7 May 2023

Offsetting has both technical and behavioural problems, meaning my preferred approach is self-taxation to fund nature and policy projects

When I started on the challenge to reduce my family’s carbon footprint, I had the idea that offsetting would be an important part of the picture. Indeed, the pledge that I signed has as its third component an exhortation to offset any carbon footprint that cannot be reduced today. This was not a new idea to me - I have offset an estimate of my family’s footprint since 2011. I was aware of some of the leakiness and unreliability of carbon offsets (reflected in their unrealistically low price) and so would offset 4x the estimated footprint, to allow for a 25% efficacy rate. I then sought to find what I considered to be high quality offsets. This included conventional offsets purchased through ClimateCare (now Climate Impact Partners), rainforest and woodland protection projects through Coolearth and The Woodland Trust, and the purchase and retirement of carbon credits through the EU Emissions Trading Scheme (ETS). Even allowing for the 4x offsetting rate, this would only cost around £40 per tonne.

I adapted the approach from time to time. For example, I became disenchanted with retiring EU ETS credits given the over-supply problems in that market. From time to time I changed my view about the most worthy offsetting projects. But I stuck with this broad approach for over a decade, until I came to review it as part of this project. I’ve now come to believe that a different mindset is required, for both technical and behavioural reasons.

Technical problems with offsets

You don’t have to research offsets much to come up against the formidable problems that they face. I won’t go into them in detail here (Mark Trexler’s work is a great introduction to the topic). But in essence any carbon offset comes up against four major technical problems:

• Additionality: is the removed carbon additional to what would have happened anyway? Carbon offsets used to relate to developing markets which were not covered by the Kyoto Protocol. A reasonable starting assumption was that, because they sat outside the treaty, no carbon reduction projects would happen in these countries without external funding, so everything could be considered additional. While that might have been questionable at the time, it has become even more so since the Paris Agreement drew in essentially all countries. It has now become virtually impossible to tell whether a project is additional to what a country would do anyway under its Nationally Determined Contribution (NDC), or whether any reductions project will just be counted towards achievement of the NDC and so remove the need for other reductions.

• Permanence: is the carbon removal permanent or might the carbon be re-emitted? This matters, as the whole point of an offset is that to genuinely be an offset it needs to remove carbon on a millienial timescale. Carbon which is captured and converted to rock and buried probably fits the bill. But many nature-based offsets do not. A preserved piece of forest can be burned down, releasing all the carbon into the air, for example.

• Leakage: does the carbon offset simply displace activity elsewhere? An example here could be that protecting a portion of rainforest simply changes the bit of rain forest that gets felled for logging , rather than enabling any absolute reduction in deforestation.

• Rebound: does the application of carbon reduction technology simply result in greater usage? More efficient cooking stoves may lead to lower emissions per item cooked, but result in more cooking. As a simple rich-world example, if I compare my parents’ kitchen with my kitchen, a single 150 Watt incandescent bulb has been replaced by 18 (yes 18!) 9W LEDs (although in our defence we generally only have three or six on at a time).

These problems mean that that efficacy of carbon offsets is highly dubious, and even my 25% assumption may have been too optimistic.

Behavioural problems with offsets

But the behavioural problems with offsets are perhaps even greater. The first of these I describe as the moral licensing effect. If offsets work, then we don’t need to worry about the implications of our lifestyle. In the manner of medieval indulgences we can just absolve ourselves from responsibility through a modest payment. I have experienced myself the reduction in guilt that results from buying offsets. (As an aside, I have now generally tried to wean myself off the emotion of guilt when it comes to climate change - I don’t think it’s very productive and can also turn you into a bit of a bore.)

This “warm glow” from buying offsets helps trick us into thinking that we’ve managed the consequences of the behaviour, so the behaviour doesn’t need to change. Airlines clearly think this works, otherwise why would they offer the easy opportunity to click a button to offset the carbon emissions of a flight? We’re perfectly capable of not asking ourselves the awkward question: can an offset that costs a trivially small amount - typically as little as $2 for a transatlantic flight - possibly be effective? Clearly it cannot.

The second problem is the race to the bottom caused by the binary nature of offsets. The whole notion of a carbon offset requires a project to be equated to a Tonne of carbon. But this binary designation creates incentives for providers seek to offer offsets at the cheapest possible price. The complexity of measuring carbon offset quality means that ingenious providers will always be ahead of anyone trying to police the market. As Mark Trexler points out, offsets really need to be thought of as being on a continuum of quality rather than a pass or fail. Otherwise the market will always push at the lower bound for quality. Hence it is widely accepted that a large proportion of offsets available today are junk. The boundaries are being pushed every day. Offsets are being granted to protect forests from being cut down when there was no plan to do so. Should my commitment not to tarmac my lawn enable an addition annual flight?

The third problem is that not everything that counts can be counted. But the logic of carbon offsets leads to a focus on projects that can be subject to (often questionable) quantification. Vital nature projects or public policy advocacy often do not lend themselves to credible quantification in terms of Tonnes of carbon saved. Yet they may be amongst the most important projects for our planet.

