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The Importance Of Carbon Credits

According to its supporters the idea of a global carbon market would significantly cut carbon emissions around the globe. But critics of the idea say providing polluters with the option in paying to cover their carbon emissions is not the solution to the issue of climate change.

The fires of July ravaged vast areas in North America. In Oregon the Bootleg fire caused the destruction of nearly 400,000 acres worth of forest. While the trees went up in flames as did a significant quantity of carbon offsets including those purchased by companies like BP or Microsoft.

The Bootleg fire revealed one of the shortcomings of the carbon offset market: how do we be sure that the carbon reduction projects that we invest in will be in place in 10 years or even 100 years? With climate change causing more intense wildfires and longer droughts in the coming years, the issue is whether these offsets are reliable tools that could assist us in drastically reducing carbon emissions.

The biggest market for carbon offsets currently under discussion during November’s 26th United Nations’ Climate Change Conference of the Parties (COP26) which will be held in Glasgow. Governments believe that carbon credits as well as the creation of a global carbon market in which the credits are able to be purchased and sold, will assist them in meeting their ambitious emissions reduction goals. However, environmentalists warn that such a scheme gives rich countries an excuse to continue to pollute.

In advance of this year’s conference Future Planet analyses what an effective carbon market might look like and the amount it would cost to be able to reduce world’s carbon emissions.

A global market

Carbon markets were conceived by economists to help increase the ambition of climate change and reduce the carbon dioxide (CO2) concentrations in the air. This was accomplished by providing incentives for the financial sector to cut emissions.

It is a concept that, when one country pays to allow emissions to be reduced or captured in another country, such as through the planting of trees or installing renewable energy facilities it is able to count the reductions in its own climate targets. The goal is to ensure that for each tonne of CO2 emitted by one country there is a second tonne stored elsewhere.

Countries are able to trade carbon credits, each of which represents one ton of CO2, against each other on an international marketplace. In theory, this exchange will be balanced and stop the overall increase in carbon emissions – in the event that all emissions resulting generated by human activities are covered under the scheme.

The creation of the first global carbon market however, has proved to be a daunting task. Over the past 30 years, different countries have tried, and generally unsuccessfully, to create strong regulations.

Its first international scheme goes to the United Nations’ Kyoto Protocol on climate change which was adopted in 1997. The scheme is known under the Clean Development Mechanism (CDM) This carbon market went in the year 2006. In the CDM the richer nations could cut their emissions by committing to the development of carbon-lowering initiatives in poorer nations, and then incorporating the reductions in their own goals.
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It was also the first time that Kyoto Protocol also established “cap and trade” plans, which set limits on the total amount of carbon emissions allowed from carbon-intensive sources for example, shipping and energy industries on a regional, national as well as international scales. In 2005, the European Union created the world’s first emissions trading system, built on the principle of cap and trade in the year 2005. According to a study for 2020 the system cut the carbon emission by over 1 million tonnes from 2008 through 2016.

The CDM On contrary, has effectively fell apart due to widespread concerns about the efficacy of the environment as well as corruption and human rights violations. 85 percent of offset projects that were used in the European Union under the CDM did not cut emissions, a study conducted by the European Commission found.

As of 2015, more than 190 nations joined the Paris Agreement and set emissions reduction goals. As per article 6 in the agreement they agreed to set up an international carbon market that is voluntary with the intention of avoiding the mistakes which led to the disintegration in the CDM.

Six years later, countries are still working out rules and are far away from a consensus. Ministers hope to progress in this regard at the Climate summit COP26 at Glasgow in November. However, huge differences remain over how to structure Carbon market.

There are those who believe the dispute could decide the fate of some believe it could derail the Paris Agreement. “This was the promise that countries made to each one another,” says Cynthia Elliott who is an associate in the global climate program within the World Resources Institute. “If they fail to keep their word then they will not be able to meet the requirements of the Paris Agreement doesn’t have the same importance.”

