The truth is that offsets can be complex. Done right they do indeed reduce the amount of greenhouse gases in the atmosphere. Done wrong they can be exposed as no more than greenwashing, damaging the reputations of the organisations that bought them, usually in good faith.
I promised you more detail on the carbon offset controversy which was started by a report in the press last month. Here's an interview with someone with firsthand knowledge of the market.
Offsets and Confusion
There is a lot of confusion about low carbon living. People are led to believe that by buying a certain sort of breakfast cereal or using a certain deodorant or some other consumer product, they are helping to save the plant. Best of all they no longer have to feel guilty about flying if they purchase offsets. The idea of offsets is that they absorb or neutralise the greenhouse gas emitted by your flight or your car or even your central heating boiler. Offsetting seems to be the ultimate get out of jail free card but it's recently been increasingly associated with greenwash.
Greenwash – something that looks green but is very far from environmentally friendly. This culminated with a major report published by the Guardian, Die Zeit and an organisation called SourceMaterial attacking the whole idea of offsetting or at least the way that some people manage it.
My guest today is Chief Impact Officer and co-founder of Compensate, Niklas Kaskeala. Niklas welcome to the Sustainable Futures Report.
Niklas: Thank you. Nice to be here.
Verra - carbon standards
Anthony: Now the main thrust of this report and you were involved in drawing it up I believe was an attack on an organisation called Verra. Niklas can you start by explaining to us exactly what that organisation is and what it does.
Niklas: Yes, so let me start by saying that the voluntary carbon market where Verra and Compensate and other organisations operate is very lightly regulated, there is very little regulation and so there have been some voluntary standards have been set up to be an assurance of quality on the market so the carbon credits can be reliably used by companies or individuals who want to offset their emissions. Now Verra is probably the leading standard when it comes to these voluntary standards on the market. They certify credits from carbon projects around the world and kind of give them their stamp of approval that they have followed a certain methodology that Verra has created or approved and that there have been things like third party audits and such taking place to verify that things have gone according to the methodologies that Verra has set up.
It’s not about one standard or one entity, it's more like the systemic problem that has been overflowing the market where there haven’t been any standards that are sufficiently good enough. There are other voluntary carbon market standards than Verra and certifiers that have pretty much the same problem so I would hope to be able to say that it's been a systemic failure of the market that we haven’t been able to produce good quality carbon credits. The standards like Verra are definitely a big part of that failure however there are other actors involved as well so something I hope is that the market will quickly learn from and evolve and move forward because otherwise we will never create the trust we need.
Anthony: So you are saying you cast doubt on other players like the Gold Standard and so on as well would you?
Niklas: Yes, I mean what we’ve done is when Compensate was founded we worked together with a panel of scientists; leading forest and climate scientists, to create our own criteria to evaluate projects that have been certified by the leading carbon standards like Verra, Gold Standard, Plan Vivo etc… there are others as well but those are the major international carbon standards. We’ve been using this criteria that is especially dedicated to forest projects; so land use projects and we’ve been using it for coming up to three years now and what we have seen is that 90% of all projects certified by these leading international carbon standards fail to pass our evaluation process. It’s the same figures that apply be it Verra or Gold Standard so I think it’s a larger issue of the market not just particularly one standard.
How does Offsetting work?
Anthony: Okay, now if I want to emit some carbon, I go and buy a carbon credit. Now what is there behind the carbon credit that means that it is something which I can use to offset what I am doing? What is actually happening in the field?
Niklas: So if it’s lets say a nature base credit that’s based on reforestation, it could mean that some trees have been planted already some time ago and they have grown to a certain extent which means that they have sequestered a certain amount of carbon and that can be then verified and audited that that has actually taken place and a project that has planted these trees can issue then carbon credits that can be sold on the voluntary carbon market. In theory each carbon credit is worth 1 tonne of carbon dioxide, so if you have emitted 1 tonne of carbon dioxide in theory you buy one carbon credit and you have offset your emissions. In theory it sounds very simple, in reality it's much much more complex and I would say that the vast majority of carbon credits available on the voluntary carbon market are really not suitable for offset claims. They are not really delivering on their promise of actually reducing or removing carbon from the atmosphere.
