The Legitimacy—or Not—of Carbon Offsetting | Opinion

In the run up to the United Nations Climate Change Conference (COP26), companies have been tripping over one another to announce commitments to net zero emissions. The International Air Transport Association (IATA) recently announced that it would achieve this goal by 2050, on behalf of 290 airlines.

Such commitments are necessarily dependent on offsets, yet a growing chorus of voices has been calling for an end to carbon offsetting altogether. The charge is that it is ineffective and prone to fraud, providing a license to companies to continue emitting greenhouse gases.

Some skepticism is understandable. Offsets have an admittedly disappointing record. Institutions designed to scale their adoption, like the European Trading Scheme, for years failed to deliver the results advertised by the economists who promoted them. And the risk of greenwash is always present, to wit the recent example of "carbon neutral" hydrocarbons.

Yet, a draconian decision to abandon offsets entirely, as organizations like Greenpeace have called for, would be a mistake. Offsets must be regulated, reformed and heavily scrutinized. But we still need them. And we need them to succeed.

First, we need every single part of the economy to reduce emissions as fast as possible. It would be naïve to assume that the will of corporate executives is the only obstacle to such a transition. The capital investment cycle of many industries will need time to replace the carbon-intensive production infrastructure they rely on.

Well-functioning, verified offsets can provide the economic incentives needed to adopt solutions that may be technically feasible today, but uneconomic without additional revenue. One could argue that it should be governments, not offsets, to provide such price signals, but in truth the urgency of the problem requires both.

But the most important rationale for pursuing offsets is that, under all desirable scenarios of the Intergovernmental Panel on Climate Change (IPCC), we will need to draw carbon out of the atmosphere. Today a fifth of emissions is absorbed by the growing plants and soils commonly referred to as the "terrestrial sink." As decarbonization drives emissions toward zero, we will need to take out more.

While some hope that technologies like carbon capture and storage or carbon removal technologies will save the day, it would be a delusion to rely solely on these. At present, the only way to remove carbon at a scale commensurate with the problem is by enhancing the planet's terrestrial sink, to mop up the excess carbon dioxide that has already entered the atmosphere or that will do so in the years leading up to a zero-carbon world.

This is a necessary, urgent and difficult solution. It is not enough, as some seem to think, to plant trees anywhere possible. A forest is not just a collection of trees. It is a system that regenerates over time, through fires and other disruptions, and that relies on broad demographic distributions within plant communities and diversity of species across them.

But if complex ecosystems like biodiverse forests are restored—and if we commit to protect them over time—large amounts of carbon could be sequestered for much longer than any other solution available today. After all, lowland tropical forests like Daintree Rainforest in Australia or the Amazon have been standing for thousands of years, through countless human perturbations. And parts of these ecosystems have persisted for millions of years, well beyond the potential of any conceivable human technology.

The question is how to get there. Most of the world's land is subject to property rights or similar claims. For the terrestrial sink to grow and contribute to carbon sequestration, we need those who have title to land to make crucial, expensive decisions about its long-term use. Individuals and communities who manage vast rural landscapes—many of whom live in developing countries and are, frequently, marginalized—need to be in the driver's seat and have the resources to deliver.

State-led expropriation or forced land-use change do not have a great track record of human rights—and, in any case, most countries do not have the resources to pay for sequestering carbon on behalf of the rest of the world. Nor, frankly, should they have to.

Offsets—if well designed, verified and regulated—can draw on the financial resources of wealthy, polluting companies to pay for this global service. And they can be a far more effective mechanism than inter-governmental transfers, as we have seen with the failure by rich governments to deliver on a $100 billion commitment to poorer ones.

In 1960, the economist Ronald Coase wrote that the cost of pollution could be allocated to any market participant, in an ideal, perfectly transparent market, free of transaction costs. He heralded the birth of market-based mechanisms, including carbon offsets. But his central insight is often misunderstood: perfectly transparent markets, free of transaction costs do not exist. Instead, well-designed institutions are needed to make those transactions effective. Therefore, recent efforts to establish formal governance for offset mechanisms are welcome developments.

Carbon offsets can make an important contribution to transition to a zero-carbon economy. But they require supervisory institutions to provide oversight, infrastructure to verify and monitor their performance and regulatory instruments to punish fraud. Ardent critics of offsets should rethink their positions and contribute to strengthening those institutions instead. Reform—not avoidance—is the necessary road ahead at COP26 and beyond.

Giulio Boccaletti, PhD, is the author of Water: A Biography (Pantheon Books). He has held leadership positions in the private and not-for-profit sectors, including as chief strategy officer of The Nature Conservancy. He is an honorary research associate at the Smith School of Enterprise and the Environment, University of Oxford, and the co-founder of Chloris Geospatial.

The views expressed in this article are the writer's own.