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As We Push to Decarbonize, Offsets Can Still Play a Role
November 19, 2021
In 1988, while working at the World Resources Institute, I helped pull together the world’s first carbon offset project for energy company AES, which was building a 150MW coal-fired power plant in Connecticut.
AES wanted a way to counterbalance their impact, so I found an agroforestry project in Guatemala run by CARE, and AES provided $2 million in support to offset the anticipated emissions. There were no regulations forcing AES to make the investment, they just thought it was the right thing to do—and it was.
Fast-forward more than three decades since their introduction and carbon offsets have become either an essential tool for combatting climate change or anathema, depending on your perspective. As a result, offsets are a very hot topic, as they were at the recent international COP26 climate meeting in Glasgow, which focused on how the world stays within safe bounds for emissions and thus avoids dangerous climate change.
Climate models show that two broad approaches are needed to keep global temperatures within safe limits. The first is decarbonization, which is shifting away from fossil fuels to energy sources that don’t emit carbon dioxide and other greenhouse gases, like methane. Because we will not be able to completely decarbonize every industry in time to keep warming within safe limits, we will also need to embrace the second approach: taking carbon dioxide out of the atmosphere. This can be done mechanically–with direct air capture–or naturally, by planting trees, protecting forests, sequestering carbon in soil organic matter, and adopting other mitigation measures not tied to energy production.
Thirty-three years ago, renewable energy was not close to being cost-competitive with coal, while growing trees to sequester carbon was a cheap way to achieve a net-zero result. Today, the marginal cost of wind and utility-scale solar are both cheaper than coal, and about the same as nuclear and gas. Prices are still coming down, and with battery costs dropping precipitously, renewables’ problem with intermittency will likely be solved within the coming decade, though it may take several more decades for the current stock of carbon emitting energy infrastructure to turn over.
This gets to one of the controversies we’ll have to address: How much should we depend on carbon offsets versus pushing as hard as possible to decarbonize?
Having It Both Ways
The answer, of course, is "Why choose?” Alongside the advances in technology that will enable decarbonization, there are additional advances in natural solutions to offset emissions. For example, nitrogen fertilizer use is the largest source of greenhouse gas emissions from agriculture in the U.S. and other countries, but also is a chief cause of the low-oxygen or hypoxic marine dead zones, of which there are 400 around the world. High-tech methods to better manage fertilizer applications can reduce emissions and the extent of these growing dead zones.
Soil carbon sequestration reduces the runoff that contributes to poor water quality and improves soil health. In parts of the world where rice is grown, methane emissions contribute a large share of greenhouse gases. A practice called alternate wetting and drying can cut emissions while conserving water and energy. And while some make a joke of emissions from cow belching and farting, that source accounts for 3 percent of U.S. emissions alone. Improving diets enhances animal health, productivity, and farmer profits while limiting methane generation. These approaches also provide additional nutrition benefits.
Carbon trading presents another opportunity to reduce emissions. An agreement was finalized at COP26 in Glasgow that establishes the rules of the road and will lead to much greater levels of investment in offsets because the rules create transparency and greater integrity in carbon markets by avoiding double-counting. Estimates of the value of these markets range widely but are expected to grow dramatically.
That’s why USAID and the USDA are looking to encourage private, nature-based climate financing to mitigate and adapt to climate change, both internationally and domestically. These agencies support these efforts because, in addition to the mitigation benefits, these solutions can foster employment, generate revenues, and provide other benefits. Better forest management and protection can sequester carbon but also provide habitat for endangered species. Water management in paddy rice production can reduce methane emissions while saving energy and conserving water. Enhanced soil carbon sequestration removes carbon dioxide from the air and improves soil health and water retention, protecting against drought.
The private sector is aware of these dual benefits, too. The World Business Council for Sustainable Development, which has 200 multinational corporations among its members, announced in July a new effort to increase carbon storage through natural climate solutions and avoid greenhouse emissions in forests, agricultural lands, grasslands, and wetlands. These businesses represent millions of tons of greenhouse gas emissions as well as the potential for billions of dollars in offset purchases.
No Turning Back
To those who worry further investments in offsets will provide an out for consumers of fossil fuels, the arc of justice is against it: the advances in decarbonization technologies are such that using fossil fuels simply will not make sense in a few decades. But we can’t wait for those decades to come and go. We must bridge the gap between now and full decarbonization.
Countries need to push hard to employ increasingly affordable renewable energy solutions to supplant coal, oil, and natural gas. While this energy transition moves forward, private financing of nature-based climate solutions—bound by appropriate rules to ensure suitable application, monitoring, and measurement—can provide a critically needed response to reduce atmospheric carbon and mitigate other emissions from land use.