Anthony: So this is what you’ve found in the report is that correct?
Niklas: Well actually Compensate what we did is we published a white paper a couple of years ago that several investigative journalist since then have used as a tool when they have done their own investigations and in that white paper we found that about 90% of nature-based carbon projects certified by the leading carbon standards like Verra but others as well; Gold Standard and Plan Vivo, are not suitable for offset claims so they have are various issues with their climate integrity, they might have issues with their social impact, there are issues with biodiversity and we believe that these standards are an insufficient guarantee of quality, there's just too much variety within the standards so you need additional layers or tools to sort out the actually impactful projects from the vast majority of projects that don't create any additional impact.
Anthony: Okay okay I'm just trying to get my head around it. I mean if somebody comes along and says I’ve got a stand of trees and these trees represent or have indeed absorbed this much carbon and I'm going to sell a credit on the basis of that, well if you've already grown the trees I suppose if they were specifically grown in order to be a carbon sequestrator and they wouldn't have been grown otherwise then you can say right, there is a carbon credit there. But the other problem of course is those trees aren’t going to stand there forever so although you've locked up that carbon, it depends very much what you do with those trees when they reach the end of their life and a lot of trees are going to reach the end of their life relatively quickly they are not all sequoias and so on, so isn't it all a bit dodgy?
Niklas: Yes I think you described one of the main characteristics of a good quality credit there first - that is that it's additional so that the trees have been planted because or they wouldn't have been planted otherwise if there wouldn't have been revenue for carbon credits. So basically the sale of carbon credits to the voluntary carbon market was a prerequisite for those trees to be planted, otherwise it would have been perhaps business as usual if they are planted, for example, in a plantation fashion so serving the timber industry by planting rows of eucalyptus somewhere and that's actually one of these plantation projects are actually quite common on the voluntary carbon market and they are very very problematic because of the other issue that you mentioned which is permanence of the stored carbon. Even if you plant eucalyptus which is a really fast growing tree but if you chop it down 20 years later and you most probably sell it to the forest industry or it's been turned into pulp or paper or some other short storage carbon storage project, the carbon gets released back into the atmosphere so these projects are extremely problematic and personally I don't understand how they can issue carbon credits. We would never accept any of these plantation type projects into our portfolio because of lack of additionality because there is already an established business model where you plant trees and then cut them and sell them to different industries and because of the very short permanence of the carbon.
REDD - not cutting down
Anthony: Now the other thing is that somebody will come along and say I have a stand of trees, I have my forest, if I cut it down it will release 10,000 tonnes of carbon into the atmosphere. If you pay me I won't cut it down and therefore I won't release all this carbon and people say: “oh that's an offset”, but the point about that surely is if they cut it down it adds to the amount of carbon being emitted in the atmosphere. If they don't cut it down it doesn't reduce it, it stops it getting bigger but it doesn't reduce it and what we're aiming for is net zero. We are aiming for equilibrium, we are aiming for not adding to the carbon in the atmosphere and simply by not cutting a tree down you are not actually having any effect surely? But yet again what the United Nations calls REDD (which is Reducing Emissions from Deforestation and Forest Degradation) they call that carbon offsets and surely that is not logical?
