The Overblown Promise of Carbon Credits
Why Regulation of Carbon Credit Markets Is Needed
Larry J. Kane
There is a growing fascination among climate scientists and economists with the concept of negative carbon emissions.[1] It is a key factor underlying announcements emerging almost daily of the commitment by yet another large corporation to achieve net zero carbon emissions by 2050.[2] Examples include Apple, BP, Ford Motor Co., Mercedes Benz, Microsoft, and Shell Oil, among others. These announcements are appearing in such numbers as to give the impression that, despite mankind’s rather abysmal performance to date in curbing carbon emissions, the Paris Agreement’s goals may still be within reach.[3] But a cold splash of reality is needed before our optimism becomes too effusive. Before taking such corporate commitments on zero net emissions seriously, the fine print needs to be carefully examined.
When such corporate commitments are carefully examined, we find that many base their projected achievement of net zero emissions on the availability of future negative carbon emissions to offset a substantial fraction of corporate emissions. An example is Shell Oil, which has proposed to offset much of its carbon emissions through the afforestation (AR) of an area the size of Spain (50.5 million hectares (Mha)). This is a sobering estimate considering that the Intergovernmental Panel on Climate Change (IPCC), in its Special Report on Global Warming of 1.5°C (SR15), cited research estimating that only about 500 Mha of land is available globally for afforestation or reforestation. Thus, a single large oil company (Shell Oil) proposes to utilize 10% of land projected to be available globally for afforestation to meet its appetite for negative carbon emissions.
Corporate Reliance on Illusory Negative Carbon Emissions
Is there a problem with this tendency of large carbon emitters to rely on negative carbon emissions to meet net zero goals? Indeed, there is. There appears to be widespread overreliance on the promise of negative emissions in view of practical limits on their available capacity.
Sources of negative carbon emissions can be divided into two broad categories: (1) natural sources, such as the planting of trees to absorb carbon dioxide through photosynthesis, and (2) theoretical engineered methods such as direct air carbon capture and storage (DACCS). For simplicity, all forms of removing carbon dioxide from the atmosphere will be referred to generally as “carbon dioxide removal” (CDR) methods, a term used by the IPCC.
In its SR15 report, the IPCC provided the following estimates of carbon removal capacity (in units of billions of tons (gigatons) of CO2 per year (Gt/yr.)) that can be achieved by the following CDR methods:
CDR Capacity in Gigatons CO2/Year (Gt/Yr.)[4]
Where:
AR — the planting of trees in new areas (afforestation) or in formerly forested areas (reforestation);
SCS — soil carbon sequestration, which refers to the management of agricultural lands so as to increase the retention of CO2 in organic matter from plants and animals;
BECCS — bioenergy with carbon capture and storage; and
DACCS — direct air carbon capture and storage.
The CDR capacities listed above can be placed in perspective by comparison to the annual global greenhouse gas emissions from man’s activities, which were approximately 50 Gt/yr in 2018 and 2019.[5] Before making the comparison, it must be observed that the first three — AR, SCS and BECCS — are mutually exclusive, at least to a substantial extent, since each would be competing for roughly the same available land area for their implementation at scale. This implies that the total theoretical CDR capacity would be approximately 10 Gt/yr. (5 Gt/yr. total from AR, SCS and BECCS and 5 Gt/yr. from DACCS), which is only 20% of current annual global emissions. Accordingly, achieving net zero emissions would require global sources to reduce their carbon emissions by 40 Gt/yr. from current levels.
Realistically, the estimate of 10 Gt/yr. total for CDR may be overly optimistic given that there are very few BECCS operations in existence and DACCS remains an unproven theoretical concept at this time. There are no DACCS facilities operating at a scale that would be needed to demonstrate practical feasibility of achieving the theoretical capacity listed above. Moreover, considerable energy input is needed to operate such systems, based on existing prototypes.
