Carbon offsets undercut California’s climate progress, researchers Find

By Ben Elgin | Bloomberg

Since the passage of its landmark climate regulations 17 years ago, California has been a leader in the fight against global warming. The state reached its 2020 emissions target four years early. It has set a timeline to phase out the sale of gasoline-powered cars, and utilities in the state must get 60% of their electricity from renewable sources by the end of the decade.

But for all of California’s progress, some of it is being undercut by a problem with one of the state’s key climate policies, according to a research paper published Thursday.

That policy, known as cap and trade, creates a market where the state’s biggest emitters must ratchet down their climate pollution over time or pay others who have more aggressively slashed their emissions. The program also allows companies to meet part of their requirements by purchasing carbon offsets. These credits come from projects around the country that follow the state’s rules, like forests that store extra carbon or dairy farms that capture methane from manure.

In the first nine years of California’s cap-and-trade program, companies have purchased offsets representing more than 140 million tons of emissions — nearly double the recent annual climate footprint of Greece — to help meet their requirements.

But the most frequently used type of offset project in the state program appears to deliver far fewer climate benefits than claimed, according to the peer-reviewed paper, published in Communications Earth & Environment and led by scientists at advisory firm Carbon Direct, as well as academics at the University of California at Berkeley. Those projects, known as “improved forest management,” are supposed to create healthier forests that soak up more carbon by strategies such as reducing or delaying timber harvests. Thus far, they’ve accounted for more than 80% of the offsets issued under California’s program.

All offset projects are supposed to deliver climate benefits that are “additional,” meaning the climate-friendly activity was unlikely to occur without the carbon payments. But IFM projects appear to cause the storage of little extra carbon, according to the researchers, who analyzed decades of satellite data for 90 such projects and compared the pattern of changes on these lands to what occurred in similar forests not enrolled for carbon payments.

“There’s been very little additionality to date,” said Jared Stapp, the paper’s lead author and a scientist at Carbon Direct.

This echoes the findings from a similar study last year, led by researchers at the University of California at Irvine, which examined 37 IFM projects in the state’s cap-and-trade program and concluded offsets weren’t impacting the amount of carbon stored in the forests.

Both studies suggest the atmosphere suffers when polluters in California purchase these forest offsets rather than cut their own emissions.

“If the offsets don’t work, it means your emissions are actually staying high and not getting squeezed down,” said William Anderegg, director of the Wilkes Center for Climate Science and Policy at the University of Utah, and a contributor to last year’s study of IFM projects. Anderegg was not involved in the Carbon Direct research.

While the authors of this week’s paper say the findings are concerning, they also point out that it’s still early, with most of these projects operating for less than a decade. California’s rules require forests to maintain their carbon stocks for 100 years. And although the scientists are seeing little indication that IFM projects spur different management practices, it’s possible such changes could materialize in the future.

When asked to respond to the study, the California Air Resources Board, which administers the cap-and-trade program, highlighted this uncertainty and called the findings “inconclusive.” David Clegern, a spokesman for the regulatory agency, said in a written statement that the state overcame a legal challenge to its approach to using offsets a decade ago and that the program’s rules can be amended “as the science evolves.”

The problems with California’s forest offsets closely mirror some of the flaws that have recently upended the voluntary carbon market, which reached about $2 billion in value before losing steam. In that arena, companies purchase carbon credits on their own volition to claim they’ve lowered their emissions and to present a greener image to customers.

A steady drumbeat of reports has exposed deep flaws with many of these projects, including nonprofits and local governments selling credits for protecting trees that weren’t in danger of being harvested. With the quality of these credits under fire, big purchasers from Nestle SA to EasyJet PLC have backed away from using offsets and the prices of these credits have plummeted.

Although this week’s paper on California’s IFM projects doesn’t single out specific projects, it’s not difficult to spot some that appear problematic.

The Edge of Appalachia, for instance, is a project consisting of 13,000 forested acres in southern Ohio, which is owned by the Nature Conservancy, the world’s largest environmental group. The nonprofit began accumulating the land in 1959 through donor contributions and has sought for decades to expand and protect this “ecologically rich” mixture of forests and prairies from human development.

In its filings to establish a carbon project, the nonprofit claimed the preserve would experience aggressive harvesting in the absence of carbon payments, with about half of its trees felled in the next decade. Because it has avoided this catastrophic scenario and its lands remain well-stocked with trees, the Nature Conservancy is being awarded hundreds of thousands of carbon offsets. These are sold to California polluters, who can use them to meet state requirements in lieu of slashing some of their own climate emissions. Phillips 66, which operates oil refineries in California, has purchased 150,000 offsets from the project to help meet its state obligations.