Carbon contribution claims

So carbon offsets run a big risk in justifying continued polluting activity while falling very far short of mitigating its negative impacts on the environment. This could end up with offsets enabling a bigger problem than they solve. They also potentially direct funds towards particular types of project that can be readily quantified in carbon terms. The problems with resolving the problems with carbon offset markets seem insuperable and enduring. If I had $1 for every time I read on LinkedIn that “we need to scale up high integrity global carbon markets”…

But surely we still want to encourage funds to go towards important projects, especially nature-based projects that are a vital component of the fight against climate change as well as being valuable in their own right? Trexler proposes a different approach; carbon contribution claims. A carbon contribution claim is not presented in a manner that enables it to be used to justify a number of Tonnes of emissions. It therefore avoids the moral licensing effect of carbon offsets. It also allows for funding a broader range of projects with more or less quantifiable impacts, and more or less certainty about quality. Therefore, someone could choose to fund a small amount of extremely high quality carbon removal (e.g. physical capture and storage, typically around $1,000 per Tonne for a retail punter) or fund a policy campaigning group, with potentially large but highly unquantifiable impact.

Carbon contribution claims are defined as much by the amount of money going into them as the certainty of the carbon reduction coming out of them. Quality scoring mechanisms could be developed to help people assess where on the cost-quantity curve they want to sit. Claims to carbon neutrality, which are almost always bogus, would instead be replaced by a commitment to contribute a % of income, revenues or profits to nature-restoring projects.

Self-taxation to fund carbon contribution claims

I find this an appealing approach, and one that works at a personal level too. But once we move away from offsetting an amount of carbon, how do we decide how much to contribute and to what? Here the second principle of my middle-class approach to decarbonisation can help: act as if there is a carbon tax of £100 per Tonne today. If I could wave a magic wand, this policy would apply, creating incentives to move away from more heavily polluting activity. So I will apply a carbon tax of £100 to my family’s estimated carbon footprint and apply that to fund carbon contribution claims. Given that a typical basket of consumption creates 1 Tonne of Carbon for every £2,000 of expenditure, this broadly equates to a 5% additional consumption tax. Not too unreasonable in the circumstances.

This is also a superior approach to carbon offsetting for the reason it is both meaningful and scaleable. The concept of net zero makes sense at a global level. It just about makes sense at the unit of a large country (although even then there are significant border adjustment issues). It probably doesn’t make any sense at an industry or company level. And it certainly doesn’t make sense at an individual level. This is because no individual, organisation, or sector can opt out of the carbon economy given how deeply interwoven fossil fuels are into its structure, nor can they offset their way out of it. Personal carbon neutrality is therefore an ill-defined approach. By contrast, a carbon tax is both a rational and scalable solution to climate change. Self-taxing places the incentives on myself that should apply in society in order to drive change towards a sustainable future. A one-person stand does not, of course, directly drive that change, but it is a more coherent approach than personal carbon neutrality.

There is one slight variation I am making to this, which relates to air travel. Flights are by far the most carbon-intensive aspect of our consumption activity, and also the aspect that is most explicitly a rich world luxury. I have a target to reduce our carbon emissions from flying to 1 Tonne per head per annum over a rolling three year average. However, I can already see it’s going to be tough. The reasons are selfish. First, I enjoy travel. Second, my family enjoys travel and I have to bring my stakeholders with me on this carbon reduction journey! To stiffen my resolve, I’m applying a supertax of £1,000 per Tonne to any air travel over this rolling target. Why this amount? It broadly equates to the price of removing and burying a Tonne of Carbon using Climeworks’ carbon removal and physical storage mechanism. It’s the closest we’ve got to an absolute price of carbon removal for an individual.

I won’t use this money to buy Climeworks offsets. I think that large scale corporate buyers able to make multi-year purchase agreements are best placed to support the scale-up of carbon capture and storage. Moreover, I don’t want to fall into the moral licensing trap of thinking that I’m offsetting the impact of our flying - after all, it’s not a global solution as there is not the capacity at Climeworks and similar operations for this approach to be scalable across all flight emissions. But it will make us think harder before flying. It quite neatly has the effect of forcing us to pay business class fares for economy long-haul flights, which is probably about right given the environmental damage they do. This should help us hit our target. And if we miss it, we will at least have funded some useful work (even if we won’t have offset our emissions).

Funding nature and policy advocacy

Where to put the funds? This will be a matter of personal choice for everyone. But I have chosen to prioritise two dimensions: nature and policy. Preservation of nature is the poor relation of carbon mitigation when it comes to the attention it receives, but is an essential twin objective. Devoting funds to high quality nature projects seems a very good value use of resources. I will continue to support The Woodland Trust here in the UK to this end. Choosing other nature-based projects is difficult for me to do, so I will piggy-back off the work of my former firm, PwC, who have identified three high quality biodiversity-related projects through Climate Impact Partners, which I shall seek to support via my business (they no longer seem to serve the retail market). If this doesn’t work out, I will need to find alternative ways to access similar projects.

Supporting nature projects is vital, but it’s also vital to change the system, which means influencing policy. I considered lots of options. Client Earth do great work ensuring that the laws we have today are enforced for the benefit of the environment. Campaigning organisations like Friends of the Earth, Just Stop Oil, and Extinction Rebellion keep climate change in the public’s attention. But ultimately I’m a bit of a policy wonk. So for me, the most resonant contribution is to support organisations working in the specific area of policy influence. Fortunately, through the wonders of LinkedIn, I was introduced to Giving Green. This organisation, influenced by the Effective Altruism movement (its good not its bad attributes!), has curated a set of non-profit donation opportunities, closely connected to key policy questions. Although the opportunities are mainly related to the US and Australia rather than my home country of the UK, the opportunities there are probably greater, and carbon emissions know no bounds.

Good enough

I’ve spent more time than is probably productive thinking about carbon offsetting. But I’ve come to an approach that I’m happier with than what I had before. I’m much more comfortable with the idea of self-taxation to fund carbon contribution claims than with the dubious practice of offsetting. I have a rationale for the monetary contributions I will make and I’m much clearer on the reasons for choosing the causes I will support. And that, for now, is good enough.