In a world that urgently needs to reduce greenhouse gas emissions, carbon offsets have emerged as one possible solution. We asked PPIC adjunct fellow Van Butsic, a cooperative extension specialist at UC Berkeley and principal scientist with Carbon Direct, to tell us more.
Can you describe the carbon offset program in California?
In California, certain industries, including heavy industries like steel, cement, or petrochemicals, are allowed to address their hard-to-abate emissions with carbon offsets. To offset emissions in a hard-to-abate sector, you reduce carbon emissions in a different sector. If you do this accurately, the idea is that they can cancel each other out and have negative emissions. This has been implemented as part of the cap-and-trade program in California.
You and a group of researchers studied the effectiveness of forest offsets. What did you find?
Most offset projects involve forests. We looked at a special set of offsets that are designed to improve forest management. You change the management of a forest so that it stores more carbon than under traditional management. These projects can take place all over the US, so even if the emissions occur in California, the offsets can be anywhere. The difficulty is that the credits are generated against a hypothetical baseline—that is, the management that would have happened had the project not taken place.
Overall, we found very little evidence that most projects actually changed forest management. We did this analysis across corporate timber owners, family forests, tribal lands, and others. What’s interesting is that we found it was working with really large landowners: the only place we saw change was in Real Estate Investment Trusts (REITs), which are basically timber companies.
The implication of this finding is that a large number of currently available carbon offsets might not represent true carbon removal. The climate impact was not what we would have expected or hoped for from this policy.
Offsets in the voluntary carbon market are getting some troubling press. What’s the difference between a voluntary market and California’s compliance market?
They’re very, very similar. There are differences, but the methodologies used in the voluntary market versus the compliance market are very similar. As the name implies, in a voluntary market the offsets are generated voluntarily. In a compliance market, they are generated as a requirement of a regulatory program. Cap-and-trade is an example of a compliance market. But for many types of forest-based carbon offsets, the offsets on voluntary and compliance markets are both based on a hypothetical baseline.
What policy changes might help?
First, you need a functioning market that incentivizes carbon reduction and removal. The question is, how do we make a market work well enough to reach those goals? For nature-based management, there are new, stronger methodologies in development. Technology can play a role: we need better remote sensing data to observe forests over time, better protocols to make it harder to game the system, and more realistic baselines so that offsets represent real climate impact. We don’t want to throw the baby out with the bathwater; we just need to double down to develop high-quality projects.
Is this going to impact trust in carbon offsets?
From my experience at Carbon Direct, there’s a lot of mistrust in the carbon market and much of it is well placed. Most projects we’ve looked at do not meet the quality bar; only about 10% of the projects meet or exceed our quality criteria. We have a long way to go to get projects removing as much carbon as they claim. Buyers are becoming more sophisticated, and there’s an appetite for high-quality projects, but it’s hard to tell the difference between a high-quality and a low-quality project—you need experience. It’s not easy for a consumer to be confident yet. There are some good projects right now; those projects should be held up and replicated. That will go a long way toward making the carbon market work better.