That unrealistic expectations are being placed on CDR capability becomes even more apparent when we consider various mitigation pathways assessed by IPCC’s climate models to theoretically achieve the 1.5°C target. Following is a reproduction of Figure 2.5 from the SR15 report. The lower half of this figure displays four of the many emission pathways modeled by the IPCC that would conceptually attain the 1.5°C target. The LED pathway would utilize the most aggressive decarbonization policies, with sharp reductions in carbon emissions beginning in 2020, along with modest reductions in overall energy demand, and would reach net zero emissions around 2055. A small amount of CDR based on afforestation is needed to lower the overall carbon emissions budget to meet the 1.5°C target. As the pathways shift to S1, S2 and finally S5, they assume progressively less aggressive rates of reduction in carbon emissions and correspondingly greater projections of CDR to fit within the necessary carbon budget by 2100. The S2 pathway and, even more so, the S5 pathway exhibit an unrealistic reliance on BECCS (shown as yellow highlighted area) as the CDR method of choice. As the extreme example, the S5 pathway projects very high negative emissions from BECCS, reaching a rate of roughly 15 Gt/yr. by 2050 and increasing to 25 Gt/yr. by 2100. These projected CDR rates far exceed the IPCC’s projected maximum BECCS capacity of 5 Gt/yr. and, frankly, amount to a fictional exercise.
Mitigation Pathways for 1.5°C Global Temperature Increase
These alternative mitigation pathways illustrate two critical points for the present topic: first, it is clear that some pathways make unabashedly unrealistic demands on CDR to remain within the needed carbon emissions budget for the target increase in mean global temperature. A second related point follows from the first: a failure to make timely and substantial reductions in global CO2 emissions places even higher demands on CDR in order to adhere to the overall carbon emissions budget. The greater the delay in achieving carbon emission reductions, the greater becomes the demand upon CDR to make up the difference. While it is easy to generate models with purely fictional amounts of BECCS, DACCS, or other CDR methods, reality is not so pliable. If a pathway like S2 or S5 were followed and the needed CDR capability were not available, the result unavoidably would be a missed target for the increase in mean global temperature. See: K. Anderson and G. Peters, “The trouble with negative emissions”, Science, 14 October, 2016, p. 182.
This criticism should not be taken to imply that research and development efforts should not be invested in various forms of potential CDR methods. However, it is only prudent that planning for climate mitigation actions in the near term should be based on the present reality regarding those CDR methods that are proven and available for practical application.
Implications for Carbon Credit Markets
A related problem is illustrated with increasing calls by some organizations for the creation of a more robust market for voluntary carbon credits (or, carbon offset credits) that can be purchased by carbon emitters to offset their carbon emissions. While the standardization of carbon market procedures and verification standards is no doubt needed, we posit that one of the greatest needs concerning carbon credit markets is the introduction of a measure of regulation, preferably by national governments acting pursuant to clear, uniform international agreement, that limits the eligibility of purchasers of carbon credits. More specifically, it is proposed that carbon emissions sources such as fossil-fuel fired power plants or industrial users of fossil fuels for which there are readily available renewable energy technologies for decarbonizing their operations should not be eligible for the purchase of carbon credits. Given the realistic limitations on the capacities of various types CDR, it is important that CDR capacity be reserved for those emission sources for which emissions reduction is recognized to be technologically or economically intractable, such as airline emissions and possibly, in the near term, industrial processes requiring intense heat such as cement manufacturers and primary steelmaking. See: C. Blaufelder, C. Levy, P. Mannion, and D. Pinner, “A blueprint for scaling voluntary carbon markets to meet the climate challenge”, McKinsey & Company, January 2021.