If implemented correctly If it is done correctly, this mechanism for trading could nearly double the reduction in global emissions , and make it significantly less expensive for countries to achieve the Paris Agreement climate goals, according to the advocacy group Environmental Defense Fund. Offset projects can channel required funds to less developed countries and provide huge benefits to climate change adaptation, offering them financial incentives to improve their forests, as well as other hot spots for biodiversity, according to Lennon.

However, if nations aren’t able to plug loopholes or ensure it will result in actual reductions in emissions, advocates believe it will do damage more than it does good.

The dangers

The biggest issue with the existing carbon market mechanisms is their “very wide way of doing crediting” according to Lambert Schneider, a carbon market expert at the Oko-Institut in Freiburg, Germany. Many offset projects are approved without needing to offer very high-quality assurances that they will cut emissions, he claims.

In actuality, the requirements an offset project must satisfy to be able to effectively achieve a certain amount carbon are extremely stringent as stated by Grayson Badgley, a fellow in the field of forest ecological sciences of Columbia University in the US.

“The math must be flawless, but there are occasions when the numbers don’t add up, ” says Badgley.

The offsetting program in California as an example, has produced between 20 million to 39 million credits for carbon. However, they did not result in real carbon savings, as per an analysis conducted by CarbonPlan an organization that is a non-profit located in San Francisco that analyses the scientific validity of carbon offset schemes.

This could raise questions when organizations whose purpose is to safeguard wildlife and forests accept credits that permit companies to continue to pollute. A number of US conservation organizations, such as The Nature Conservancy (TNC) and the Northeast Wilderness Trust, have been involved in the carbon offset marketplace, Badgley notes. “What could be the outcome if there weren’t the exchange of cash for offsets on carbon?” He asks. “Was this forest truly threatened?”

This system “allows owners who are already managing their land effectively to earn credits for the work they had already been doing” according to Barbara Haya, director of the Berkeley Carbon Trading Project at the University of California.

Yet, TNC points out there are instances where conservation of forests can make use of carbon credits in a fair manner for example, where the funds are used to enhance the management of forests, which results in increased carbon sequestration. In the St John River Forest in Maine TNC purchased 75,000 acres (290 square miles) from the manufacturer of pulp and paper International Paper. For the past 20 years harvesting timber at the site was the principal source of revenue for TNC. The reduction in timber harvesting in exchange for carbon credits enabled TNC to shift away from tree felling, claims the spokesperson for TNC.

“Since 1998, the harvesting of timber is The Nature Conservancy’s main source of funding to pay taxes and oversee the stewardship of the Upper St John River Forest. When it joined the carbon project for forests, TNC made a long-term commitment to alter its current harvesting practices, and to maintain the highest quantity of carbon in the land,” TNC spokesperson says. TNC spokesperson states.

The Northeast Wilderness Trust also underlines the distinction between a forest offset plan in which there is a real possibility of logging, and one in which there’s no risk of logging. Trust’s Wild Carbon programme “is dedicated to carbon offsets that are derived exclusively from ever-wild areas that were unprotected and susceptible to logs prior to our purchase” according to the trust’s director of operations, Jon Leibowitz.

“It isn’t accurate to assert that conservation groups should not be involved with carbon market,” Leibowitz claims. “Science shows that allowing trees to age and keep the process of storing and sequestering carbon remains one of the most cost-effective and efficient carbon capture and storage methods we have.

“For the same reason conservation organizations ought to have access to carbon revenues in the event that the carbon-related projects they undertake are permanent and not new,” Leibowitz says. “Done correctly carbon revenue, particularly in the case of permanent wild conservation, is an excellent tool to keep the carbon within our forests in check and allows forests to expand and capture and store more carbon in the years to come.”

To take carbon sequestration a step further Some of the most stringent strategies do not offer offset credits Gilles Dufrasne who is the policy director at the non-profit international organization Carbon Market Watch. When the offset schemes do issue them, they seek to identify projects that will not be able to reduce emissions without offset credits’ funding. Also, it is about ensuring that offset schemes do not sell reductions that are likely to occur in the first place.

