Carbon Offsets

Mindset of Change

“We need acts of restoration, not only for polluted waters and degraded lands, but also for our relationship to the world. We need to restore honor to the way we live, so that when we walk through the world we don’t have to avert our eyes with shame, so that we can hold our heads up high and receive the respectful acknowledgment of the rest of the earth’s beings."

Robin Wall Kimmerer, Braiding Sweetgrass

So, what exactly are Carbon Offsets?

Imagine that our atmosphere is a bathtub and that greenhouse gasses (GHGs, e.g. carbon dioxide, methane, etc) are water. The bathtub can only hold so much water before it starts to overflow, and the global temperature begins to warm. We are at the point where the bathtub is overflowing, but the faucet is still on. The most important thing to do is turn the faucet off, but even if we can do that, the bathtub is still too full. We also need to take some water out.

Governments, businesses and individuals need to 'turn off the faucet' by tightening up or adapting their operations to reduce GHG emissions - most importantly, ceasing to burn fossil fuels. But realistically, even if we were genuinely committed to 100% renewable energy, it would take some time to get there and our atmosphere is already too warm. Carbon offset projects remove GHGs from the atmosphere.

Offset projects tend to take two primary forms: 1) technological solutions (e.g. direct air capture); 2) natural solutions (e.g. forestry). Once carbon has been captured, it needs to be stored somewhere where it won't leak back into the atmosphere, ideally permanently. Different solutions sequester carbon more or less permanently.

[Note: When I say 'carbon' in many of these contexts, I am referring to CO2 equivalent or Co2e which is a shorthand term to refer to GHGs as well as water vapors and other warming atmospheric particles.]

Another term for carbon offset is carbon credit. They are used semi-interchangeably, although carbon credit is more specific. The term offset generally holds the expectation that companies are using the efforts of a third party project to offset the emissions from their own operations. The term credit takes this a step further and implies a system of carbon accounting (much like financial accounting).

Through their everyday operations, all companies and institutions emit carbon in some manner – by powering their offices and IT systems, by making and shipping products, by holding their operating cash in banks that fund fossil fuels. Although they must try to reduce their carbon emissions in some way (by switching to renewable energy, optimizing shipping efficiency and choosing lower emission shipping methods, and using green banks), they can also pay to offset their emissions by purchasing carbon credits produced by reputable offset solution companies.

Carbon Accounting

The carbon accounting approach is the framework for most companies purchasing carbon offsets. It serves as the backbone of the Voluntary Carbon Market, which is the collection of standards bodies, offset projects, and brokerages that allow people to produce, accredit, buy, sell, and retire carbon credits.

The process goes something like this:

1. A company like Coca Cola or Marine Layer hires a sustainability consultant to do a carbon emissions analysis of its operations. It wants to know its liability in case a carbon tax somehow passes Congress (or maybe, how much it needs to spend to lobby against this). It's also been getting a lot of bad press lately about its sustainability efforts (or lack thereof), and needs to be able to commit to some pledge to reduce emissions.
2. The sustainability consultant does an analysis of its Scope 1, 2, and 3 emissions. Scope 1 are direct emissions on site of company property (e.g. smoke from the infamous smoke stack). Scope 2 is from energy usage (e.g. the cost to produce the electricity needed to run the factory). Scope 3 are indirect emissions off-site (e.g. raw materials, shipping by third parties).

3. The sustainability consultant gives Coca Cola or Marine Layer a number - its total carbon emissions. They might also submit opportunities to reduce emissions (by switching to renewable energy, instituting circularity or buy back programs, or purchasing more sustainable raw materials).
4. The company looks at the sustainability consultant's recommendations, and debates a course of action. They may choose to implement some of the recommendations to reduce emissions. Or, they may decide that the public has moved on, Congress seems anti-carbon tax for another four years, and drop the whole effort. But most likely, they will choose to purchase carbon credits to offset a percent of their emissions and bolster their image as a sustainable company. Nothing like throwing money at a problem, you know?
5. The company then hires a person to manage the whole offsetting process. This person - the Carbon Manager or Sustainability Manager - then goes to an accreditation platform like Verra and finds a few carbon projects that offer enough carbon credits to offset the company's emissions with minimum effort. Then, they may go to that offset project directly to buy credits; they may go to a brokerage like Carbon Credit Capital; or they may buy a pre-created portfolio of offsets from a more sophisticated provider like Carbon Credit.
6. Once purchased, these credits are then retired (usually after a year). Retiring credits means they have essentially been used up. So, if the company has purchased 100% of the credits from a forestry project, when they are retired that means the company has essentially offset part of its emissions with one year of the forest's carbon sequestration potential.

