Carbon offsetting: does it actually work?

Carbon offsetting: does it actually work?

11/02/2021

In February, Prime Minister Scott Morrison made a speech at the National Press Club and used his strongest language to date to imply that net zero by 2050 was likely to become government policy. “Our goal is to reach net zero emissions as soon as possible, and preferably by 2050,” he said.

Three days later, the Australian carbon offset price spiked and closed three per cent higher, at a 12-month high of $17.15 a tonne, according to carbon market analyst RepuTex. By September, the spot price had increased to $26 a tonne. What was happening?

The Prime Minister’s words had triggered an investment splurge in carbon credits. Large corporations and big emitters were buying up credits while they were cheap, expecting Australia would eventually set a cap on emissions, or tighten regulations and cause the price to rise.

Carbon credit – greenwashing or incentive?

Most people are familiar with offsets as consumers, such as when they’re asked if they want to pay extra to offset emissions when they buy a flight. On a much larger scale, carbon credits are also used to offset Australia’s carbon emissions and those of heavily polluting industries.

And we’re going to hear a lot more about them. The federal government’s new plan to reach net zero by 2050 claims that by the middle of this century, 10 to 20 percent of Australia’s emissions reductions will come from carbon offsets. More on that later.

Carbon credits are generated by projects that reduce, remove or capture emissions from the atmosphere, like tree planting or replacing fossil-fuel generators with renewable energy. But their use is controversial. Some climate scientists say relying on offsets only delays much-needed action on slashing carbon emissions, and are a form of “greenwashing”. Others say they should only be use in limited circumstances.

Dr Kate Dooley, a University of Melbourne researcher on environmental politics, says framing offsets as “essential” will delay making unavoidable emission reductions and could be considered intergenerational inequity. “Relying on offsets is one of the many flaws in the government’s plan,” she says.

Alison Reeve, deputy director of the energy and climate program at the Grattan Institute, says offsetting should not be a substitute for avoiding cutting emissions, but it has a place when dealing with emissions-heavy industries, like cement production.

Australia has a voluntary government offset scheme, overseen by the Clean Energy Regulator. One Australian carbon credit unit, or ACCU, is created for each tonne of carbon dioxide equivalent that is stored or avoided by a project.

The federal government purchases about 90 per cent of these ACCUs and about six per cent are bought voluntarily by companies that want to offset their emissions. Only 0.5 per cent are bought by big emitters such as gas or mining companies that have exceeded their generous pollution baseline and have to buy credits.

How they work

Some carbon offsets prevent emissions being released in the first place, through strategies like avoiding deforestation, switching from fossil fuels to renewable energy or feeding (methane-burping) dairy cows additives in their diet.

One of the issues with this is how to assess whether the activity would have gone ahead without an offset scheme. A recent report from the Australian Conservation Foundation and the Australia Institute found the government’s approach for issuing “avoided deforestation” credits was likely to result in projects being granted credits for not clearing forests that were actually never in danger of being destroyed.

Deforestation in the Amazon. Credit:AP

“We did this study that showed 20 percent of all carbon credits are just junk because they rely on the theory that landholders were going to clear their land but it was never going to happen,” says report author Polly Hemming, a climate and energy advisor at the Australia Institute.

The Clean Energy Council rejected these claims, saying that this report was based on a number of false assumptions and demonstrated a “serious misunderstanding” of how the avoided deforestation offsets are calculated.

A carbon offset revegetation venture at the Peniup property in Western Australia.Credit:

Controversial technology for large-scale carbon capture and storage – where emissions are captured on site and pumped underground – has recently been added to the carbon credits scheme by Energy and Emissions Reduction Minister Angus Taylor. To date, billions have been spent on trying to get this technology to work with little success.

Dr Megan Evans, from the UNSW Canberra, says Australian ACCUs have a reputation for integrity, but the inclusion of carbon capture and storage undermines this: “It does not have a lot of evidence behind it.”

“There’s a mixture of quality in the different kinds of methods that are used to generate these credits, but once it’s turned into an ACCU you can’t distinguish where they came from,” she says.

Some carbon credits are issued when carbon is removed from the atmosphere – like tree planting, reforestation and changing agricultural practices so that soils absorb more carbon. Estimating how much is absorbed can be tricky because there are many variables. And carbon sinks like trees are also vulnerable to bushfires, which are increasing in frequency and intensity because of climate change.

The future for carbon credits

Australia’s plan for net zero by 2050 has been criticised for a lack of clarity or modelling on how its “technology not taxes” approach will work.

It says Australia will work with other countries in the Indo-Pacific to build a “high-integrity” carbon offsets scheme. About $60 million was committed to this in April, but there is scant additional detail.

Most carbon offsets offered to consumers – like those plane ticket offsets – come from overseas carbon offset projects – Reputex say that 90 per cent of offsets bought by Australian firms are from overseas projects.

These units are cheap (as low as a $1 a tonne in places like China, India and Turkey), and their provenance can be murky, though there are some non-governmental organisations that monitor their integrity.

Polly Hemming says the Australia net zero plan is underpinned by a flawed assumption of what offsets are for. “They’re not meant to be used to legitimate or expand fossils fuels,” she says. “It’s a measure of last resort, and only in those very, very hard to abate areas.”

Offsets at COP26

At Glasgow, one of the most complex tasks facing negotiators is how to agree on a market-based mechanism that will allow countries to use international carbon credits to meet their emissions reduction goals in the Paris agreement. Progress on agreeing those rules broke down at the last talks in 2019.

Alison Reeves, deputy director of the energy and climate program at the Grattan Institute, says offsets have a legitimate place, but only if countries have done everything possible to eliminate greenhouse gases first. If we want to stabilise the global climate we will need to pull carbon dioxide out of the atmosphere, she points out.

“We will need to do this even if we remove all sources of emissions. We are going to have “go negative”. And we are going to have to plant a lot of trees.”

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