Volunteers work on a reforestation project in Gran Canaria
Decarbonising: volunteers work on a reforestation project in Gran Canaria. Calculating how much carbon a given piece of woodland absorbs is a complex and inexact science © Desiree Martin/AFP via Getty Images

Plant a tree, save the planet: the equation is simple. And, for many companies, the carbon credits generated by forestry projects are the simplest solution to a complex dilemma: how to meet emissions targets while containing costs.

Each credit is supposed to represent a tonne of carbon dioxide avoided, or removed from the atmosphere. Because companies can buy them to set against their own continuing emissions, they are also referred to as offsets (and are not to be confused with the “permission to pollute” credits issued under government cap-and-trade schemes).

This market was worth $2bn in 2021, and will reach $10bn-$40bn by 2030, according to a report issued in January by the Boston Consulting Group and oil company Shell.

But calculating how much carbon dioxide a specific forest has absorbed is a complex and imprecise science, and critics say the calculations can generate too many credits — more offsets, that is, than tonnes of greenhouse gas removed. This, combined with a lack of regulation and of transparency, has sparked fierce opposition: campaign group Greenpeace, for example, has branded offsetting “total greenwashing”.

Supporters, however, argue that even imperfect projects have a positive effect on climate, nature and communities — noting that we need the money companies are willing to pay. And this idea that the market can deliver real benefits is behind numerous proposals to overcome its flaws.

“It’s easy to take shots at something that someone is trying to accomplish voluntarily . . . when you aren’t asked to [come up with] an alternative,” says Dirk Forrister, president of the International Emissions Trading Association. “I don’t know of another alternative.”

Regulatory oversight offers one route to reform. Last October, senators in the US urged the Commodity Futures Trading Commission to develop standards for the offsets market and to look into possible cases of fraud.

Then, in March, an independent task force planning to police the market, the Integrity Council for the Voluntary Carbon Market, unveiled its inaugural set of rules. Forrister reckons that the ICVCM is a “potential game-changer” and will give buyers “a much higher degree of confidence”.

Another way to boost buyer confidence is for carbon credit groups to be choosy about which companies they work with, in order to deflect accusations of greenwashing. Carbon Trade Exchange does not permit oil majors to use its trading platform, for example.

New purchasing models are also a possibility. Discounting models could require companies to buy two credits, say, for every tonne of carbon emitted, to allow for the risk of shortfalls. Alternatively, companies could commit to buying new credits every few years, rather than assuming that each one represents a permanent and irreversible carbon saving.

These approaches have their limitations, though. Jo Anderson, co-founder of carbon credit project developer Carbon Tanzania, cautions that discounting is a way to “protect the buyer” rather than a solution to the uncertainties of carbon calculations. “It’s not going to change the fact that we can only ever estimate within an acceptable level of accuracy,” he says.

Even so, he argues that offsets represent a boon for nature conservation, which has historically been funded “in far from optimal ways . . . There have been billions of dollars put into these things. And we do not have a good way of understanding in any comprehensive way the impact of those billions.”

One reason people have “latched on to” the carbon market, he suggests, is that “it promises — and has delivered — the consistent use of funds for the planting of a certain number of trees”, in a measurable and trackable way. Yet concerns persist over exactly how much carbon is being stored by forests or other nature-based offsets.

There is also the question of durability, as some dramatic failures have demonstrated: in 2021, for example, forests that had generated credits that were bought by companies including Microsoft went up in flames as wildfires tore through Washington and Oregon states, returning the stored carbon to the atmosphere.

Stacy Kauk, head of sustainability at ecommerce company Shopify, says it is “inconsistent” to use forest credits to claim net zero, because the carbon cycle of trees is often far shorter than that of fossil fuel emissions. Whereas the latter stay in the atmosphere for centuries, a tree whose lifespan is measured in decades will release the carbon it has locked up much sooner.

The “tension”, she believes, is that “we still want those nature-based projects to be funded”, and want companies to be accountable for their impacts on the natural world. “We have to figure out how to maintain those projects while also being accountable for emissions in a meaningful way,” says Kauk.

For some, the answer is to bypass nature and look to technology. Direct air capture — in which carbon is sucked mechanically out of the atmosphere and stored permanently underground — is an area of growing interest for corporate buyers, though the credits are much more expensive than those from forest schemes, costing hundreds or even thousands of dollars each, rather than $10-$20.

Mark Kenber, executive director of the Voluntary Carbon Markets Integrity Initiative — a multi-stakeholder group that has just issued guidance on offsetting for governments — agrees that using forest offsets to compensate for fossil fuel emissions involves a problematic “mismatch” in timeframes.

Buyers of nature-based carbon credits could use them to show that they are taking climate action, without formally counting them towards their official carbon footprint, he suggests.

But incentivising companies to do that is “where it gets tricky”, Kenber says. At present, the “tonne for tonne approach is not perfect, but we haven’t got anything better”.

Climate Capital

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