Mark Maslin, UCL and Simon Lewis, UCL
French global energy giant Total recently announced that it has made its first shipment of "climate neutral liquefied natural gas". Natural gas is of course a fossil fuel and therefore cannot itself be climate neutral. Instead, the emissions from the transport of the freight were partially "offset" by investments in a wind farm in China.
But here's the problem: this wind farm has been in operation since 2011 and has already issued more than 2 million tons of these so-called "carbon credits". One such project clearly took place nine years ago, without the additional funding from the sale of loans to Total. Therefore, it is highly unlikely that recent purchases resulted in additional carbon removal from the atmosphere.
These types of projects are why many scientists and environmentalists are skeptical of companies buying loans to reduce emissions in other parts of the world rather than reducing emissions themselves. That's why Mark Carney, the former Governor of the Bank of England, has set up a private sector task force to create a “credible” carbon offsetting market in 2021 so buyers can be confident that their investments are actually removing greenhouse gases from the atmosphere .
We partnered with climate data analysts from Trove Research to support Carney's task force. Our new report shows that the market already contains hundreds of millions of tons of poor quality loans. If changes are not made, the market could become flooded with them, causing companies to pay money but not meaningfully reducing carbon emissions. New rules are needed to keep older loans out of the market.
Why the carbon market is growing
More than 1,000 companies around the world are committed to reducing their greenhouse gas emissions to zero by 2050. Many have pledged to go further. For example, Microsoft has an ambitious goal of becoming carbon negative by 2030. By 2050, Microsoft aims to remove all of the carbon pollution from the atmosphere that the company and its supply chain have emitted since it was founded in 1975.
At least 15 airlines, including EasyJet, British Airways and Emirates, have announced important carbon offsetting programs. Even BP has stated it will be carbon neutral by 2050 by eliminating or offsetting more than 415 million tons of carbon emissions (though the devil is always in the details).
Companies need to cut their emissions quickly, but it is difficult to get to absolute zero. Some companies commit to reducing their emissions and using carbon credits to lower their effective emissions by investing in projects around the world that reduce emissions elsewhere, or remove carbon dioxide from the atmosphere.
These projects include wind or solar parks, the planting and growing of new forests or the protection of existing forests. However, some companies could invest in the cheapest credit available, regardless of their credibility, simply to launder their "green" reputation.
The integrity of the carbon offset scheme depends entirely on additionality – whether the money paid for the offset payments is actually used to reduce emissions or to capture carbon dioxide from the atmosphere, which otherwise would not have happened. Our report identified some worrying problems with a significant back-up of old, poor quality carbon credits.
Old emission certificates could flood the market
Carbon offsetting market is expected to grow: our report estimates that the carbon offsetting market is likely to be worth more than $ 90 billion (£ 67 billion) and possibly as much as $ 480 billion by 2050 – at least a 200 billion -fold increase of $ 0.4 billion spent in 2020.
The bad news is that enlargement may not actually reduce emissions, as 600 to 700 million tonnes of old emission allowances could currently be claimed on the carbon offset market – seven to eight times the current annual requirement. If all of this were to be said, it would flood the market, meaning companies are buying cheap loans from projects with little or no additionality and little or no climate benefit.
There are more CO2 offsets available than were bought, which leads to a large “surplus” (in gray, millions of tons of CO₂ equivalent). The surplus grows year by year as retirement and the cancellation of compensation payments (red line) do not keep pace with the oversupply. In order to eliminate the surplus and make the compensation more effective, we have to withdraw much more old compensations for renewable energies. Trove / UCL, author stated
The situation could be worse – as the study's lead author, Guy Turner, points out – if old carbon credits from the last decade of the UN's clean development mechanism are allowed. This would produce an additional 7,000 million tons of carbon dioxide, which is 50 to 60 times the current annual demand. If these CDM loans were included in the voluntary market, they would effectively make the voluntary market obsolete as a mechanism to reduce global carbon emissions.
This means that companies, including the world's leading consumer brands, could inadvertently apply for carbon credits for projects that have been in operation for several years and were approved under previous, less stringent conditions. As in the case of Total and the Chinese wind farms, this would effectively mean that their CO2 offsets would not result in a new removal of greenhouse gases from the atmosphere.
The study is not all doom and darkness. We also presented a number of ways the carbon market can actually reduce emissions to the Mark Carney Task Force. The world needs an independent international organization that monitors and carefully regulates the market. This would have to ensure that the verified emissions certificate registers only contain high quality projects. After all, buyers must be empowered to obtain loans that clearly make a real difference.
Businesses need to reduce their own emissions first, but currently there are few alternatives to fossil fuels for some applications – for example, transporting goods by sea or air. Therefore, CO2 offsets can be justified if they are part of a portfolio of measures to bring emissions to zero and stabilize the earth's climate. However, there is a need to clean up and strictly regulate the voluntary carbon market to ensure that real emissions reductions are achieved.
Total did not respond to The Conversation's request for comment.
Mark Maslin, Professor of Earth System Science at UCL and Simon Lewis, Professor of Global Change Science at the University of Leeds and UCL
This article is republished by The Conversation under a Creative Commons license. Read the original article.