctions possible.
  • Making carbon and non-carbon benefits clear - Rather than aiming for absolute fungibility among all carbon credits, why not be upfront about the fact that some carbon project types offer highly certain carbon impacts, while others cannot provide the same degree of certainty without introducing lower standards or buffer assumptions? This can be accomplished through a tiered or graduated rating system that distinguishes between offsets with high-certainty atmospheric impacts and those that offer less certainty. Many carbon projects produce valuable non-carbon "co-benefits", for example protecting biodiversity or restoring ecosystems. In many cases, these co-benefits complement carbon benefits: nature-based offsets which do not ensure functioning, connected, and biodiversity ecosystems are unlikely to store carbon for long. Conversely, carbon projects with high-certainty climate impacts (capturing and permanently storing industrial emissions or atmospheric CO2) often have the fewest co-benefits. The CCP could provide a clear path to separately evaluating the carbon and non-carbon benefits of carbon projects, which will give buyers the clarity needed to understand what benefits their purchases actually provide and which claims ("net zero impact on land conversion" versus "net zero carbon emissions") they can safely and permissibly make. This approach keeps the door open for a wider variety of offsets to participate in the market and scale without watering down the rules for evaluating either co-benefits or carbon benefits.
  • Frankly acknowledge and address quality issues - It's no secret that many of today's offsets are not delivering what they claim to, due to a combination of systematic over-crediting, unresolved questions of additionality, incomplete frameworks for measuring indirect carbon leakage, and the need to incorporate sources of non-CO2 forcing. Other issues will also soon reemerge, including distinguishing between ex post (reduction or removal already confirmed) and ex ante (reduction or removal yet to be performed) accounting, properly valuing temporary storage, and requiring retroactive corrections to past reductions or removals as models improve. These are solvable problems that cannot be carved out and dealt with later; it's in everyone's interest to face them head on. Note that although these accounting issues are not limited to nature-based offsets, they are prevalent among them. This is not an indictment of nature-based or other climate solutions themselves, but rather of the lack of rigor and honesty in the rules that govern how carbon projects are permitted to generate credits. The Taskforce can begin by acknowledging and cataloguing these and other known issues with offset quality, collect and elevate the right scientific expertise to make recommendations, and explore and compare different options for reforming offset quality control.
Image: Belozorova Elena / Adobe Stock

Offsets that store carbon in more durable forms, like these carbonate mineral deposits in Pamukkale, Turkey, will become increasingly important. New technologies from mineralisation to enhanced weathering are emerging to complement more mature high-durability carbon storage methods, such as in depleted natural gas well or in subsurface geological formations.

The Taskforce can be commended for taking on the challenging topic of voluntary carbon offsetting and offering a clear vision for reducing sources of friction between buyers and sellers. The mentioned importance of shifting from emission reduction toward carbon removal offsets over time is a welcome acknowledgment of the need to balance emission sources with carbon sinks, as codified in the Paris Agreement. But all told, the Taskforce places too little emphasis on how offset quality will be defined and ensured, potentially imperiling the ability of a credible market to scale. High-quality offsets are in fact the key to scaling, as only real atmospheric outcomes can engender confidence and create a virtuous cycle. In its final phase, the Taskforce can refocus its efforts on building trust in a process to define quality, drawing on the scientific expertise needed to establish rules for net zero-aligned offsetting. Oceans of capital are waiting to scale voluntary carbon markets and supercharge financial innovation. Before we open the floodgates, let’s first address the fundamental challenge of making carbon credits work.

Eli Mitchell-Larson is a DPhil candidate at the University of Oxford's Environmental Change Institute, and a co-author of the Oxford Principles for Net Zero Aligned Carbon Offsetting. He tweets @EliMLarson.

This article appeared first at BusinessGreen.com on 10th December 2020.