As a second addendum to my recent summary of COP26, I want to convey the importance of the accord on carbon markets. This accord resolves aspects of Article 6 of the Paris Agreement. There had been wrangling over this issue for past five years. Not everyone is happy with all aspects of the outcome, but the rules are now better than the previous set of guidelines, which were as waterproof as a sieve. The issue was how to regulate the carbon market, that is, the selling and buying of credits for the removal of CO2 from the air.
What are carbon credits? A simple example is forest management that results in additional uptake of CO2 through photosynthesis and then storage of that carbon in the ecosystem in living and dead trees and the soil. A carbon credit could also be generated by carbon removal from the air using industrial methods, which, as I discussed in a previous post, have not been demonstrated, at least not yet at a scale that matters. In fact, any activity that takes up and stores additional carbon (or cuts emissions) can be turned into a carbon credit that can then be sold.
Who would want to pay for carbon credits? CO2 emitters such as corporations, institutions, or even countries that wish to balance their carbon sheet, that is, they want to “offset” some of their emissions by purchasing credits for the removal of carbon elsewhere. So, if an owner of 100,000 acres decides to permanently halt harvesting so that the forest can take up and store more carbon, the amount of “additional” stored carbon can then be turned into a credit that is purchased, for example, by a corporation to offset an equivalent portion of their CO2 emissions. This buying and selling of carbon credits occurs in the “carbon market.”
The benefit of carbon markets and credits is that it promotes activities increase the removal of carbon from the air, which is then stored in forests or elsewhere so that it’s not heating up the planet. Not everyone likes carbon credits and markets, however, because they argue that actually cutting emissions would be more effective and also, importantly, that carbon credits might be gamed or not well-supported by science.
That’s in part where the new accord comes in. Article 6 is meant to regulate carbon markets so that the credits are…well…credible. On the positive side, the new rules set up a centralized system for selling and buying credits. All carbon sales will also be taxed at 5%, which will go to less developed countries to adapt to climate change. Additionally, 2% of carbon credits will be retired with each transactions to make more headway on actually reducing emissions (rather than just balancing them with credits). These changes should spur growth in carbon markets, which can mean more forest land spared from harvest or managed in a more ecologically sensitive way, as well as other positive activities.
One aspect of the new agreement that was strongly criticized by a variety of interest groups is that some old, inactive credits could now be released into the market. This could depress prices and make new carbon credits less attractive. The final language was actually a compromise. Some lesser developed countries that make extensive use of carbon credits to balance their “net carbon emissions” lobbied for allowing all past credits. Others argued for allowing few. The compromise was to include those so-called “zombie” credits from 2013 to 2020.
Want to know more? For a kind of neutral view check out https://www.reuters.com/business/cop/outline-carbon-markets-deal-emerges-un-climate-summit-2021-11-13/. For a negative view check out https://carbonmarketwatch.org/2021/11/13/cop26-half-baked-carbon-market-rules-fail-to-take-heat-off-the-climate/. For a more positive view, check out https://www.ft.com/content/f13bce2b-8a2b-4289-9281-9c6acf34f472
As I mentioned above, there are contrasting views about carbon credits and markets in general. One reason is the difficulty in ensuring that they are real. Let me explain. A true, physical carbon credit must meet two criteria. First is “additionally,” which means that the emissions reduction or removal are “additional,” that is, above and beyond what would have occurred without the activity. For example, imagine that an organization owns 100,000 acres of forestland that has been harvested on a sustainable schedule for 50 years. To count and sell this land as a carbon credit, you must do something else that will remove and store additional carbon from the air. For example, you could harvest the forest half as frequently as you have been, which would allow more carbon to accumulate in the forest.
The second criterion is no “leakage,” which I can best describe with an example. If you decide not to harvest that 100,000 acres of forestland at all in order to claim a hefty carbon credit, but this results in higher levels of timber harvesting elsewhere (outside the 100,000 acres) to make up for the loss of timber products, then you can’t count your activity as a credit. This makes sense. The goal of carbon credits is a true and permanent removal of carbon from the air and into forestland for the entire planet not just your 100,000 acres. There are some other rules that I won’t cover here — for more info, see https://c402277.ssl.cf1.rackcdn.com/publications/1342/files/original/What_Makes_a_High-quality_Carbon_Credit.pdf?1591405169.
You can probably right off see the challenges here. One has to do some serious ecology and economics in order to verify that a claimed carbon credit is truly a carbon credit. Who does that? For the burgeoning USA carbon market, there are independent organizations that verify credits by carrying out this underlying work. I don’t know how it works at the international level, especially with respect to entire countries claiming credits. Presumably, the new carbon market accord addresses some of those aspects of this planet-wide market, which is beyond the scope of this post.
One issue that has arisen in my home state, Maine, is that accessing the carbon market for activities on forestland is only available for large landowners. That’s a big deal because Maine is 89% forested (the most of any state) and has many small forestland owners. My family owns 100 acres of forest and would be interested in exploring carbon credits, but the verification process is far beyond our financial means. As part of the deliberations of the very successful Maine Climate Council (http://climatecouncil.maine.gov), some possible avenues for small forestland owners are now being explored (https://www.maine.gov/dacf/about/news/news.shtml?id=4073426). I commend the ambitious work of the Climate Council on these and other climate change issues in the state. (Full disclosure: I serve on one of the Working Groups, although my contributions have been small.)
I’m a booster of carbon credits, but I have to admit this is partly because of the side benefits, not just the carbon removal. Carbon credits done right can lead to protection and improved management of forests and other lands as well. It also is spurring serious work on industrial carbon removal from the air, although this is not something we can count out to save us any time soon (or maybe never).
Here’s an interesting new wrinkle on carbon credits. Dr. Fabio Berzaghi, at the Laboratory of Climate and Environmental Sciences (LSCE-CEA) in France, is exploring ways of attaching carbon credits to elephants in Gabon. Through their activities of removing tree branches and going about their daily lives, elephants increase the uptake of CO2 (by vegetation) and storage of carbon. It turns out that, for this and many other reasons, elephants are worth much, much more alive than killed for their meat and tusks. But any child could have told you that without consulting carbon and $$$ metrics.
The World is On Fire 
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