If Offsets are the Answer, What is the Question?
To think coherently about offsets, we first need a framework for who is responsible for mitigating emissions
Back in April, I wrote about avoided-emissions carbon offsets: the idea of using a reduction in greenhouse emissions from one source to compensate for continuing emissions from another. Having given it a lot of thought, I decided I was against the idea, suggesting that avoided-emissions offsets are “a well-intentioned shell game”.
Aaand then I found myself repeatedly bumping into avoided-emissions offsets that seemed really important and worthwhile. For instance, in much of the developing world, it’s common for refrigerants to be vented into the atmosphere when a refrigerator or A/C unit is being serviced. These refrigerants are powerful greenhouse gases; disposing of them properly would be a big win. A startup, Recoolit, is working to capture and destroy these refrigerants. Their business model? Selling offsets.
Organizations like the Environmental Defense Fund are promoting REDD+, a system for protecting tropical rainforests using – you guessed it – carbon credits (aka offsets).
I really like the work Recoolit is doing. They’re addressing an important need, in an under-addressed niche, using a clever approach. And offsets are the obvious funding source. I found myself going through mental contortions to try to reconcile this with my conclusion that avoided-emissions offsets don’t make sense. For instance, I found myself saying:
…by the time a batch of refrigerant has found its way into a window A/C unit in Jakarta (Recoolit’s headquarters city), it has escaped effective control, and so… in some sense, it has already been, like, “emitted”? It’s not yet loose in the atmosphere, but that’s where it’s likely to wind up. And so collecting that refrigerant isn’t “avoiding” emissions, it’s actually negative emissions, like DAC (pulling greenhouse gases out of the atmosphere)? Kinda? If you look at it the right way?
This is maybe not completely wrong but it’s definitely a stretch. And at this point I was trying to hold onto the mental position that DAC is good, but avoided-emissions offsets are bad, unless they’re the Recoolit kind of avoided emissions which are actually good, and…
Who Should Buy These Offsets?
I wound up raising this on the My Climate Journey Slack board, where the thread wandered onto the question of who is buying the offsets. (Many thanks in particular to McGee Young, founder and CEO of WattCarbon, for a stimulating discussion.)
Suppose that a tropical landowner is planning to raze some rainforest; PG&E (my local utility) pays them not to; and then PG&E claims an “offset” which allows them to meet some net-zero target while continue to operating a gas plant. This is the precise scenario I’ve argued against: the gas plant is still operating, so we have not achieved zero emissions. (See that previous post for a longer explanation.)
If, say, Warren Buffet were to purchase that same offset, there’s no problem. Warren Buffet, personally, is not generating a lot of emissions1. Anything he might do to reduce emissions, regardless of where he does it, would be strictly to the good.
So, offsets seem to be a fine thing only when the purchaser doesn’t use them to counterbalance some polluting activity. But then, why call them “offsets”?
Review: How Are We Planning To Get the World to Net Zero, Again?
To make sense of all this, I think it’s necessary to review the general concept of how the world gets to (net) zero emissions. There’s not really any canonical plan, but I think most serious participants are working from a framework that looks something like this:
The goal is to zero out all manmade greenhouse emissions, so that the level of greenhouse gases in the atmosphere stops increasing.
The overwhelming majority of emissions-producing activities need to stop. No more extraction of fossil fuels, minimize or mitigate methane-producing agricultural activities, no more production or (especially) release of greenhouse-inducing refrigerants, etc.
In some cases, rather than ending the activity, we might modify it so as to eliminate the emissions. (For instance, capturing and sequestering the CO₂ released from limestone during cement manufacturing.)
In a few cases, when neither of the preceding options are practical, we might continue the polluting activity, but counterbalance it by pulling CO₂ out of the atmosphere.
This can be summarized as: each emitting activity must either cease, be modified to not emit, or be counterbalanced by negative emissions. Which then begs the question: who is responsible for all this?
The obvious starting point for discussion is that everyone is responsible for mitigating their own emissions. Homeowners must heat their homes and water without burning natural gas. Utilities must provide emissions-free electricity. Steel mills must produce carbon-neutral steel. And so on.
Then we get into adjustments based on questions of ability (a low-income family can’t float the up-front cost of a heat pump), motivation (try convincing Kim Jong-un that it’s time for North Korea to stop using coal), and equity (explain to Africans that it was OK for the West to industrialize using coal, but they’d better not). I couldn’t even begin to explore the complexities here, so I’ll merely note that any complete solution will need to include subsidies, regulatory coercion, etc.