Niklas: Yes you explain what are called avoided emissions from deforestation projects and you're right. Avoided emissions projects are not suitable for reaching net zero because they are not removing carbon from the atmosphere, they are preventing emissions from happening and actually quantifying their climate impact is extremely complex and there are so many uncertainties involving them that for example Compensate concentrates on carbon removal projects. We have previously looked into these REDD+ projects and we have evaluated over seventy of them with our scientific criteria created with some leading forest scientists and what has happened is that only three of those seventy projects have passed our evaluation. We deemed that only three would be suitable for making any kind of offset claim and actually right now we only have one of these REDD+ projects because we're trying to phase out from them completely and move exclusively to these carbon removals which, as you mentioned, will be the credit type that is required for reaching a net zero state. REDD+ is a very, very problematic project type and it's also the biggest project type in terms of volumes of credits available on the voluntary carbon market and these recent investigations for example by the Guardian and Die Zeit and Unearthed and others have revealed you know I would say fundamental problems with REDD+ methodologies and problems that we have also been very vocal about for several years as well. I would really love to have mechanisms to fund protecting our valuable carbon sinks in tropical areas especially where the REDD+ projects operate, but creating carbon credits that are then used by companies, for example, for different climate claims like carbon neutrality is not really the way to go to fund these projects. We need to come up with other mechanisms, other ways of supporting the protection of tropical forests than creating carbon credits are like you used the term .. ‘very dodgy’. That is not the right way to fund these projects.
Anthony: Okay now tell me about carbon removal; is that things like direct air capture, carbon capture and storage and of course growing new trees is carbon removal to some extent? What sort of projects are you involved in on that side?
Niklas: Yes, so carbon removal is where you either with the help of nature, use nature-based processes to remove existing carbon from the atmosphere or you have these technological approaches like you mentioned direct air capture. Given the urgency of the climate crisis, I think we need these nature-based solutions even though they are not perfect and one of the issues with them is the low permanence so we cannot guarantee that trees will remain standing for hundreds of years, while in other more sort of tech-based approaches we can actually guarantee a longer permanence if the carbon is stored in places where it's not released back into the atmosphere. However, many of these technological approaches like direct air capture are not ready to scale yet. If you count all of the direct air capture facilities around the world that are already doing it at the moment the amount of carbon they remove from the atmosphere is equivalent to just a few seconds of all of humanity's emissions and many of them are extremely expensive and sort of sold out as well, they're not producing the amount of volumes that is necessary so I believe that we need to innovate more and we need to support these projects but at the same time we need to use the solutions we have today for carbon removal and there in nature there is actually the way to scale things; we can use mangrove restoration, we can use reforestation or afforestation and we can build mechanisms to mitigate the risks that these projects have for example through overcompensation where we don't make an exact equivalency between one tonne of emissions and an one carbon credit. There are ways to kind of work around the imperfections or the flaws of the nature-based solutions but I would argue that we need them today because they are the only means we can scale today.
Anthony: Ok but isn't offsetting really, or should it not be, a very last resort? I mean isn't it irresponsible to persuade people that offsetting is a magic bullet which will eliminate all the harm from business as usual? Surely we've got to approach it from the point of view that business as usual is not sustainable and we've got to stop these emissions at source rather than say well we'll just carry on as normal and we’ll just keep looking for ways to try and offset it, which you've just admitted are not yet adequate.
Niklas: Yes, offsetting is the last resort but it's also something that I think we have to do. Imagine if I were to walk through a park every day and I would throw trash into the park and then suddenly I decided to only throw trash there every other day which would be equivalent to halving my emissions, right? I would still be destroying the park right, so why don't I pay up to clean up after myself as well? I think you know it's the last tool you have in your toolbox to fight climate change but it's also a necessary one and one that I think as long as we're causing harm - as companies or individuals or other organisations - we should be liable for the harm that we cause and we should be required to clean up after ourselves. It's obviously better not to make a mess in the first place. Radical decarbonisation is the primary way to fight the climate crisis, but we're at a point where that's no longer enough. Another way to look at it if you would imagine the atmosphere being a bathtub and the water in the bathtub being the level of carbon dioxide. Now we've had the tap on for decades or centuries as humanity and it's reached a level where the water is already overflowing. It's flowing over the edges of the bathtub and causing vast amounts of damage already today. So it's no longer enough to slightly turn off that tap, we also need to drain the tub from the excess water and the same thing with the atmosphere. We surpassed safe levels of CO2 concentration in the atmosphere back in the late 1980s so we have gigatonnes of carbon dioxide that needs to be removed from the atmosphere and the carbon market is one way of scaling that carbon removal that will be necessary and is already necessary today. It's not a perfect solution but it's one where I think we need to look past you know.
