Wall Street’s Favorite Climate Solution Is Mired in Disagreements

June 03, 2021

Print This Article Share it With Friends

by Jess Shankelman and Akshat Rathi (Bloomberg) Two titans of finance are working with hundreds of executives and scientists to set up a global trade in carbon offsets. It’s messy, and time’s running out. -- ... Create a market that turns a ton of removed carbon into a commodity just like corn or copper, and money will flow from the emitters to the fixers.

That’s the theory behind the new carbon-offset market being conceived by Mark Carney, a former governor of the Bank of England, and Bill Winters, the chief executive of Standard Chartered Plc. The two financial veterans late last year set up a rule-making taskforce populated by hundreds of bankers, airline executives, sustainability experts, commodities traders, scientists and other business leaders.

...

Interviews with more than a dozen people involved in this new initiative as well as internal emails seen by Bloomberg Green reveal impasses over make-or-break issues such as which companies can use offsets to reach their climate goals and whether credits based on avoiding emissions—the vast majority of offsets currently available—should be part of net-zero plans. (Bloomberg Philanthropies has pledged funding for the initiative.)

...

A key objective is to come up with a “core carbon principle” label that could be used to mark offsets that meet its standards, akin to how groceries might be labeled organic. Members have spent months arguing over the criteria for inclusion, with sharp divides over how high to set the bar.

...

Just the 18 oil majors that already have net-zero goals will eventually need to erase 3.3 billion metric tons of annual emissions, according to clean-energy researchers at BloombergNEF. That’s nearly 18 times the amount of carbon offsets issued in 2020.

...

“If they generate a lower carbon benefit than they claim and the company is still emitting, well then you end up with more emissions than you would have otherwise,” said Mitchell-Larson (Eli Mitchell-Larson, an Oxford University environmental scientist helping to develop the rules). “We have to be open to the idea that the voluntary market might fail.”

...

Who gets to buy offsets?
Customers in the U.K. filling up their tanks with Royal Dutch Shell Plc’s gasoline today will see advertisements about the beneficial role of carbon offsets. Pay a small fee at the pump, drivers are told, and their emissions are neutralized by funding a forest program in Peru.

...

The danger is that cheap offsets can be used to avoid the hard work of actually cutting emissions.

...

Should companies be allowed to balance their carbon ledgers by purchasing offsets without first exhausting all other options to clean up their business?

“That’s not our job to answer that question,” Winters told Bloomberg Green in an interview on May 19.

...

Will climate players endorse the rules?
To be taken seriously, the taskforce has to gain the endorsement of an influential gatekeeper in the world of corporate climate accounting. The Science-Based Targets initiative, or SBTi, is a group of experts that sets widely respected standards on what it takes for a company to reach net zero. SBTi doesn’t approve the use of carbon offsets for short-term climate plans until a company has tried every other available fix, be that installing wind turbines, boosting efficiency or switching to cleaner fuel.

...

If these well-regarded companies continue to vet projects without adopting the common standard, one senior member of the taskforce predicted that the market won’t take off.

Who governs a global voluntary market?
Financial markets are overseen by government regulators like the U.S. Securities and Exchange Commission, which ensure manipulation and fraud are punished. Carney and Winters are advocating for a voluntary market—and that means no government oversight.

Regulating a carbon-offset market isn’t just about stopping rogue traders. The projects themselves can be a source of fraud and abuse. Researchers at the nonprofit group CarbonPlan recently discovered $400 million worth of offsets had been sold in California without absorbing a single ton of CO₂. The Finland-based nonprofit Compensate found 90% of offsets fail to deliver or come with damaging side effects for local communities.

...

For how long should an offset remain valid after the original carbon removal?

...

Climate experts participating on the taskforce have expressed concern that finance veterans don’t necessarily have the skills to deal with all the scientific complexities.

...

What about all those ‘avoided emissions’?

...

In February, he (Mark Carney) walked back statements claiming Brookfield had used “avoided emissions” from clean-energy projects to cancel out its entire carbon footprint, including ownership stakes in dozens of fossil-fuel assets.

Avoided emissions are widespread—and controversial. Most projects designed to generate carbon offsets seek to prevent trees from being cut down. In other cases a company can claim credit for switching from fossil fuel to cleaner energy. Offsets from avoided emissions made up 96% of all contracts issued last year, according to data compiled by the taskforce.

But to effectively tackle climate change, the majority of offsets sold will have to actually remove CO₂, by planting forests or using technology that can suck carbon out of the air. Groups like SBTi and most climate scientists do not accept avoided emissions. READ MORE

Turning Carbon Offsets Into Catnip for Commodities Traders (Bloomberg)

Microsoft's Azure IoT platform helps make farming greener as well as smarter (TechRepublic)

How playing in the carbon markets can benefit cannabis producers (MJ Biz Daily)

Has the Carbontech Revolution Begun? Science can now pull carbon out of the air. For that to make a difference, though, businesses need to find profitable places to put it. (New York Times)

Ethanol Industry Banks On Carbon Capture To Slow Climate Change, But Researchers Have Doubts (Illinois News Room)

Environmentalists Ramp Up CCS Attacks Amid Infrastructure Debates (Inside EPA)

How a debate over carbon capture derailed California’s landmark climate bill (Grist)

Excerpt from Inside EPA: Environmentalists who oppose carbon capture and storage (CCS) are ramping up their criticism of the technology as a climate mitigation strategy, even as lawmakers are crafting the details of a major infrastructure package expected to include several provisions that would encourage CCS. “Simply put, technological carbon capture is a dangerous distraction. We don’t need to fix fossil fuels, we need to ditch them. To avoid catastrophic climate change, we need to deploy resources to replace the fossil fuel... READ MORE