Offsets Should Come From Exceeding Your Responsibility, Not Meeting It
As soon as we say that everyone is responsible for their own emissions, the inescapable problem with “offsets” becomes clear. Let’s revisit the example of PG&E paying a tropical landowner to protect a patch of rainforest. The landowner has no standing to provide an “offset” to PG&E; any credit for protecting that forest is needed to discharge the landowner’s own responsibility.
This also makes it clear why offsets for DAC (Direct Air Capture) are fine. If my responsibility is to have zero emissions, but I build a DAC plant on my land, then I have negative emissions – I have exceeded my responsibility. I can sell a credit for those negative emissions without breaking the responsibility model.
This is why offsets / credit markets are often used in conjunction with a cap-and-trade system. Under cap-and-trade, participants are not required to have zero emissions; they are allowed to emit up to their “cap”. If they emit less than their cap, that generates a salable credit. It’s easier to exceed your responsibility when your responsibility is not “halt all emissions”.
Of course, cap-and-trade only works if the cap is eventually reduced to zero, at which point the “avoided emissions” credits will dry up. In this model, offsets are allowing us to optimize the sequencing of our mitigation efforts – pick the low-hanging fruit first – while still requiring us to eventually zero out everything.
Finally, it’s worth reiterating a couple of other issues with offsets that I mentioned in my earlier post. Offsetting carbon emissions doesn’t do anything to mitigate other impacts, such as local air pollution. And offsetting the emissions from, say, a steel mill doesn’t help us climb the learning and scaling curves on producing carbon-free steel2, as we will eventually need to do.
So… How Do We Save the Rainforest, Then?
Avoided-emissions offsets are funding important work. If we can’t use offsets, then how do we fund that work?
I don’t know. Earlier, I noted that any complete vision of a net-zero planet will have to incorporate subsidies and regulatory coercion to get everyone to do their part. Coercion can only go so far; it’s hard to apply beyond national borders, and limited by political will. That leaves subsidies. Who will pay for them?
In my example of the classic-but-flawed offset model, PG&E is paying the subsidy to protect a patch of rainforest. If we rule out that approach, then we need to find another payer. The biggest challenges, again, come when we cross national borders. For instance, here in the US, the Inflation Reduction Act provides subsidies for a wide variety of actions within our borders. But for developing nations that can’t / won’t fully fund their own transition, where can the money come from?
Again, I honestly don’t know. This strikes me as one of the biggest challenges we face. Here are a few possibilities, presented more to flesh out the difficulty than to claim a solution:
Offsets do become more practical under cap-and-trade. Needless to say, establishing a cap-and-trade scheme covering the entire planet would be challenging!, but it would provide a pathway to funnel mitigation funds across borders.
Suppose we can imagine a reasonable cap-and-trade system, without actually trying to get global buy-in to enforce it. We could modify a conventional offset scheme so as to emulate the effect of cap-and-trade. For instance, suppose that in some third-world country, there’s an electricity plant which emits 10 Mt/year of CO₂. If PG&E pays to replace that plant with solar + batteries, we could give them a credit equivalent to the plant’s hypothetical emissions cap - say, 9 Mt/year today, gradually declining to zero. There are problems with this approach: it would leak like a sieve (many emitters would ignore their obligations under the “cap”), and we might wind up with multiple competing systems, allowing operators to participate in whichever system treats their particular circumstance the most favorably. But it would still be better than just crediting PG&E for the full 10 Mt/year.
Cross-border government funding. The problem here, of course, is the political challenge of finding sufficient funding.
Philanthropy. Again, this is great if the money is there, but it won’t be, in sufficient quantity.
Giving Green recently published A business case for beyond net zero, which contains some interesting ideas and promising case studies.
One way or another, we need to find a way to fund projects that won’t happen without external funding, and do it in a way that doesn’t give polluters a loophole to keep polluting indefinitely. Just as we’ll eventually need to find a way to pay for extra DAC to roll back some of hour historical emissions. I don’t know how to do that – but it’s a question we’re going to need to answer. Post your thoughts in the comments!
To be clear, I am referring to Warren Buffet the individual, not Berkshire Hathaway (his company) and its many subsidiaries. We’ll need Berkshire Hathaway to phase out emissions, just like every other business.
I know, I know, steel contains carbon by definition, otherwise it’s just iron. By “carbon-free steel”, I mean steel which was produced with no net atmospheric carbon emissions. If you’re the sort of person who reads footnotes, then you understood that, and if you’re not the sort of person who reads footnotes, then you’re probably not hung up on the iron vs. steel thing anyway. So I think we’re done here.