Carbon Offsetting: A Case Against Market-Based Climate Solutions
With climate change accelerating at an ever-increasing pace, the media is flooded by corporations advertising their commitment to carbon neutrality. Many of these efforts involve market-based solutions that often prioritize capital interests over social and environmental impact. One common type of market solution is carbon offsetting, a process in which corporations fund greenhouse gas (GHG) emissions-reduction projects by buying carbon credits. The reductions generated from these funds then hypothetically cancel out the GHGs they emit, leaving all of their own harmful practices untouched. Notably, past examples of carbon offsetting have demonstrated that it is not an efficient means of tackling the global climate crisis. Moreover, it allows industrial activities to continue damaging local populations and environments while the communities hosting the offsetting projects are put at risk.
This issue can be seen on every scale of government and policymaking, meaning urgent action against false carbon market narratives is crucial. A notable international example of the dangers of carbon offsetting was the 1997 Kyoto Protocol, which imposed GHG emissions reduction targets on developed nations. The protocol outlined the creation of the Clean Development Mechanism (CDM), a system that allowed developed nations to reach their reduction goals by purchasing credits that in turn funded offsetting projects in developing nations. The value of these projects was evaluated in terms of Certified Emissions Reduction units (CERs), a metric based on the amount of emissions a given project was predicted to reduce. However, there were many issues with this crediting process, most notably the difficulty of assessing additionality as well as the risk of perverse incentives.
The legitimacy of an offset project’s credit value hinges on whether it is ‘additional.’ A project is additional if the emissions reductions it generates would not have occurred in the absence of the CDM. The CDM has several tests that attempt to verify the additionality of a proposed project, most of which require proof of barriers preventing the implementation of the project. These can only be overcome with the investment of developed nations. The system has been criticized extensively because “the question as to whether a project would also be implemented without the CDM is hypothetical and counterfactual — it can never be proven with absolute certainty.” Furthermore, the CDM’s most popular project types are often “pursued for reasons that extend beyond simple financial return,” making them unlikely to be additional.
The CDM system is also problematic because it places the burden of resolving climate change on developing nations — despite the fact that developed countries are the primary contributors to environmental devastation — without actually creating a system to enforce the promised sustainable development benefits. Studies have shown that most developing countries do not favor projects with high sustainable development benefits over projects with few or even no benefits. As a result, there is minimal incentive to implement sustainable development. In fact, this system actually incentivizes the opposite, as creating “more stringent standards could raise the cost of projects and deter potential investors.” This is because the main priority of investors, as is the case with most market-based climate solutions, is profitability, making the cheapest projects most appealing.
This failure to monitor the impact of these projects doesn’t just result in a lack of sustainable development, it also results in cases where the projects significantly damage the health and environment of their host communities. This is largely because project developers rarely consider the interests of the locals, often not even giving them the opportunity to express their concerns. As explained by the International Forum of Indigenous Peoples on Climate Change at the UN Climate Talks, CDM projects were being carried out without the consent of Indigenous Peoples, and had “disastrous impacts on Indigenous Peoples lands, territories, and resources, as well as violating their rights…costing many Indigenous Peoples lives.”
Overall, the CDM demonstrates that with offsetting mechanisms, there is an inherent risk of illegitimate emissions reductions, as they are based on the subjective and unverifiable concept of additionality. It also exposes that these systems can allow for the destruction of host communities, especially if insufficiently regulated. Given that many of these flaws may be impossible to resolve completely, the CDM exemplifies why the use of offsetting is not an effective means of mitigating climate change. Although the Kyoto Protocol was effectively replaced by the Paris Climate Agreement in 2015 — making the CDM irrelevant without a clear future — the use of offsetting and the belief that neoliberal climate policy can resolve the environmental crisis is widespread.
In fact, the issue has already taken root here in Michigan, particularly within the state’s Healthy Climate Plan, which was released in 2020 with the goal of achieving economy-wide carbon neutrality by 2050. One of the ways it hopes to achieve this goal — while also promoting sustainable development — is by selling carbon credits. This is part of the Department of Natural Resources’ (DNR) forest carbon crediting program, through which carbon credits are derived from the DNR’s maintenance and growth of forest stock in Pigeon River County State Forest. The first 10 years of credits will be sold to DTE Energy, who will in turn offer the offsets to industrial natural gas clients wanting to reduce the impact of their carbon emissions.
The DNR is using the American Carbon Registry (ACR) for crediting, which likely prompts emissions reduction-related issues similar to those of the CDM. In fact, the ACR states that they “generally [accept] methodologies and tools approved for use by the Clean Development Mechanism (CDM)” for project verification. In other words, the environmental impact of DTE Energy and the Michigan government may not be as positive as it seems. The potential illegitimacy of this program facilitates ‘green-washing,’ allowing DTE Energy and its industrial clients to profit from their sustainable image without making any genuine changes.
Furthermore, the plan fails to recognize the direct impact that natural gas and industrial production has on urban communities in Michigan. DTE Energy and its industrial customers, through air pollution, have damaged the respiratory and cardiovascular health of many people in the southeast region of the state. This reality is well known, so much so, that DTE Energy recently lost a lawsuit regarding claims by the US Environmental Protection Agency that DTE was violating the Clean Air Act. The DNR crediting program allows these detrimental industrial practices to continue. Although forest management efforts may improve the environment in Michigan as a whole — assuming the credits are legitimate — these strategies come at the cost of people’s well-being, particularly those living in cities where industrial pollution remains. Considering the demographics of the areas most impacted by this environmental injustice, the decision to use carbon offsetting in lieu of restrictions on industrial practices has a disproportionate impact on low-income communities and people of color.
Thus, the history of carbon offsetting has proven to be a means of greenwashing as opposed to an honest attempt at reducing emissions. Not only that, but it has and will continue to perpetuate environmental injustice and harm marginalized communities in Michigan and beyond. For these reasons, we should be critical of corporations and government organizations proclaiming sustainability through offsetting. It is crucial that we understand the flaws of these performative market-based “solutions” to climate change so that we can advocate for more radical environmental action and prevent emitters from capitalizing on the climate crisis.
