Disclosing carbon offsets, or: credibility and integrity!

The current exposure draft on climate-related disclosures would require disclosure, among much else of course, of the intended use of carbon offsets in achieving emissions targets…

The disclosure would cover whether the offsets will be subject to a third-party offset verification or certification scheme and if so, which scheme, or schemes; the type of carbon offset, including whether the offset will be nature-based or based on technological carbon removals and whether the amount intended to be achieved is through carbon removal or emission avoidance; and “any other significant factors necessary for users to understand the credibility and integrity of offsets intended to be used by the entity (for example, assumptions regarding the permanence of the carbon offset).”

That certainly covers some crucial information, but how well it work? We previously cited the view of one commenter, Carol Adams, that the proposals “will not lead to harmonization…green washing will flourish and disclosures will be challenging to audit.” There’s plenty of reason to indeed think that the “credibility and integrity” of whatever companies say about their use of offsets can’t always be taken at face value. For instance,  here are some extracts from a recent New York Times opinion piece by Zeke Hausfather:

  • Trees are our original carbon removal technology: Through photosynthesis, they pull carbon dioxide out of the air and store it. They have lately been touted as a climate savior, a way to rapidly reduce the carbon dioxide that has accumulated in the atmosphere as we cut our emissions….Planting trees and protecting forests are a major part of many corporate efforts to offset emissions.
  • But there’s a catch. Carbon dioxide removed from the atmosphere is only temporarily stored in trees, vegetation and soil, while a sizable part of our emissions today, will remain in the atmosphere, much of it for centuries and some of it for millenniums to come.
  • Trees can quickly and cost-effectively remove carbon from the atmosphere today. But when companies rely on them to offset their emissions, they risk merely hitting the climate “snooze” button, kicking the can to future generations who will have to deal with those emissions.
  • We have a saying in the climate science world: “Carbon is forever.” Around 20 percent of the carbon dioxide we put into the atmosphere today will still be in the atmosphere many thousands of years from now. This means that to effectively undo emissions, the carbon we take out of the atmosphere needs to stay out. There is a real risk that, in a warming world with more wildfires, with pests preying on trees and with drying soil, carbon in tree plantations could end up back in the atmosphere sooner rather than later. For carbon to be permanently removed by planting trees, forests would have to remain in place for thousands of years. On top of that, the trees would have to be planted on land that would have been forest-free for those same thousands of years had the trees not been planted.
  • Companies using trees to offset their emissions often sign a 40-year contract. But the companies selling and buying carbon credits may not be around in 40 years. There is a real risk that no one will be left holding the bag if tree plantations are clear-cut for development, go up in flames or are devoured by mountain pine beetles a few decades hence. In short, the timelines over which carbon removal needs to occur are fundamentally inconsistent with the planning horizons of private companies today.

Hausfather’s last word is that “we should be skeptical of claims that rely on temporary removals to justify additional ‘forever’ emissions.” This intersects with a recent multi-authored article in Canadian Accountant, based on a study of corporate reliance on renewable energy certificates (issued by power generators, representing solar, wind and other green energies flowing into the electricity grid) to report steep electricity emissions reductions. The article reports:

  • We analyzed the emissions reporting of 115 companies with approved science-based targets. From 2015 to 2019, they reported a 31 per cent reduction in greenhouse gas emissions from purchased energy…
  • However, 89 per cent of the companies claimed emissions reductions through certificates. In fact, two-thirds of the claimed emissions reductions were from certificates that most likely did not lead to additional renewable energy or emission reductions. 
  • The real combined emissions reduction was closer to 10 per cent, which would barely align with limiting global temperatures to well below 2 C.

And of course, there’s plenty more where that all came from. The ISSB are obviously aware of all these risks (take that specific mention of “assumptions regarding the permanence of the carbon offset”). Still, given the torrent of false and self-serving information churned out in this area, it’s likely that tighter and more prescriptive wording will be required in the final standard…

The opinions expressed are solely those of the author

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