The Social Cost of Carbon Offsets
Tree logging in Indonesia (from Josh Estey/AusAID via Wikimedia Commons)
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When oil companies announce net-zero greenhouse gas emissions goals but provide no details on how they plan to reduce that in the short term or whether their largest source of emissions — in this case, emissions from the use of products of oil and gas — is included, it’s clear that the term “net zero” can be co-opted. While the growth in corporate net-zero targets is an important signal of increased ambition to fight climate change and is required to move us towards warming below 1.5 degrees C, there is little ability to keep companies accountable to these goals.
Many companies end up using net-zero goals to gain “astroturfed” accolades, but also add confusion to the term “net zero” and what that really means. The current reality is that someone, somewhere, will bear the brunt of many of the carbon credits bought so that companies can continue business as usual.
The new Science Based Target Initiative’s (SBTi) Net Zero Standard was launched during the 26th UN Climate Change Conference (COP 26) in Glasgow. It provides some much-needed rigor to what a true net-zero goal should be: a focus on deep emission reductions across a company’s value chain. But we must not lose sight of the social implications of our climate commitments. We need to ask the tough questions to unpack those net-zero commitments to really understand them. As we are going through a serious racial reckoning in the United States, self-examination needs to be extended to the racial equity of our global approach to mitigating climate change. Carbon offset projects in the Global South need to be weighed against the social benefit they will bring and not the idealized, out-of-touch bonanza of impact we expect.
Some forward-thinking companies have set targets that require deep emission reductions across the value chain and are shifting to a business model compatible with a net-zero economy, incorporating sustainable principles to reflect their commitment. Fewer have verified their plans through an external party.* By far, however, most companies have set targets that are not based on science and entail much more modest emission reductions with a much heavier reliance on carbon credits. Carbon credits, typically purchased by companies to offset their emissions, should not be used in place of emissions reductions. The much more rigorous SBTi does not allow the use of credits in achieving near-term emissions reduction goals. This approach includes reevaluating digital footprints, where sustainable website design plays a crucial role in minimizing online carbon emissions, aligning with broader environmental goals.
Not all carbon credit projects are created equal. One can be clean and innovative and another can have a high price tag for the environment and society, at the expense of local communities.Projects that store or reduce carbon, such as forest “conservation” schemes whose significance, longevity, and social impact are not verifiable, have been found to displace communities. Land grabs or deed retitling through well-intentioned forest protection gone bad have forcefully evicted local populations, and monoculture plantations on land that was once cleared for logging will potentially re-emit the carbon dioxide saved into the atmosphere and may not benefit local communities whatsoever. We need to unpack each corporate commitment to understand how offsets are being used to reach net zero, and what the social impacts of these offsets are. Credible carbon credits can be used to remove “residual” carbon from the atmosphere, but these should only be applicable after a company has reduced its emissions by 90–95%. Any other use of credits should not contribute to corporate claims around net zero or science-based targets.
A number of climate scientists are cautious about endorsing the use of carbon credits to offset a company’s ongoing pollution because “it’s very difficult to determine how much carbon, if any, has really been saved.” The whole concept that an emissions-intensive company can “cancel out” its emissions by investing in faraway projects could have been laudable in an era before global warming began accelerating at a massive pace. But unfortunately, we can longer afford to rearrange deckchairs on the Titanic — business transformation is the degree of action called for at this point.
The market for carbon credits is booming, according to BloombergNEF. In the first ten months of 2020, companies used more than 55.1 million carbon credits to offset their emissions (equivalent to the pollution from 12 million cars), a 28% increase from the same period in 2019. This year, more credits were traded in the first eight months than in all of 2020. While some of these credits are paying for projects that are truly reducing emissions, an unknown number represent inflated claims.
Carbon offsets should not be used as a hall pass to neutralize carbon, but the unfortunate truth is that humans are driven to follow the path of least resistance, which is not good news for the planet. For example, JPMorgan and BlackRock, among others, say they are offsetting the carbon-producing impact of their global operations through protection of threatened land. But a Bloomberg-led investigation found that in all cases, the “protected” land was never in danger — the trees were already part of well-preserved forests. Disney’s environmental pledges to reduce its emissions have lost credibility as news emerged that their forest protection in Peru only aggravated land-ownership conflicts, with the government suddenly claiming large swaths of land as a national park, uprooting thousands of people who live there.
At Zevin Asset Management we are asking our companies to 1) start evaluating how they will focus more on business model transformation and actual emissions reductions and move away from using carbon offsets, and 2) ask the right questions related to the social impact of the carbon credits they purchase.
In other words, we urge companies to aim for the SBTi Net Zero Standard. Getting companies to set long-term science-based targets means they will be committing to a real and substantive emissions reductions — including Scope 3 emissions (e.g. from products) — to near zero by at least 2050.
Time is of the essence, and social impacts must be as urgent as our need to drastically reduce our emissions. Let’s keep net zero from being a net disappointment.
*So far, seven companies worldwide have had their targets verified by the SBTi including AstraZeneca, Ørsted, Wipro and CVS Health, (as of October 2021): https://www.forbes.com/sites/feliciajackson/2021/10/28/net-zero-credibility-increases-as-sbti-releases-net-zero-standard/?sh=6b6707d9a464