Such limitations are unlikely to be established or complied with if they exist only in the form of voluntary guidelines for carbon credit markets. Regulated markets are, we believe, essential for this purpose. The absence on such restrictions predictably will lead to excessive demands on the credit markets by large, wealthy corporate emission sources, as can be inferred from those corporate commitments for net zero carbon emissions that rely on expansive quantities of negative emissions as referenced at the onset of this article. Such excessive demand on an unregulated market is likely to lead to a high portion of available carbon credits being acquired by powerful entities that could feasibly reduce their carbon emissions but prefer to refrain from such action so that they may continue to use fossil fuels. If this were to occur, it would mean that carbon emissions will not be reduced as low as otherwise possible, thus increasing the likelihood that carbon budgets would be exceeded and that higher global temperature would occur.
Another facet of this latter issue involves legislation being proposed at federal and state levels to facilitate expanded carbon offset markets for negative carbon emissions that can be realized through more sustainable farming methods (e.g, the Growing Climate Solutions Act of 2020) or afforestation (or reforestation) projects (e.g., the Trillion Trees and Natural Carbon Storage Act). The point here is not to criticize such legislation per se since increased negative emissions are always a positive so long as the activities by which they are created are sustainable and don’t conflict with other critical land uses. Rather, such legislative proposals only reemphasize the need for regulation of carbon offset credit markets to limit credit sales to those carbon-emitting sources for which practicable technologies to reduce emissions are not available.
Conclusions
Negative emissions — or carbon offsets — appear to offer an easy accommodation for our stubborn resistance to engaging in the hard work of reducing our appetite for fossil fuels. The siren call of vast future stores of negative carbon emissions that appear to justify our dalliance with fossil fuels can seem irresistible. Said another way, mankind appears to be flirting with a fatal attraction for negative emissions as a means of further enabling its longstanding love affair with fossil fuels. But the reality is that practically available CDR capacity is limited and does not appear sufficient to meet the vast demands already being expressed. Widespread recognition of this limitation is imperative as planning proceeds for carbon mitigation actions. This practical limitation on CDR capacity should be recognized through the regulation of carbon credit markets so as to reserve carbon offset credits for those sources with the most intractable emissions. If we fail to do so, the likely downside seems clear. By yielding to the deceptive lure of inexhaustible carbon credits, we will fail to restrain future global temperature increases within desired targets.
Endnotes
1. As used in this article, “carbon emissions” is short for carbon dioxide (CO2) emissions, while “negative carbon emissions” refers to the removal of CO2 from the atmosphere, whether by natural processes or artificial, technological methods, and is sometimes known as “carbon dioxide removal” or “CDR”. Negative carbon emissions can be thought of as canceling or “offsetting” carbon emissions of equal magnitude, which gives rise to the term “carbon offsets” as another synonym for negative carbon emissions. However, carbon offsets and another term, “carbon credits”, more typically are taken to refer to a formalized market exchange by which an entity that emits CO2 can purchase the offsetting effect of negative carbon emissions generated by another entity and be credited for the magnitude of negative emissions so purchased.
2. “Net zero carbon emissions” means, as the term suggests, that the net of all positive and negative carbon emissions from a particular source or entity is zero (or less).
3. The Paris Agreement, as negotiated by nearly 200 nations in 2015, sets a target for limiting global warming to no more than 2°C above pre-industrial mean global temperatures. It also identified an aspirational goal of limiting the increase in mean global temperature to 1.5°C.
4. These estimates of CDR capacity are considered conservative at the lower end of the described ranges. However, cautionary concerns have been expressed whether the upper end of the ranges shown above are realistically available. See: Sabine Fuss, et al., “Negative Emissions — Part 2: Costs, potentials and side effects”, Environmental Research Letters 13, 2018, p. 29.
5. In addition to carbon dioxide, greenhouse gases include methane, nitrous oxide, and a handful of other gases that exhibit the greenhouse effect. Greenhouse gas quantities are stated typically in terms of carbon dioxide-equivalent units. The substantial majority of annual greenhouse gas emissions are CO2.
Larry J. Kane is a retired environmental attorney who resides near Indianapolis, IN.
