Mr. Carbon Credit - Saviour or Imposter?

What is Carbon Offsetting?

Carbon offsetting is a practice used by companies to compensate for their carbon emissions or other greenhouse gas (GHG) emissions by funding or engaging in activities that reduce, avoid, or remove an equivalent amount of emissions elsewhere. Offsetting carbon supports companies in achieving their decarbonization plan’s goals. It is most often used for two main purposes:

1. To offset carbon emissions that are challenging to reduce because of the lack of viable and scalable green technologies such as plane rides, shipping vessels transits, and specific manufacturing processes.
2. To offset emissions that were not reduced despite the company’s effort.

But how does it work concretely?

Companies invest in carbon credits (tradable certificates or permits) that represent the right to emit one ton of carbon dioxide or an equivalent amount of another greenhouse gas. There are three main types of carbon credits:

• Avoidance credits (75% of all credits): Avoid future emissions by investing mainly in renewables and reforestation.
• Reduction credits (22% of all credits): Reduce current emissions with preservation and restoration projects.
• Removal credits (3% of all credits): Remove current emissions with carbon capture technologies such as direct air capture and underground storing or through nature’s work such as reforestation.

Most credits are based on projects that aim at preserving threatened natural heritages or/and restoring damaged natural heritage. A tree naturally captures carbon, and ensuring it does not die ensures that its captured carbon is preserved and does not go into the atmosphere. Growing more trees restores the carbon capture potential of a forest.

So, here’s the catch.

While the Core Carbon Principles (CCP) are becoming the norm in the voluntary carbon market, only 6.4% of current carbon credits' credibility meets the CCP’s criteria. The low credibility of credits is often attributed to the risk factor of the project. Wildfires and/or illegal logging add risk as they directly affect the durability of a project. Additionally, there are cases of projects preserving forests that are not under threat or even planting trees that are already planted (true story).

So, carbon credit: Hoax or Real Solution?

Carbon offsetting is necessary, but not all carbon credits are created equal. Carbon credits, traded like stock, are often bought and sold with little regard to their actual impact (Subprime hum hum). However, several regulatory bodies, such as the Verified Carbon Standard (based on CCP), the Gold Standard, and the Climate Action Reserve, properly identify legitimate projects with measurable and long-term impact on carbon emissions.

Additionally, it is important to understand that preserving or restoring a forest or a coral reef is not only securing or increasing its carbon capture potential but also benefiting the whole ecosystem embedded within this natural habitat. A benefit that is mostly unaccounted for as it is difficult to measure and translate into carbon terms. I believe focusing on decoupling business growth with rising carbon emissions is a better long-term strategy than investing in carbon credits. Carbon offsetting should not be used as the go-to solution but rather as a complementary one.

- "Mr. Carbon Credit - Saviour or Imposter " Article 4, Understanding Tomorrow, Kim Siew.

Disclaimer: I do not consider myself an expert. I am just a curious guy with a curious hobby - writing.