Mark Maslin, UCL and Simon Lewis, UCL
French global energy giant Total recently announced it had delivered its first shipment of “carbon neutral liquid natural gas”. Natural gas is, of course, a fossil fuel and so can’t itself be carbon neutral. Instead, emissions from transporting the cargo were partly “offset” by investing in a wind farm in China.
But here’s the problem: that wind farm has been operating since 2011 and has already issued more than 2 million tonnes of these so-called “carbon credits”. A project like this clearly happened nine years ago without the additional funding from selling credits to Total, so it is highly unlikely that the recent purchases resulted in additional removal of carbon from the atmosphere.
These kinds of projects are why many scientists and environmentalists remain sceptical of companies buying credits to reduce emissions elsewhere in the world instead of reducing emissions themselves. This is why Mark Carney, the former governor of the Bank of England, has set up a private sector taskforce to establish a “credible” carbon offsetting market in 2021 so buyers can have confidence that their investments really will remove greenhouse gases from the atmosphere.
We teamed up with climate data analysts at Trove Research to feed into Carney’s taskforce. Our new report shows that the market already contains hundreds of millions of tonnes of poor quality credits. If changes are not made the market could be flooded with them, resulting companies paying money, but failing to meaningfully reduce carbon dioxide emissions. New rules are needed to exclude older credits from the market.
Why the carbon market is growing
More than 1,000 firms across the world have made pledges to reduce their greenhouse gas emissions to zero by 2050. Many have pledged to go even further. For example, Microsoft has an ambitious target to go carbon negative by 2030. By 2050 it wants to remove all 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 major carbon offset schemes. Even BP has declared that it will be carbon neutral by 2050 by eliminating or offsetting over 415 million tons of carbon emissions (although the devil is always in the detail).
Companies need to get their emissions down fast, but getting to absolute zero is hard. Some companies are committed to reducing their emissions and use carbon offset credits to lower their effective emissions by investing in projects around the world that reduce emissions elsewhere or that remove carbon dioxide from the atmosphere.
These projects include wind or solar farms, planting and growing new forests or protecting existing forests. But some companies could be investing in the very cheapest available credits, with little regard to their credibility, simply to launder their reputations as “green”.
The integrity of the carbon offset concept relies wholly on additionality – whether the money paid for the offsets is actually used to reduce emissions or capture carbon dioxide from the atmosphere that would not have happened otherwise. Our report found some worrying problems with a significant reserve supply of old, poor quality carbon credits.
Old carbon credits could swamp the market
The carbon offset market looks set to grow: our report projects that by 2050 the carbon offsets market will probably be worth more than US$90 billion (£67 billion) and maybe as much as US$480 billion – at least a 200-fold increase on the US$0.4bn spent in 2020.
The bad news is that the expansion may not actually reduce emissions because, at the moment, 600 million to 700 million tonnes of old carbon credits could be claimed in the carbon offset market – seven to eight times the current annual demand. Were these all to be claimed it would swamp the market, meaning companies buying cheap credits from projects with little or no additionality, and so little or no climate benefit.
The situation could be even worse – as lead author of the study Guy Turner points out – if old carbon credits from the past ten years of the UN Clean Development Mechanism are allowed. This would produce an additional 7,000 million tonnes of carbon dioxide representing 50 to 60 times current annual demand. If allowed into the voluntary market these CDM credits would effectively make the voluntary market redundant as a mechanism for reducing global carbon emissions.
This means companies, including world leading consumer brands, could unwittingly be claiming carbon offset credits for projects that have been operational 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 their carbon offsets would create no new removal of greenhouse gases from the atmosphere.
The study is not all doom and gloom. We’ve also presented the Mark Carney taskforce with a number of ways to make the carbon market actually reduce emissions. The world needs an independent international body to oversee and carefully regulate the market. This would have to ensure the registries of verified carbon credits only hold high quality projects. Finally buyers need to be empowered to demand credits that will clearly make a real difference.
Companies need to reduce their own emissions first, but there are currently few alternatives to fossil fuels for some uses – for example, the transport of goods by sea or air. Hence carbon offsets can be justified if they are part of a portfolio of measures to get emissions to zero and stabilise Earth’s climate. Yet, cleaning up and tightly regulating the voluntary carbon market is needed to ensure that real emission reductions are achieved.
Total did not respond to The Conversation’s request for comment.
Mark Maslin, Professor of Earth System Science, UCL and Simon Lewis, Professor of Global Change Science at University of Leeds and, UCL
This article is republished from The Conversation under a Creative Commons license. Read the original article.
This carbon dioxide scheme is just fraud waiting to happen. Buyer beware.
And of course, there is the little matter that there is no evidence that shows CO2 needs to be reduced in the first place.
