Carbon Offsets Come Under Fire

Mark Shapiro, of Berkeley, Calif.’s Center for Investigative Reporting, has written a scathing report on the carbon offset industry in the February edition of Harper’s. Policymakers crafting U.S. climate legislation, which might include provisions for offset projects, should heed the warning, but the criticism shouldn’t be confused with calls to kill a nationwide cap-and-trade program.  

The industry to generate and then verify carbon offsets has exploded in recent years largely because of the Kyoto treaty, which established national limits on emissions. The treaty allows regulated companies to purchase credits produced from these offset projects to meet a portion of their emissions-reductions targets set by the international program. More than 300 million credits, each representing the equivalent of one metric ton of carbon dioxide, have so far been generated, and these credits can then be traded on commodities markets. Shapiro says up to 2 billion new credits could be drawn from offset projects if a cap-and-trade program similar to the proposals now before Congress were to become reality.

Shapiro, who traveled to Brazil and Europe and interviewed a legion of experts to write this piece, argues that the system is fraught with pitfalls, from grossly inaccurate readings on the emissions reduced by projects to conflicts of interest from the third-party firms hired to “verify” offsets. A study published in the peer-reviewed journal Climate Policy reportedly found that just 60 percent of the projects it looked at actually provided evidence that they were reliable. Shapiro calls the market for credits produced by offset projects “an elaborate shell game, a disappearing act that nicely serves the immediate interests of the world’s governments but fails to meet the challenges of our looming environmental crisis.”

Other writers have taken their shots at the offset market, including those at BusinessWeek and the Financial Times. UK-based environmental journalist George Monbiot has likened the industry to selling indulgences and called offsets an excuse for business as usual. But Shapiro’s warning comes at a crucial time, as Congress is expected to start debating national climate legislation again later this year.

The offsets allowed under current cap-and-trade proposals in Congress would be far broader and complex than those now traded in Europe and created under the Kyoto regime, according to Shapiro. He points to provisions allowing offsets from reductions in greenhouse gas-intensive farming practices and the preservation of forests as two examples of new classes of “carbon promises” with measurement and accountability challenges.

In theory, allowing for the creation of credits from offsets has benefits – incentivizing businesses and individuals to invest in carbon-reducing projects that otherwise wouldn’t have occurred and transferring technology to poorer countries, say through a project that replaces kerosene lamps with solar-powered lights. But if a reliable system can’t be established to verify real offsets, then the idea should be phased out. A robust and effective cap-and-trade program could be implemented without offsets – large emitters bid each year for a gradually declining number of allowances, or credits, sold by the government and those that end up needing fewer than they bought can sell them to those that require more. Killing cap and trade because of the offset problem would be like cutting off an arm because of a broken finger.

Image courtesy The Library of Congress via Flickr.

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