Even if a venture actually is able to capture carbon that would not otherwise have been captured offset strategies can fail due to various reasons. As the Bootleg incident demonstrated that they aren’t able to provide the carbon sequestration that they’re often believed to provide. The portion of offsets within the US are covered by the Improved Forest Management protocol, which fails to consider the different risk of fire in different areas of the country , and how they will increase due to climate change, as per Badgley.

“We know that the danger of fires is likely to rise. California’s system does not take into account those dangers,” he says.

There are ways to ensure that offset schemes last However, ensuring their sustainability is almost impossible. “What would the deforestation rate will be like in Brazil in 5, or 10 years? We don’t know. Through the years, the baseline has changed dramatically,” says Schneider. “The basis used is an assumption of the future, and comes with a lot of uncertainty.”

New rules

In the midst of negotiations to revise regulations for carbon markets during COP26 on November 26, activists claim it is essential that all forms of fraud and corruption be removed. Two points remain a source of contention about double counting and whether excess credits from the previous CDM system are appropriate to carry over into the future carbon market.

The first concern is the double-counting issue. Brazil is seeking to claim credit for offsets it sells to a different country and the reductions that are achieved will get counted twice. When you are in the UK decides to invest in a plan for to safeguard rainforests in the Amazon forest, as an instance, Brazil wants to count the reduction in emissions toward the country’s own goal as well as the United Kingdom’s target.

Brazil along with China as well as India as well as India and China, would like to sell older credits from Kyoto time period onto the market of the future, in order to safeguard the value of investments made in the past. “As the reductions in emissions were already in place in the past and are not a result of these credits, they won’t change the environment and will not affect nations’ goals on climate change,” argues Schneider.

For Dufrasne, it’s best to not sign any deal instead of allowing exemptions to double counting and carrying forward old credits. “You can negotiate with ambition, but you shouldn’t bargain over the possibility of cheating” As he puts it.

The environmental and human rights records of the past market, such as the CDM remain an issue. Numerous carbon offset programs have to date “have not been hygienic for the environment and violated rights of the human,” says Erika Lennon Senior attorney at the Center for International Environmental Law noting that in a lot of instances, developers of projects failed to get approval from local communities.

One of these projects can be found in one of the Alto Maipo hydropower scheme in Santiago, Chile, which was approved by the CDM despite major environmental concerns and the opposition of local communities that claimed the plan, which involved redirecting water out of the River Maipo for 100km (62 miles) to generate electricity, could jeopardize their right to food, water and even life.

“It shouldn’t be too difficult to ensure human rights are respected when it comes to climate change,” says Lennon.

If the loopholes don’t get buffed out and the regulations become stricter There’s no point in to have a carbon market worldwide that is flooded with low-cost, ineffective offsets, according to Haya.

“You cannot do successful mitigation of climate change based on fiction. It is essential to ensure the credits are genuine or else the market is founded on a lie,” says Haya, suggesting that the establishment of an incentive fund to support mitigation initiatives, which businesses as well as countries contribute to in order to be more effective in cutting emissions overall.

Even with strong regulations, nations cannot depend on carbon offsets alone to achieve their ambitious climate targets.

“We’re in a different scenario than we were the time that it was the time that the Paris Agreement was adopted,” Elliott says. Elliott. “Many countries have come up with net zero goals, that put the whole rationaleto market prices to be questioned and suggest that we have to take action that is more transformative.”

The existence of a global compensation program will not be “not the primary component of global climate change action,” Dufrasne explains and he suggests that nations prioritise implementing regional and domestic strategies to reduce emissions. This will help lead to the reductions needed to put the world on a course to zero net emissions in 2050. “Governments should not rely on borrowing that come from foreign countries but instead focus on cutting domestic spending.”