Suppose those governments which have signed on to the Paris Climate Agreement decide they need to establish a worldwide system for the trading of carbon credits.
Within such a worldwide system, the value of a carbon credit can rise or fall; it can be exchanged and traded for real currency; and it can support the mining of carbon credits for profit in the same way bitcoins are now being mined.
And last, but most important, the system can largely decouple the value of a carbon credit from the tonnes of carbon emissions which are actually being produced.
The solution to this need might be to create a government-sanctioned equivalent of bitcoin for the carbon credit trading market — the carbcoin — a carbon emission currency of sorts.
This is how a carbcoin-based equivalent of a bitcoin might work.
At the very outset, based upon a pre-established valuation criteria, the carbon trading market value of all existing zero-carbon energy facilities on earth might be assigned in the form of X number of carbcoins pegged at Y initial value as stated in US Dollars.
Throughout its operational life, each zero-carbon energy facility carries the same number of carbcoins originally assigned to it. As long as that facility remains in operation and is in conformance with the criteria under which its carbcoin assignment was first established, it keeps that initial facility-specific carbcoin allotment.
New zero-carbon energy facilities, and qualifying upgrades to existing zero-carbon energy facilities, are assigned their own initial allotment of carbcoins. Once assigned, the value of these carbcoins rises or falls depending upon the current market conditions for carbon credits.
The ownership of an individual carbcoin after its initilal issuance changes hands as best suits the financial interests of both buyers and sellers.
Who ‘owns’ the carbcoins initially assigned to any given zero carbon energy facility?
At initial assignment, ownership of two-thirds of the carbcoins might be held by the private or public corporations which own and operate the energy production facilities. One-third might be held by the government of the nation in which the zero-carbon facility operates. After initial assignment, the carbcoins are bought and sold under whatever market conditions then exist within the carbon credit trading markets.
How does carbcoin work in practice?
For example, if you are an airline and you want to continue flying your jet powered airliners, you buy that number of carbcoins you think will balance the carbon trading value of the jet fuel your airline consumes. The number you buy or sell at the current market price being consistent with your profit making objectives. The airline services consumer will pay for any increases in airline ticket prices which result.
For another example, if you are an oil & gas company, and you want to continue producing oil & gas, you buy or sell that number of carbcoins you think will balance the carbon trading value of the carbon fuels you produce — the number you buy at the current price being consistent with your profit making objectives. The oil & gas consumer will pay for any increases in fuel prices which subsequently result.
As a private or a public corporation engaged in the business of producing electrical energy, do you choose to invest in a fossil fuel facility of some kind — coal, gas-fired, etc. — or do you instead choose to invest in a wind, solar, or nuclear facility? (Assuming that nuclear is a qualifying zero carbon option under the carbcoin scheme.)
Under a carbcoin system, the type of energy production facility you choose to invest in will depend in part on your estimate of the future price of a carbcoin. The number you buy or sell over the life of the facility being consistent with your profit making objectives. In any case, the energy consumer will pay for any increases in energy prices which subsequently result.
Is the concept of a carbcoin-based carbon credit trading system diabolical in the extreme?
Of course it is. The price of all forms of energy could double or triple under this scheme. Governments and corporations alike could rake in huge amounts of cash from its operation. That’s why a good number of government functionaries are probably thinking about creating something like a carbcoin system even as we speak.
‘Green’ products work using the same principles as ‘Lite’ products.
Both are based on the ‘fishing lure’ principle. Fishing lures are designed to catch the money in your wallet. The ability to also catch fish is a secondary byproduct.
Perhaps the biggest part of this scam is REDD+. The biggest land grab ever, all in the name of saving the planet.
For little eco wariers, the equivalent of carbon credits is recycling every little bit of plastic and buying organic ‘food’. Some of them boast they get their organic milk in glass bottles.
These actions permit them to fly whenever they get the urge. Another way to get credit to fly is to get an EV for your second vehicle.
I’d like to suggest giving some sort of carbon offset value to bonds for financing nuclear plants. There might not be any immediate carbon cutting results (as if there’s all that much significant results now), but there would be great long term potential which is the way CO2 should be looked at if it is indeed a problem.
Is the issuing of carbon credits regulated? Or can any issuing body simply print and sell as many carbon credits as they want?
You do not have to be a scientist to see that carbon credits are the world’s biggest financial scam.
This makes as much sense as sin-eating
Especially when you consider that wind farms need huge investments in base load power from non-unreliables to make the parts build them and connect them with high tension power lines to the grids. It is unlikely that the windfarm will ‘pay back’ the ‘carbon’ generated in its manufacture in its surprisingly short useful life.
(Not that CO2 is a real problem but using alarmist arguments against them)