As Climate Accountability Nears, Removals Carbon Market Seen Replacing Offsetting (1)

–Register for scaling emission removals event on July 26 (see note 5) — International Emissions Trading Association

By Mathew Carr

July 25, 2021 (LONDON): The Paris climate deal’s voluntary nature is seen resulting in the death of the overly complicated carbon-offset market as we now know it.

Such a move may be necessary to make climate solutions work faster and attract more capital, as business seeks to mesh in better with the Paris rulebook, which could offer carbon markets as only one voluntary option for countries, said Jeremie Paul, product development manager at Terrametric Solutions, a U.K.-U.S. joint venture seeking to create a platform for voluntary removal markets (see note 2).

“I believe we should not only reform the carbon offset market, but also introduce a new carbon removal market to bring an alternative to the consumer,” Paul said. After United Nations climate talks in Glasgow, Scotland, set for November, “the carbon removal market will skyrocket,” he said.

The market, which may gradually replace the existing offset market, would boost transparency.

No tracking system in the United States, Europe or elsewhere actually records and tracks avoided emissions associated with renewable energy generation. Indeed, one of the key problems holding back global climate action is there are currently too many carbon markets and too many standards — there’s not one global certification system and Paris isn’t looking likely that it will deliver one, either — at least not quickly.

UN emission credits previously worth 15 euros a metric ton of carbon dioxide equivalent are now worth less than a euro. Renewable energy certificates can become worthless, once supply of the securities meets limited demand.

Environmental, social and goverance measures are also disparate, globally.

If the Paris climate deal is failing on one of its big promises — that it might be able to provide a platform for companies to know for sure that what they are investing in is proper climate action — what to do next?

The only answer is to find an alternative way to ensure no one can accuse them of greenwash.

Paul’s idea is deliver a platform that will be all things to all companies and all countries – no small feat.

The carbon markets already distinguish between the various types of carbon credit. Prices range from a crazy low $1 a ton for an old renewable energy credit to hundreds of dollars for direct-air-capture credits where the greenhouse gas is securely and permanently stored (there are hardly any of them).

In my mind, the talks to set a Paris rulebook could still deliver Paris-compliant credits. Everything else would become close to worthless, because everyone would want that Paris (or Glasgow) stamp on what they were buying.

Others also are expressing doubt about the future of non-mandatory markets, including some from surprising quarters.

“Voluntary carbon markets should be cancelled,” said Assaad Razzouk, Group CEO at Sindicatum Renewable Energy. “We have no time for games with CO2 indulgences created 20 years ago as a transition tool. Buyers of voluntary offsets are greenwashing, many knowingly. They should just cut emissions directly.” (See Note 1)

Jennifer Morgan, executive director of Greenpeace International, has criticized the U.K. advisor on UN climate talks Mark Carney and the Taskforce on Scaling Voluntary Carbon Markets that he backs. (Still, even Carney says voluntary markets will probably be temporary.)

“Offsetting is one of the most sophisticated, cynical and pervasive forms of greenwashing – and has no role in a climate emergency. And neither does Carney’s Taskforce. Green halo off, greenwashing crown on,” Morgan said. (see note 3, and for more on the debate see note 4)

Here are some of Paul’s ideas:

Carbon capture projects can create and sell these “removal certificates” for every ton of CO2 independently verified as captured and securely stored, he said by phone and email. The storage could be old oil fields, with appropriate insurances taken out to cover potential leakage, or change of land use, production of biochar.

Biochar is a specially designed charcoal which offers a bright future for soil improvement and carbon capture. It contains a high proportion of stable carbon, and so sustainable production of biochar can be a significant, viable negative emissions technology for mitigating climate change.

Avoidance emissions credits would be disallowed after some period of time. They would be incentivized using other policy such as renewable obligations, certificates, contracts for difference linked with compulsory carbon pricing.

“Our certificates will let companies and consumers neutralise emissions footprints to support net zero claims,” Paul said.

If Paris can’t deliver a merger of the compliance carbon markets and the voluntary ones, Terrametric’s platform might offer an alternative.

“The Nationally Determined Contributions fixed under the Paris Agreement are compliance requirements. Article 6 of Paris is talking about the possibility of implementing corresponding adjustment to the NDC through emission/removal trading schemes.”

Terrametric’s system could become involved in such a compliance scheme if countries decide to make the credits eligible to buy and redeem. They could be used for compliance in the buying country or the selling, but not both.

“The same credit must not be used twice” Paul said.

You could say that an offset represents an avoidance of emission against a benchmark. Basically, an offset allows you to claim “Thanks to me, x tons of CO2 have been avoided from release into the atmosphere, compared to what would have happened normally.”

There are several limits to that, first of all, how do you prove that the price of a carbon offset is responsible for this emission not happening (notion of additionality), he said.

Second, what is it you consider as what “would have happened normally” — playing with this almost random benchmark of what is considered “business as usual” can make the whole thing very blurry, he said.

“A removal, on the other end, is a proven quantity of CO2 that has been actively removed from the atmosphere.”

In a Direct Air Capture or graphene-production facility, there is no possible argument about the quantity of CO2 removed from the atmosphere as is it measured as an absolute basis, not as a value relative to a benchmark, Paul said.

Photo by Life Of Pix on

“In areas where cap-and-trade systems exist there are other complications depending upon the structure of the Renewable Energy Certificate system, cap-and-trade market or support systems where the avoided emission within a capped carbon market cannot be seen as globally reduced emissions due to the fundamental cap on all carbon emissions within the area of trade. Why is this an issue? What is the value of avoided emissions if they are not conveyed with a REC?”

“REC consumers generally want their RECs to include all emissions benefits, including emission reductions, because it’s a stronger environmental claim. They usually believe that is what they’re getting, despite the fact that tracking systems can’t measure or verify emission reductions that occur elsewhere on the grid.

“At the same time, owners of renewable generators may see financial opportunity in converting their
estimated avoided emissions into carbon offsets, which can be monetized and traded as a separate
commodity from RECs. Generators that want to sell offsets must apply to voluntary offset programs and
meet various screening tests or criteria; REC tracking systems do not perform this function because
offsets are a very different commodity from RECs.

“The issue is that the credibility of the RECs may be called into question if a third party is claiming the
avoided emissions or emission reductions.”

CDP, formerly the Carbon Disclosure Project, also clearly distinguishes between RECs and offsets as RECs being used for tracking factual information concerning scope 2 emissions information and offsets being considered a separate instrument outside of all individual carbon accounting scopes and used to compensate overall GHG emissions responsibilities of end-users, Paul said.

Energy attribute certificates (RECs) could be seen as regional or local products being linked in some
way to the physical transmission of electricity or some defined market boundary, whereas offsets are
global fungible commodities with the same value for consumers in any part of the world, he said.

(I added the emphasis in bold)


  2. Terrametric is a joint venture of the Green Certificate Company and Carbon Finance Labs. Carbon Finance Labs is a unit of oil company Occidental, which has capacity to store carbon dioxide in oil fields.

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