April 13, 2024

A resurrection of confidence in carbon offsets is needed to reach net zero

Carbon offsets are under intense scrutiny, with recent reports from Amazon to Australia exposing some flaws, which could lead to doubts about their effectiveness and therefore distrust. This is compounded by the fact that understanding this entire system – carbon offsets, removal or evasion – can be complicated. Think of it as trying to solve a complicated puzzle where multiple players, including experts, are figuring out how different pieces fit together best. Even with all these difficulties, it is difficult to ignore that the voluntary carbon market is expected to grow from $2 billion in 2020 to as much as $200 billion in 2030-40, according to one estimate. Therefore, it is essential to restore the confidence of investors, governments and the general public in this market.

While it is often the problem areas that make the headlines, it is essential to note that there are several positive aspects to carbon offsets; most notably, they offer an indispensable solution to help us meet climate goals when other efforts to reduce emissions fall short. Undeniably, constructive criticism is essential for growth. However, it is also important to recognize the complexities of this nascent market that is evolving rapidly and has teething problems. Drawing on the classic saying to clarify the critical point. Was Rome built in a day?

There is therefore a need to resurrect confidence in carbon offsets, away from this diverted attention to adverse outcomes. The unintended consequence of this distorted attention is that it fuels concerns, making key players skeptical about venturing into this critical space. It also harms organizations that sell genuine, high-quality carbon offsets. And that’s a big problem because these offsets play a key role in keeping global warming under control. Therefore, it is essential to re-emphasize some of the basic principles of carbon offsets to increase their effective contribution to meeting global net-zero emissions targets.

What type of carbon offsets align with net zero

For newcomers, there are two tradeoffs: removal and reduction/avoidance. Both help achieve net-zero emissions, but their importance changes over time. Both need more investment now. Organizations can create a portfolio of these two offsets for their net-zero emissions strategies. However, all offsets are only recommended for mitigation beyond the value chain when efforts to remove residual emissions within the value chain have been exhausted.

Carbon reduction offsetsreduce or avoid carbon through measures such as renewable energy, energy efficiency or avoided degradation of ecosystem lossthey are essential now, but can be expected to decrease over time. This trajectory is presented in a simple graph in the Oxford Principles for Net Zero Aligned Carbon Offsetting, released last month. The gradual decrease is understandable. For example, carbon reduction or offsets to avoid emissions through clean cooking programs are key to reducing emissions and bringing co-benefits of better health and incomes to some of the poorest parts of the world. Over time, as energy access improves through clean cooking projects, the scope for further expansion would diminish.

Carbon removal offsets are tools that remove and store carbon. They are expected to become much more critical in the long term. These compensations fall into two categories: biosphere removal and geosphere removal. Biosphere removals happen in a variety of ways, such as planting trees or restoring ecosystems. But there is a risk that the stored carbon will be released back into the atmosphere, as if the forest were destroyed or caught fire later. Like reduction offsets, these offsets can also be phased out over time because there is only so much land available for forests and ecosystems on our planet.

Removals from the geosphere occur through technologies such as Direct Air Capture and Storage, which capture and store carbon from the atmosphere. For example, oil companies are increasingly investing in carbon capture and directing the pressure of stored carbon to extract oil from rocks.

Removing carbon from the geosphere is identified as a significant investment opportunity, but remains delayed due to high costs. Only a few oil companies and large technology companies currently dominate this space. According to the Berkeley Carbon Trading Project’s Voluntary Offsets Database, only 3% of carbon offset projects were for pure carbon removal.

How much carbon removal is needed to reach net zero

The world needs carbon removals roughly in the range of 5 to 15 gigatons of CO2 equivalent per year between 2030 and 2050. These estimates are based on pathways used by the IPCC, the scientific body guiding global efforts to net zero emissions. This amount is approximately equivalent to the annual emissions of the United States, the largest producer, and it is no easy task to remove this amount of CO2 from the atmosphere.

It is important to understand that the range of numbers above shows that it is difficult to know the exact amount of carbon removal required. The numbers are based on hypothetical scenarios that depend on efforts made now. For example, the need for carbon removals is low in scenarios where renewable targets are met, but is much higher in other scenarios focused on harmful emissions.

Preparation for all outcomes is essential; therefore, carbon offsets are significant. This Easter season, as people around the world reflect on the resurrection, the word “resurrect” may not immediately conjure thoughts about carbon markets. However, its essence resonates deeply in this phase of skepticism, emphasizing the critical need for trust in this vital domain.

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