Explained | What are Carbon Offsets and why most Rainforest Carbon Offsets are being termed ‘Worthless’

A recent report after a nine-month investigation states: “The forest carbon offsets approved by the world’s leading provider and used by corporations like Disney, Shell, and Gucci are largely worthless and could make global heating worse.”

Verra, the world’s leading carbon standard, is accused of selling more than 90% of their rainforest offset credits as “phantom credits” which do not represent genuine carbon reductions. This has raised a serious concern over the carbon credits which are bought by numerous internationally renowned companies which label their products claiming to be “carbon neutral” by showing net zero emissions. 

But, questions have been raised, frequently, over their effectiveness.

This investigation has been undertaken by the Guardian, the German weekly Die Zeit, and Source-Material. It is based on a new analysis of scientific studies of Verra’s rainforest schemes. Their findings are alarming and pose serious questions for companies that are dependent on offsets as part of their net-zero strategies.

The investigation found that credits from 21 projects had no climate benefit at all, seven of them had between 98% and 52% – lesser than claimed using Verra’s system, and one among the 21 had 80% more impact. 

What are carbon offsets? 

According to the World Economic Forum, “Carbon offsets occur when a polluting company buys a carbon credit to make up for the greenhouse gas it has emitted. The money should be used to fund action somewhere in the world that removes the same amount of carbon out of the air, or to prevent carbon emissions.”

Thus, carbon credits are measurable, verifiable emission reductions from certified climate action projects. These projects tend to reduce, remove or avoid greenhouse gas (GHG) emissions. Apart from these, they also claim to bring a whole host of other positive benefits, for instance, they work to empower communities, protect natural ecosystems, restore forest land and reduce reliance on fossil fuels. Offset schemes were set up with the aim to allow the largest polluters, who exceed permitted emissions levels to fund projects, such as reforestation, that reduce carbon dioxide (CO2) in the air, essentially balancing out their emissions equation. 

Image Source: UNEP

ICROA provides an Accreditation Programme and supports organizations through advocacy and action-oriented activities aimed at advancing best practices in the Voluntary Carbon Market (VCM). 

How is the pricing for carbon offsets decided?

There are diverse types of carbon offset projects that are implemented. Some are:

1.  forestry sequestration projects (which work by removing carbon dioxide from the atmosphere when trees grow) to energy efficiency, and 
2. renewable energy projects (which reduce future carbon dioxide emissions in the atmosphere). 

There are a number of factors due to which prices of carbon credits vary. They are:

• The value delivered by the project, for example, some projects empower women or have direct impacts on people’s lives;
• Project implementation costs depend on the size and location of a project;
• Price of technology used, some are more expensive than others;
• These prices are also driven to a large extent by supply and demand.

What are verified carbon standards? 

Offsetting is a way through which an increasing number of companies and organizations are making pledges to curb their emissions and become carbon neutral. The Verified Carbon Standard (VCS) is a carbon crediting mechanism through which credits are issued to projects that reduce or remove greenhouse gas (GHG) emissions. 

Verra, the world’s leading certification organization, which is based in Washington DC, operates a number of leading environmental standards for climate action and sustainable development, including its verified carbon standard (VCS) that has issued more than 1bn carbon credits. It approves three-quarters of all voluntary offsets. Its rainforest protection program makes up 40% of the credits it approves and was launched before the Paris agreement with the aim of generating revenue for protecting ecosystems.  The VCS Program by Verra, has been endorsed by the International Carbon Reduction and Offset Alliance (ICROA) and meets the ICROA Code of Best Practice. The VCS Standard lays out the rules and requirements that projects must follow in order to be certified.

Carbon offsetting (Image Source: https://www.magnuscmd.com/carbon-offset-projects/)

Are carbon offsets a free pass for inaction?

Carbon offsets are only useful while infrastructure and industry make the transition to electric mobility, alternative sources of energy and adapt the new technology which is necessary for low- and zero-carbon lifestyles. While considering the short term, an offset scheme is a definitely viable option as it promises to cancel out the emissions in one place with emission-reducing actions in another. However, climate offsets are only one part of the answer. As carbon offset projects do help in reducing overall emissions, they will never be able to curb the emissions growth. If non-renewable power stations continue to grow and diesel/petrol cars continue to be bought, and the growing global population continues the consumption as it does today. 

In the actual experience of offset markets, the Kyoto Protocol Clean Development Mechanism (CDM)—and finds an urgent need for reform. Well-designed offsets markets can play a significant role in engaging developing countries and encouraging investment in low-cost strategies for controlling emissions. Another serious concern is that carbon offsets also risk giving the risky illusion of a “fix” that will allow our bulging emissions to continue to grow.