May 1, 2009

Simple Answers to Simple Questions

Dwyer Gunn over at Freakonomics:
Are Carbon Offsets Too Good to Be True?

OK, perhaps that's being too glib. I certainly believe that carbon offsets can play some role in reducing carbon emissions. But as they are currently designed, I would not want them to play a very big role in abating climate change. The several fiascos surrounding offsets are fairly well-known, and tend to revolve around the same problem: The requirement of additionality (that an offset project would not occur absent money from offsets) is difficult, if not impossible to prove, and easy to game. One simple way to address this problem, I think, would be to require that credits be issued only for projects that have not yet been started; it's amazing how many offset projects in the Clean Development Mechanism, say, were approved retroactively, on the theory that the project was built with the anticipation of getting offset funds and would not be "viable" without them.

But even if you enacted that or other reforms aimed at making offsets a more trustworthy proposition, the question then becomes, are offset programs thus more effective? That is, is there a tradeoff between the quality of offsets issued and the speed with which they can be certified and sold? Gunn points to a recent paper (PDF) by Michael Wara and David Victor, who have each written extensively on carbon offsets, that addresses this question specifically. Let me quote from the executive summary:
The demand for [CDM] credits in emission trading systems is likely to be out of phase with the CDM supply. Also, the rate at which CDM credits are being issued today—at a time when demand for such offsets from the European ETS is extremely high—is only one-twentieth to one-fortieth the rate needed just for the current CDM system to keep pace with the projects it has already registered. If the CDM system is reformed so that it does a much better job of ensuring that emission credits represent genuine reductions then its ability to dampen reliably the price of emission permits will be even further diminished.
In other words, a junk-free offset program couldn't issue nearly enough credits to allow developed countries to cheaply meet their emissions reductions requirements. And remember, the CDM is one of the more responsibly run offset programs out there.

I'm trying not to be so negative about carbon offsets, but it's rather hard to avoid these conclusions. My experience in grad school, for example, of exploring the possibility of using offsets to finance putting out coal fires in developing countries was one of trying to finesse the conceptual difficulties in order to come up with a workable outline of how it could be done.* But if Wara and Victor are right, then it seems that even when those conceptual difficulties are solved, the logistics of using offsets are too big to overcome.

* Asking whether an emissions reduction project is additional is a bit like asking whether, if your parents had married other people, you would be a different person. It's not something you can really prove one way or another, but you have to make some sort of assumption in order to proceed. The question is, do you want to make decisions about the future of this planet on such assumptions?

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