Is voluntary carbon trading a sustainable model?

Carbon assets or carbon actions?

The growth in the voluntary carbon market (VCM) is substantial. Some of teh farms I work with have reported companies are paying 30 – 90 euros per hectare of land allowing businesses across the spectrum of type and production to sequester their emitted carbon in someone else’s asset. The same farmers are only just exploring their own carbon foot print, unaware of how badly they need that asset to reach net zero.

Tree’s, hedgerows and soil are natural assets and these are being bolstered by a range of new technologies often grouped under the moniker Carbon Capture and Storage (CCS). Alongside growing exchange of asset ‘value’ a few new terms are merging into the general consciousness such as insetting and offsetting. Insetting lets a specific business or supply chain to offset net carbon emitting elements against those that are net absorbers e.g. a dairy processor may emit carbon at processing from gas boilers, but insetting against a farmers trees, soil and hedgerow could allow the supply chain to be seen as net zero. Offsetting more broadly is when actors not directly linked to the business or vertically integrated supply chain buy into carbon assets held by a different business or vertically integrated supply chain e.g. that same dairy processor buying carbon assets from forest in Indonesia.

Whilst insetting strikes me as an extension of good financial accounting, balancing carbon emissions with carbon sequestration, carbon offsetting strikes me as perverse. To sell ones assets (often without a full understanding of our own carbon foot prints) to allow someone else to pollute for a little longer does not fix problems but delays them. It also creates a lot of downstream problems, many asset owners such as farmers are being approached to sell their assets before insetting their own emissions. Leaving one of our most vital and sustainable industries at risk of carrying a substantial carbon debt. A real model of robbing Peter, to pay Paul.

It also does nothing to alter the economic model of capitalism that hasn’t always had the most positive of outcomes for society or the planet. A model based on the sale of assets promotes competition and a potential tragedy of the commons until those assets run out. It also neglects that need for actions and risks undervaluing those actions already taken.

Take for example the shift of food waste from landfill to animal feeds. Whilst this would need to be approached cautiously to safeguard our food chains, a number of large companies exist to safely undertake this action. Livestock agriculture has for decades stopped food waste ending up at landfill and continues to do so. If we want to see it’s use increase, trapping carbon in a circular economy, we need investment and reward. Recycling an aluminium can rather than mining, refining and smelting a new one, is lower in emissions intensity and infinitely more sustainable. So too is the recycling of food waste rather than growing new crops to waste. Yet we do not reward these activities in the same way we do the sale of fixed assets such as soil and trees and hedgerows. If a business that generates food waste, partnered with a network of farms and a feed processor, they could invest their offset money in feed vouchers, lowering the cost of feed to the farmer encouraging ever more circularity.

Natural assets such as soil are finite, in terms of volume and carrying capacity in short those assets will one day run out. Actions are infinite meaning we can keep trying to do the right thing forever (or near as damn it). Is it time to reward or trade actions over assets? Should companies pay a proportion of their carbon debt from being net polluters to those that are using actions to keep carbon locked in a circular system rather than released to atmosphere never to come back. Funding for low carbon feed stocks to livestock through waste food from landfill, the use of livestock waste streams to generate biomethane and hydrogen to displace diesel, petrol and fossil fuels; these actions keep carbon moving through biogenic processes. These processes reduce the total emissions yet at the same time leave assets such as trees, soils and hedgerows free to carry on sequestering carbon without being sold off to those that should not need them. The fact that actions are infinite does not mean they are also limitless meaning that the focus on actions defines better our holding capacity more aligning modern economic models with the doughnut economics suggested by Raworth (2017).

In short is the current trading model of cash for assets based on the economic models of tradition, in desperate need of a new system of trading based on an economic model set in the thresholds of our planetary boundaries?

Perhaps the next time a company looks to offset its emissions to produce a carbon neutral product it should look to invest in actions that trap carbon in the system rather than assets that are not theirs to purchase. That would be a bold and brave step, that would be innovative sustainability.