Carbon accounting as a practice has followed a similar trajectory as financial accounting, evolving over time and with multiple methodologies in practice. Similar to how GAAP accounting standards eventually emerged, carbon accounting standards are in the making, with the Greenhouse Gas Protocol leading the way.

[Note: 'Protocol' in this landscape usually means a standardized way of measuring. It can apply to larger methodologies like the GGP or to specific technologies, like measuring carbon reduction for biochar.]

A Changing Landscape

On the other side of the equation, carbon credit standards are also changing, with recent scandals at Verra and widespread, valid skepticism of the entire Voluntary Carbon Market calling into question whether its even possible to offset emissions accurately. Although there is certainly plenty of potential for bad actors - from dishonest carbon credit providers to a lack of rigor from validation platforms - the main issues boil down to:

1. Incentives structure
2. Natural complexity

Incentives

From a theoretical perspective, the point of the VCM should be to provide high quality, rigorously verified and reliable credits which are guaranteed for single use. Instead, we have 'bogus' low quality carbon credits with double counting being pervasive. Thus, the issue lies with accreditation - who is verifying these credits? and who pays? The answer to the latter question shows the problem: the offset projects pay for the verification, and in some cases, especially with brand new technologies, the projects may also write the protocols. This presents an obvious conflict of interest.

One way of addressing this is to make the buyers pay for accreditation. After all, they are the ones who need to verify the credits are high quality. This ensures that the verification platforms are not reliant on the projects themselves. However, it also could skew the market towards cheaper credits or known protocols since buyers are incentivized to pay as little as possible. This could disadvantage innovative projects that have unproven (but potentially better) technologies or more expensive start up costs. Nonetheless, one interesting player in this space is is Isometric which seeks to overcome some of these obstacles through transparency.

Complexity

Once we've overcome the incentives problem, there is still the issue of natural complexity. For example, one of the most famous forms of carbon offsets is forestry. It seems you can hardly go online these days without some company promising you it will 'plant trees' if you take their survey or buy their product. (That is pretty much always greenwashing, btw, and I take it as a sign not to believe a company's other sustainability claims.)

Trees naturally sequester carbon dioxide because they pull it out of the atmosphere as part of photosythesis. And when trees stand in a forest, their ability to sequester carbon is enhanced, because decaying matter in a forest (leaves, dead branches, dead critters) is more efficiently recycled back into the ecosystem (largely due to trees relationships with mycelium and fungi).

Unfortunately, forests are incredibly complex ecosystems, and trees' ability to sequester carbon depends on a ton of variables. Is it a native tree? How old is it? How big is it? Is it healthy? Does it stand with other trees? Are those other trees complementary species? How old is the forest? Are other species in the forest still present such that the entire ecosystem is functioning well? Nature is incredibly complex, and while forests can be huge carbon sinks, they can also emit carbon. For example, the Amazon rainforest, once called the 'lungs of the world' has now become a net carbon emitter due to logging and other human destruction.

Even with the best intentions, sometimes shit happens. Forests burn down, releasing all the carbon back into the atmosphere, or a rogue beetle kills half the trees, limiting their ability to sequester carbon. This is true for many nature-based carbon offset solutions. Even when we do our best to restore the natural environment, sometimes we get it wrong. And how can you guarantee that a forest has successfully sequestered thousands of tonnes of carbon if you know there is a chance it could burn down next year, releasing all that carbon back into the atmosphere?

For this reason (as well as all that greenwashing) forestry has fallen out of favor, as have many other nature-based solutions. This is unfortunate, because although these types of credits still exist and are popular for marketing campaigns and with the general public, rigorous and honest offset buyers (the type of people who should be leading the industry) often look on them with skepticism. Technology based solutions - which may require new protocols or have high start up costs - are often seen as providing a more reliable approach. Direct carbon capture, for example, which involves essentially sucking carbon out of the air and burying it underground, is very popular despite its problems with scale.

