Jet-setting the way to net-zero

Today, we dive into the world of carbon offsets and credits mired in controversy

Please hit the Like button ♥️ at the end if you liked reading this post so that I can know if what I am writing is worth your time.

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Explain like I’m a memer 

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Over the years you may have come across news of large (read wealthy) corporations pledging to turn net-zero or carbon neutral by 20xx (2050 being the most common year). Microsoft, Google, Meta, Apple, Shell, Reliance Industries and Mahindra & Mahindra are some of such companies. Microsoft has rather gone a step ahead in committing to becoming carbon-negative by 2030.

What does net-zero entail?

In the climate change language, achieving the ‘net-zero’ status means that as an entity, your carbon footprint, at a net level, is zero. In other words, you are not adding CO₂e¹ emissions in the atmosphere at a net level, hence, achieving neutrality in your emissions. 

CO2e emitted - CO2e removed = 0

Similarly, becoming carbon negative refers to being in a state wherein the entity removes more CO₂e from the atmosphere than it emits. A rather positive scenario.

Perfect time for a call back to a chart I had shared in an earlier post here which will help you visually understand these scenarios.

Let’s also have a look at Microsoft’s ambitious 2030 plan below.

Source: Vox

Did the phrase ‘at a net level’ sound shady?

Well, let’s dig into it.

The Industrial Revolution ignited a spark and fossil fuels spread like a worldwide wildfire. Given the all pervasive application of traditional fuels in our daily lives, it is easy to guess that no large entity can minimize its direct or indirect CO₂e emissions to zero in the near future. So, to become net-zero, deployment of countermeasures is inevitable.  

Welcome to the world of carbon offsets and credits.

Carbon offsets and carbon credits, in their basic form, are accounting mechanisms which enable emitters to neutralize their own emissions by paying for actions/projects which remove or reduce GHG emissions in any part of the world (since CO₂e emissions are strangers to the idea of geographical boundaries). These projects could be reforestation or forest conservation projects, direct air capture, seaweed cultivation or other methods highlighted in my previous post - Suck CO2 (out of the atmosphere)!

Trivia: 1 carbon offset or credit = 1 tonne of CO2e

Now, consider this hypothetical scenario:

A tech company in the US is guzzling hundreds of megawatts of coal fueled electricity to run its servers in multiple data centers across the world causing annual CO₂e emissions of 2 million tonnes. 

A non-profit organization (NPO) in India has undertaken a reforestation project over 500 acres of erstwhile barren land which will annually remove (through the natural process of photosynthesis) 5 thousand tonnes of CO₂e from the atmosphere in the next 35 years.

A textile company in Italy has devised a manufacturing process which releases 40% less toxic chemicals in open water sources during the dyeing process, hence cutting CO₂e emissions by 500 tonnes per annum.

Assuming that the US company has no means of entirely shifting to renewable sources of energy anytime soon, they can pay the NPO in India to buy the future removal of CO₂ from the atmosphere and offset it against their current emissions. Similarly, they can pay the Italian company to buy credits for the ‘reduced’ or ‘avoided’ emissions to offset against their own emissions. When reporting their annual emissions, the US company can present their ‘net’ emissions after accounting for the purchased offsets and credits. 

In the above example, emissions generated in the US were offset against emissions removed and reduced in India and Italy, respectively. This is how the carbon trade market for offsets and credits works, only with a lot more complexity. Existence of this market also helps finance decarbonization projects across the world. However, this mechanism can be afforded at a large scale only by corporations with disposable capital at hand. 

While offsets and credits are sometimes used interchangeably, they have some nuanced differences, the major ones being:

• Offsets remove CO₂e; credits reduce CO₂e emissions

• Offsets are traded in voluntary carbon markets (unregulated); credits are traded in compliance carbon markets (govt. regulated) which exist mainly in EU, California (USA) and China².

Wondering what is available to you as an individual to offset your carbon footprint? Only carbon offsets. Companies like Commons, Climes and Carboncheckout help you calculate your personal carbon footprint based on your daily actions and consumption patterns and provide opportunities to offset your emissions by investing in select certified carbon removal projects.

While the offset mechanism may seem practical, rational and a low hanging fruit in the transition to a sustainable future, the reality rests on a bed of thorns. 

There are two schools of thought which often collide:

1. Offsets incentivize climate action in the transition period: This mechanism helps legacy emitters in their climate transition while they don’t have direct access to the required technologies to reduce their own emissions. 

2. Offsets are an excuse to emit more CO₂: This mechanism delegates the responsibility of decarbonization to third parties, often in developing nations, while large emitters continue to pump more emissions with zero accountability on reducing emissions. This is as good as popping a mint after a smoke to project as if one never smoked. The major reason for this school of thought to have gathered moss seems to be the disconnect in commitment and action displayed by multiple large scale emitters - several oil companies which have made net-zero by 2050 commitments continue to explore and invest in oil fields to multiply their output for upcoming decades.

second school of thought

A Harvard Business Review article pointed that recent media investigations have suggested that the great majority of products transacted on offset markets remove very little GHG from the atmosphere³. Majority of this problem stems from the fact that measuring, monitoring and verifying the impact, quality and durability of carbon offsets continue to be the greatest challenges.

• How to ensure that the offset from a reforestation project won’t become redundant if a wildfire burns the project down releasing all the stored CO₂? 

• If a project in Ethiopia offsets emissions in Chile, What mechanism ensures there would be no double counting of CO₂ removal at an overall level?

• Is a tonne of CO₂ captured and stored in soil equivalent to a tonne of CO₂ stored in oceans?

• How to accurately measure the carbon sequestered by trees during their lifetime?

• How to value offsets which sequester carbon for a definite period vis a vis offsets which provide indefinite sequestration?

These are just a few of the many questions to which there exist no clear answers yet. While there are bodies which have been looked upto for establishing scientific standards and benchmarks for authenticity, even their conduct has come to be questioned in the recent past. An  investigation by The Guardian revealed that close to 90% of carbon credits certified by Verra, provider of the world's leading carbon standard, were worthless. 

Source: The Guardian

Further, most of the offsets are traded in an unregulated market with intermediaries. With more parties involved in an offset transaction and no robust institutional penalty for faltering on claims, accountability gets severely diluted with high potential for moral hazard problems. Once an offset is sold, seller doesn’t have much incentive to monitor the longevity of the carbon sequestered by the project. Similarly, after using the bought credit, the buyer may defer action on reducing their own emissions.

What is the solution? 

It’s a tricky path which will probably keep changing its course as science evolves. The hope is that as awareness keeps rising, more relevant questions will be asked and robust methodologies will have to be sought. At this point in time, I’m not aware of concrete steps being taken to overcome these challenges. In case you do, please do share with me as well :) 

Additional read: 

Are certain climate solutions working inversely to add GHGs in the atmosphere? https://www.propublica.org/article/the-climate-solution-actually-adding-millions-of-tons-of-co2-into-the-atmosphere

1. CO₂e refers to carbon dioxide equivalent emissions to practically include all GHGs based on their global warming potential.

2. carboncredits.com

3. hbr.org/accounting-for-carbon-offsets