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To make carbon offsets work, we have to account for their uncertain impact

Carbon credits face powerful interests and complex science – we must assess the evidence.

By Ben Filewod

The business-and-growth crowd wants carbon offsets: they impose a lesser economic burden than developing low-emissions technologies or cutting consumption. The nature-and-sustainability crowd often wants them too, since they fund conservation or development projects that deliver far more than mitigation. So it’s no surprise that governments from Canada to China are trying to make offsets work. The only trouble is, they often don’t.

You can’t fix offsets without understanding them. Carbon credits are a way of tracking the climate impacts of real-world activities. Offsets are credits used to substitute for something, like cancelling out corporate emissions. In other words, an offset only has meaning within a carbon accounting system. How we do the accounting determines how we track progress – and whether we hit climate targets or not.

To make offsets work, we have to account for their uncertain impact. This means not letting an uncertain credit cancel out a certain emission. Instead, as in the Science Based Targets initiative, uncertain credits should offset uncertain emissions that are beyond a firm’s control, and only until we have a better alternative. Taking uncertainty into account can keep all mitigation options on the table while keeping incentives strong.

Unfortunately, the voluntary carbon market is a long way from this. Credits issued for transitioning to renewable energy and avoiding tropical deforestation, historically the two most important types, appear to have been vastly overestimated in terms of their real impacts on climate. Complexities in measurement risk years of delay, especially as new capital pours into carbon markets.

[See also: The UK still has some way to go to meet its renewable electricity target]

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As last summer’s drought made clear, we are running out of time. It is essential that regulators step in and ensure that information about climate impacts is accurate. With most offsets used to underpin marketing claims, EU and UK moves to crack down on green assertions in advertising are right on target. The EU’s new Corporate Sustainability Reporting Directive is another step in the right direction, although it needs complementary investments in strengthening supply-chain data overseas to maximise impact.

However, what even counts as a credible offset is being debated. Witness the recent furore around offsets from avoided tropical deforestation. New data sources and statistical tools let scientists test the claims of avoided deforestation projects, finding that mitigation claims are often greatly overstated. Verra, a non-profit company that certifies offsetting projects, has pushed back in public while moving to significantly revamp its processes. Credit buyers don’t know who to trust.

Overstated emissions aren’t evidence of conspiracy; they are the outcome of well-intentioned people trying to scale conservation by making it profitable. But there is a right and wrong answer about the impact of avoided tropical deforestation credits (and other sources of voluntary carbon offsets). We need consensus about how to evaluate carbon credits, and their likely impact.

The need to get this consensus in time is an opportunity for government intervention, at least in a convening or endorsing role. Carbon credits face high uncertainty, powerful interests, and complex science. If we are to find solutions, we need an authoritative assessment of the evidence.

This opinion piece was first published in Spotlight’s print Energy and Climate Change issue on 9 June 2023. Read the issue here.

[See also: Is nuclear energy actually sustainable?]

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