All in all, the Voluntary Carbon Market (VCM) is evolving rapidly. Carbon accounting protocols are changing, as are carbon sequestration technologies, and measurement and verification tools. Even with best faith efforts, there is really no guarantee that buying carbon credits will 100% permanently offset carbon emissions in a reliable way. In my opinion, at this stage of the market, there can be no such thing. It is simply too early and there are too many variables. The way we measure is changing on both sides. Best case scenario, offsetting 2-3x estimated emissions and accepting a large discount rate would probably get you pretty close.

Thus, one of the biggest critiques of carbon offsets is still that they provide companies with a 'license to pollute.' And were this not a voluntary market, I would be inclined to agree.

But ultimately, there is still no regulation on carbon emissions. Companies are already fully licensed and they can legally emit as much GHG as they want to (at least in the US). With the Supreme Court's recent ruling in Chevron vs NRDC, even regulations on straight up pollution may be rolled back. So, if companies want to pledge to become Climate Neutral – even if that's by buying offsets, even if they roll it back – I think it's still a step in the right direction. It represents a change in standards, an acknowledgement that there is a problem, and an attempt to quantify that problem. And although the lack of transparency is concerning, it is beneficial that consumers become more aware of greenwashing through these public scandals.

An Alternate Lens

Although the purpose of carbon offsets has traditionally been to function as carbon credits, for me the greatest justification to buy them is: they provide financing for critical habitat restoration and technology development.

In a perfect world, if all governments, companies, institutions and people were able to reduce their emissions as much as possible, we have still degraded our natural environment to such an extent that it cannot keep up. And although we do have all the technologies we need to address the climate crisis, some cannot be deployed at scale, and improvement is still needed on many fronts. Plus, there is so much we have yet to learn about working with Nature, instead of against it. Offset projects have uncovered novel solutions (or ancient solutions, depending on how you look at it) from biomimicry and enhanced natural processes.

A few illustrative examples:

Eion - enhanced rock weathering speeds up a natural process that usually occurs over hundreds of thousands of years, to capture carbon from the air

Blue Carbon - restoring coastal ecosystems for carbon sequestration and biodiversity, as well as reduced damage from weather and erosion

Perennial - changing agricultural practices to improve soil health and sequester carbon

Biomineralisation - accelerating seawater biomineralisation to capture carbon

Artificial corals - biomimicry of corals to improve cement manufacturing and reduce carbon

[Note: As a project, Blue Carbon highlights the complexities that can often accompany offset initiatives. While conservation of essential ecosystems is valuable, who profits from it is a hot topic. Many critics of the VCM have pointed to this specific initiative as a poster child for what's wrong with carbon offsets.]

Now, some might say that we should fund all these initiatives through R&D or normal conservation efforts by nonprofits. And of course, they are right. Conservation and restoration initiatives do incredibly important work that predates the VCM, and to the extent that normal business R&D is focused on climate issues, great! This is a case where: 'yes, and' is the best answer. And carbon offsets provide yet another financing vehicle for this type of work, which lies at the intersection of restoration/conservation, research, technology, and industry.

Also, I find it fundamentally satisfying that the people paying for this work are usually the companies producing the most carbon emissions. The transparency, rigor, measurability and innovation that usually only accompanies for-profit operations can thus be directed towards efforts to restore balance.

In addition, carbon offsets have paved the way for a whole new mode of altruistic behavior, including plastic offsets and biodiversity offsets. And while these offsets suffer from the same critiques as carbon offsets, from a macro point of view, the fact that these markets are emerging at all is immensely hopeful to me. By demonstrating a willingness to purchase these types of offsets, companies and consumers are saying that plastic-free oceans and rich ecosystems are something worth paying for.

Can I buy offsets?

It can be hard to purchase offsets as individuals. The VCM was most definitely designed for companies and government, not you and me. If you are interested in buying offsets, Eion is part of Commons' carbon portfolio. You can purchase both one-time offsets and an offset subscription in the Commons app. (Klima also offers offsets for purchase by individuals, although I am less confident in their approach.)

Full Disclosure: I have an offset subscription through Commons. Because even though I try to live sustainably, sometimes you gotta take a flight or drive a car or buy vitamins. It gives me peace of mind to know that I'm giving back to worthy organizations who are making a difference out there. (Incidentally, I also buy plastic offsets.)

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Anywho, hopefully with this background you are a bit better equipped to navigate all the greenwashing, and to understand what offsets are.

Keep on keeping on!