So Are All Carbon Offsets Bad?

I'm using this piece to continue a conversation that is a pain to have in the typical LinkedIn comment format. You've probably seen a recent and powerful Bloomberg video criticizing a particular Nature Conservancy carbon offset project. I'm extensively interviewed, albeit not about that specific project.

The video has gotten more than 200,000 views and is now on YouTube, and my post to the video has gotten a lot more than the "typical" LinkedIn reaction. Including a comment last night from carbon markets expert Steve Zwick:

Mark Trexler, As written up, this project looks fishy, but he seems to be saying they’re all bad. I remember the Darkwoods project got a similar rap, and it turned out that the Nature Conservancy of Canada (no relation to TNC) had no trouble finding donors to buy properties, but they had trouble finding donors to maintain them — so the project actually made sense. Also, 12 years ago, wasn’t the big challenge in the US about finding ways of helping private forest owners pay their bills without chopping trees? I remember when Obama came in, that was the big concern. As I recall, these IFM methodologies grew out of that. Or am I mixing things up? Either way, there’s a larger context that seems to be missing.

So I wanted to bring a bit of nuance to the conversation that is hard to get across in a short video or a LinkedIn comment.

• First, I'm definitely not saying all offsets are bad, and I don't think Ben Elgin is suggesting that either. But that's certainly a possible takeaway from the video. So . .
• The real question is, is this a "gotcha story" ala periodic welfare fraud stories where it turns out someone has been collecting multiple checks and drives around in a cadillac? The problem with stories like that is that there is no such thing as a perfect system when it comes to qualifying anyone for anything, and there will always be outliers that don't mean much for the efficacy of the larger system. While the welfare story makes for good headlines, it tells you nothing about the larger system of welfare payments (which actually is pretty robust).
• Is that what Ben Elgin is doing in this piece? Targeting the one bad apple in barrel full of good apples. I don't think so.
• First, Ben has been covering this topic for a decade, and I have been for 30 years, and lots of bad apples have been uncovered.
• Second, it is hard to envision one bad apple in a barrel. Rot spreads through the barrel pretty rapidly, and that's not a bad analogy to the voluntary offset market. If one person can get away with something, others will be forced to do the same in order to stay competitive in that market.
• Third, there's a lot of literature out there questioning these markets. One study concluded that 80% of the Clean Development Mechanism offset market was probably non-additional, and that was a regulatory market! (I'm not vouching for that number by the way).
• Fourth, there are plenty of other examples of bogus offset credits. Hundreds of millions of Renewable Energy Certificates were sold as offsets with no environmental benefit at all. And I recently came across a new offset seller, Silviterra, that as far as I can tell is already selling offsets to Microsoft and others based on delaying timber harvests by a year that are not additional, are not permanent, and are likely suffer from 100% leakage. Seriously?

But here's the real takeaway. As I explained in another LinkedIn article, doing carbon offsets right is HARD. Additionality, as it turns out, is TRULY difficult to effectively implement. If you want to see what I think is a really interesting case study of the challenge take a look at my related LinkedIn piece here.

Let's step back from the weeds of this particular offset project and story. Thinking about carbon offsets from a systems perspective, what do we know.

First, we know that additionality is a real challenge. Here's the short version:

Second, we know that the potential supply of non-additional "offsets" dwarfs the supply of of actually additional offsets, and market demand. (If you don't accept this statement as factual get in touch with me. It's absolutely true!)

Third, we know that given human nature, offset rules will be gamed.

Given these three realities, doing carbon offsets well is going to be hard! It's going to require asking ourselves at every step along the way: what's the possibility I'm getting this wrong, and what would be the implications for the offset market? So that's what happens, right? Um, no.

WHEN AN OFFSET PROTOCOL IS APPROVED, NO ONE EVER EVALUATES HOW MANY NON-ADDITIONAL TONS MIGHT BE ABLE TO TAKE ADVANTAGE OF THAT PROTOCOL, AND WHETHER "FALSE POSITIVES" COULD MAKE UP 20% OR 90% OF THE EVENTUALLY APPROVED TONS.

As long as this remains true, it's impossible to have much confidence in offset markets. Are there things we could do to improve offset markets absolutely! Score offset projects for one! But because so many projects would end up with a low score, no one wants to do that.