Emissions - running hard to catch up
Anthony: We are still emitting greenhouse gases into the atmosphere and at an increasing rate, so it's running, I mean the offset industry is running like mad but it's going to be really, really difficult to catch up isn't it?
Niklas: Yes but I've been doing this for now for around four years and I've seen a huge change in the way different climate standards for companies, especially like the science based targets and other ISO standards etc… put offsetting in the right place as the last resort. They require for example the Science Based Targets which is probably one of the leading climate standards for companies at the moment to reach net zero. On a company level you need to decarbonise by 90 to 95% and only the remaining 5% to 10% can be neutralised through carbon removals, so I think you know that's the ratio that we should be looking at. 90% emission reductions but that still leaves that 10% and I would argue that also while you're on your pathway to net zero let's say your target for net zero is 2040 or 2050, you're still causing a huge amount of damage through the emissions you’re emitting today like even if you're committed to decarbonising radically so that's not enough - you still need to take responsibility for those emissions you're causing today, tomorrow, next year, and the year after.
Mood in the Market
Anthony: Now some very big names, some very big brands, big corporations have used offsetting which has been certified by Verra and others. Do you see any signs that the report that we spoke about has led any of these corporations to question the veracity, the correctness of these offsets, and do you think it’s going to lead to any sort of change in the market?
Niklas: Yes I do believe it will change. I sincerely hope it will change as well. I think I mean this has been a very small market even though there is a lot of media attention towards this market. The value of the whole voluntary carbon market back in 2019 when we were starting things with Compensate was only $300 million. Nowadays it's about 2 billion so we're still talking about a very small market and I think many of the companies that are kind of entering the market or have entered the market in recent years have done it for the first time and they have perhaps trusted existing standards and trusted them in good faith. They didn't know any better, perhaps they didn't have a sustainability professional working for them that could have vetted the project themselves but they’ll learn from these mistakes. They don't want to end up on the front page of The Guardian being accused of greenwashing because then first of all, all of the money you spent on carbon offset is completely gone to waste, plus the reputational damage is huge and these companies are under more and more pressure from internal stakeholders, employees not to greenwash but also investors, the media. So really I think you know when companies start demanding higher quality, the market will have to react and right now there's also already a scarcity of good quality credits available on the market that's one of the biggest bottlenecks in the market; that we have huge demand already locked in for the next decades because of companies setting these net zero targets and they need good quality carbon removals to reach those targets, but at the same time the quality of the available credits on the market is very low so there's a big discrepancy there. I think now is the opportunity to start creating those high quality projects because the demand for them is already high.
Anthony: Niklas that’s been a very interesting insight into the offset markets so thank you very much for sharing your ideas with the Sustainable Futures Report.
Niklas: Thank you, it was my pleasure.
My thanks to Niklas Kaskeala, Chief Impact Officer and co-founder of Compensate.
Food for thought. A complex situation.
That’s it for this week. I’m beginning to get ideas for next week with the help of friends, patrons and a number of books. What are billionaires doing about the climate crisis? How can we cope with immigrants when the numbers of refugees swell to tens of millions? Are we ourselves the true denialists? Just a few thoughts which I may explore next time.
Until then, have a great week, thanks for listening and if you're a patron thanks for your continuing support. And of course, if you're not a patron you can sort that out at patreon.com/SFR.
I’m Anthony Day.
That was the Sustainable Futures Report.
Until next week.
Comments on Carbon Offsets
Response from Verra
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