Letter written by David Beaudoin, CEO and Co-Founder
Not that I want to give this The Guardian article on carbon offsets more attention than it had already, but some elements must be put into perspective. Before I do, let me state the most important message here: if we are to have any hope that global warming is constrained to below 1.5°C, we need carbon offsetting. Humankind is responsible for more GHG emissions than Planet Earth can now naturally absorb. Even in the best scenario of accelerated global decarbonization, overall GHG emissions will still be too high for the current absorption capacity to balance out the residual emissions. Therefore, to achieve the required planetary net-zero emissions, WE must restore Earth’s capacity to remove CO2 from the atmosphere beyond what it can now. This is precicely what “Carbon Offsetting” is. We need it! To do it, we must restore the natural carbon sinks that we destroyed AND URGENTLY stop further losses.
So the question shouldn’t be whether or not carbon offsetting is a good thing; it simply is imperative that we do so! And, at the global level, it is just as important and urgent as reducing emissions. It is crucial to remember that when reading the cited article. (side note: companies and individuals should, at their level, prioritize GHG reductions over offsetting).
Now, with regards to the article, the main points that I want to shed some light on are: 1-no doubt that the vast majority of projects and resulting offsets are “low quality”; 2-VERRA is not the problem and 3-REDD projects aren’t necessarily worst than other types of project.
$6USD to $8USD a ton of CO2. According to Trove Research and our own observations, that seems to be the average price for one carbon offset unit at the end of last year on the so-called “voluntary” carbon market (with wide variability across project types, locations, etc.). That’s about 2-3 times the average price over the past decade. $8USD, should be the incentive to develop a project that aims to reduce or remove 1 ton of CO2 from the atmosphere. It is ridiculously too low. Right there, you have a clear sign that there is a significant supply of illegitimate offsets on the market.
While VERRA, which administers the Verified Carbon Standard (VCS), the world’s most important crediting program by volume, is under the spotlight in the article, it is only by necessity. Indeed, to conduct the research that led to the conclusion mentioned in the article, the researchers needed a database of existing projects large enough to perform meaningful analysis. The VCS database (aka the VCS registry) is the only database large enough for this purpose. Have the researchers included in their analysis projects from other crediting programs such as ACR, Gold Standard, CDM, Plan Vivo, CAR or else, we believe the results would have been similar. While each of these crediting programs, often referred to as standards, pretends to be the most rigorous out there, the truth is they all are imperfect. And one must understand that, while the crediting programs set the rules, they are not responsible for project design and implementation, offset calculations, or third-party verification. Should the rules be stricter and the mechanisms to oversee them more robust? Hell yeah! But the stricter the rules, the more difficult and expensive it becomes to ensure they are properly applied. At $8USD a ton, we must realize that there isn’t much left for the supporting infrastructure (i.e. standards, programs, VVBs, registries, etc.) to properly frame and ensure the quality of the issued offset credits. In a word, the consequences of a carbon price way below its true cost and value extend across the entire market infrastructure that suffers from underfinancing.
Among all project types, including renewable energy, energy efficiency, waste management, land restoration, reforestation, reduced deforestation, engineered carbon removal, etc., the ones that inherently involve the biggest assumptions are the REDD projects. Indeed, estimating the avoided deforestation and leakage (a widely misunderstood concept across the market) resulting from a REDD project really involves just as much guessing as actual measurements. It is inherent to the type of project, and it will always be. Setting stricter rules and ensuring that they are followed really comes down to being more conservative in the estimates, with the inevitable consequence of generating fewer credits, reducing the revenues and simply making the project non-viable. In fact, the resulting emission reductions likely are overestimated in most instances (one of the main conclusions of the article), but at least, the funding that they get from the sale of the overestimated credits is often necessary for the project to happen (in accordance with the concept of additionality). Other project types such as energy efficiency or renewable energy result in GHG reductions that can be more easily measured, but the economic gain that these can get from the carbon credits value is marginal and most often not required to make an economically viable project.
It is a complex market environment that evolved in a highly imperfect manner. All market stakeholders, including the crediting programs, project developers, market intermediaries, brokers, and buyers, should acknowledge the problem. We should recognize that the problem is systemic and fueled by a price of carbon that simply is too low to enable the VCM to deliver its true potential. Private organizations can, through voluntary compensation, contribute to the required global offsetting effort and this will become clear when the price of carbon reaches $40USD, $50USD…$100USD+ per ton of CO2 . Until then, we must remember that carbon offsetting at the global level is not only desirable, it is crucial. And we must trust that the market infrastructure is quickly evolving in a way that better support quality and integrity.
(from the same author: 15 years of market dysfunction)
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