How to Fix Carbon Offsets

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The White House announced guidelines this morning to strengthen the market for carbon offsets, otherwise known as the voluntary carbon market. Offsets allow companies or individuals to buy credits tied to emissions reductions created by projects that remove carbon from the atmosphere, many of which are in the developing world.

But, as Brad Plumer reports today, carbon offsets have been heavily criticized and a “growing number of studies and reports have found that many carbon offsets simply don’t work.”

So why has the Biden administration moved in to help fix a market that has drawn so much criticism?

Carbon offsets, however imperfect, are a way of getting billions of dollars to developing nations that doesn’t involve the tricky politics of foreign aid. Treasury Secretary Janet Yellen hinted at that in a statement about today’s announcement.

“Voluntary carbon markets can help unlock the power of private markets to reduce emissions, but that can only happen if we address significant existing challenges,” she said.

At their best, carbon offsets allow companies that are trying to reduce their environmental impact to do it faster. Carbon offsets often fund projects that can help developing nations grow their economies more sustainably, including ecosystem restoration efforts and distributing clean cookstoves as alternatives to open fire cooking,

At their worst, carbon offsets have been criticized as the ultimate greenwashing tool. They can give companies that don’t want to abandon fossil fuels a way to claim they’re helping to curb emissions, offering cheap credits from projects that enrich middlemen, overestimate emission reductions and abuse the land rights of local communities.

The new federal guidelines, as Plumer reports, are an attempt to define offsets that are “high-integrity,” meaning they can deliver real and quantifiable emissions reductions for projects that wouldn’t have happened otherwise. Last year, $1.7 billion was spent in the voluntary carbon market globally, but better regulations could expand the market to $1.1 trillion by 2050, BloombergNEF predicts.

In 2022, for the first time, rich nations probably met their goal of sending $100 billion a year to poorer nations to fight and adapt to climate change. But experts estimate that the developing world needs $1 trillion a year to transition to clean energy and protect valuable ecosystems.

Why has coming up with this money been so hard? Partly because convincing voters in rich countries that they need to pay for other countries’ climate efforts is hard. That’s especially true in the United States, where Congress is so polarized.

As Plumer noted, while President Biden has pledged more than $11 billion in annual climate aid to developing countries, Congress has approved only a small fraction of that.

I asked Alexia Kelly, who is the managing director of the carbon policy and markets initiative at the High Tide Foundation, a nonprofit organization, how important voluntary carbon markets become in the context of Congress’s apparent unwillingness to commit to this kind of foreign aid.

“I think the administration is playing the hand that it was dealt, which is a Congress that’s not willing to fully fund our international commitments. And that’s deeply unfortunate,” she said. “But looking around and looking at the sources of international development assistance that we have available, we cannot afford to leave any dollars on the table.”

The carbon market’s success depends on building up its credibility by getting all participants to agree on what a high-integrity carbon credit looks like. That’s the consensus the White House’s guidelines are trying to build.

Kelly told me the announcement could give companies that are afraid of investing in carbon credits more confidence to fund high-quality projects. “Right now, there’s a lot of money sitting on the sidelines because it’s confused and afraid,” she said.

But the current guidelines aren’t binding or enforceable. And there still are many cheap carbon credits out there tarnishing the market’s credibility.

As Danny Cullenward, a senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania, told Plumer, “absent the government doing something to address the bottom of the market through enforcement, I don’t see any of the low-quality credits going away.”

There is a lot of hope in the carbon offset market, too. I recently visited projects in the Amazon rainforest that are using carbon credits to fund the reforestation of huge areas of degraded pasture. I had never seen Amazon cattle ranchers, who are usually scathing critics of any conservation measure, so excited about helping the environment.

The executives I talked to say they are investing tens of millions of dollars in these projects, all located in very poor regions. That kind of money can offer a lifeline in towns where there are few economic opportunities. It has also given public officials in developing nations reason to dream that carbon offsets will become a major source of income in years to come.

What’s becoming increasingly clear is that a lot of prominent people want that vision to become reality. Chief among them is John Kerry, the former U.S. special climate envoy, who stepped down in March.

Carbon credit markets are one way to “deploy trillions of dollars” developing countries need, he said at an event last year, according to Politico. “Without this, we don’t make it.”

A wide swath of the chemicals, plastics and related industries are gearing up to fight a surge in litigation related to PFAS that could cost them hundreds of billions of dollars. The per- and polyfluoroalkyl substances, also known as “forever chemicals,” include nearly 15,000 versatile synthetic chemicals linked to serious health problems.

In a conference this year, my colleague Hiroko Tabuchi reported, a defense lawyer told a room full of plastic-industry executives to prepare for a wave of lawsuits with potentially “astronomical” costs.

The lawyer, Brian Gross, said the coming litigation could “dwarf anything related to asbestos,” one of the most sprawling corporate-liability battles in United States history.

PFAS have emerged as one of the major pollution issues of our time. Used for decades in countless everyday objects — cosmetics, takeout containers, frying pans — PFAS have been linked to serious health risks including cancer.

As Lisa Friedman reported, PFAS are so ubiquitous that they can be found in the blood of almost every person in the country and in groundwater around the world.

Much of the course of future litigation hinges on the evidence over PFAS’s health risks. While there is broad scientific consensus that exposure to the class of chemicals are harmful in myriad ways, research could still be vulnerable to criticism if companies find the right experts to testify, a lawyer at the conference said.