Carbon Offsets

By Bruce Barbour - August 2022

The recently (May 2022) elected Labor Party government (Australian Government) has committed to net zero carbon emissions by 2050. This is much better than the previous Liberal National party coalition who, while they stated that they had also committed to net zero carbon emissions by 2050, had very weak and unconvincing plans for getting to that long term goal. As the Federal Liberal and National parties are infested with climate change deniers and fossil fuel promoters they would have done nothing to try to achieve this goal. A long term goal without a detailed plan on how to get there is meaningless. The Liberal Party's approach was largely to rely on the change that is already underway, more grants to industry to reduce carbon, technology that is yet to be invented and substantial use of carbon credit offsets. The Labor Party's plan will also use carbon credits, but to a lesser extent.

When "Net Zero by 2050" was proposed we were told (or it was inferred) that the use of carbon offsets was only to offset the carbon produced that was technically difficult to prevent. At the time I certainly never envisioned that they would be used to allow the fossil fuel industry to keep polluting in a modified business as usual approach. The idea, or so I thought, was that if it was technically feasible to change the energy source of a process from a fossil fuel to a renewable source then that should be done, in preference to just offsetting the carbon pollution, even if offsetting may in some instances appear cheaper. However the use of carbon offsetting has been perverted by the fossil fuel industry and its political supporters to become the go to method for carbon reduction - though this may always have been their plan and we were just not told about it.

This extensive use is bad enough but there is a larger issue to be considered: -

Are Some Carbon Offsets a Sham?

Seventy five percent (75%) of Australia's carbon offsets are from the following sources:

The 7:30 report (linked to above on Youtube) indicates that in the opinion of Professor Andrew MacIntosh, Australian National University, many of the accredited carbon credit offsetting schemes are a sham, producing offsets on paper only, which don't relate to actual carbon reduction and offset.

According to the ABC report for the human induced revegetation, many of the accredited plantations are located on marginal land not suitable for permanent forest. For example trees are planted, they may grow initially but when a drought comes along in a few years the trees die back. There is no additional carbon sequestration over time.

The second example is where carbon credits are granted for areas that are already fully forested. The owners/promoters of such a scheme get carbon credits for doing nothing.

For avoided deforestation, the report states that sometimes claims are made for land that was never going to be cleared anyway. If this is the case it is fraudulent and if possible should be prosecuted by the police - however I imagine proving fraudulent intent may be difficult. If carbon credits have been granted for the bogus project the result is no additional carbon sequestration or avoided carbon release.

While this is concerning I have trouble with many aspects of the concept of carbon offsetting, even if they are working in the way they are meant to.

Take "avoided deforestation". Even if this is genuine (i.e. the land owner was going to clear the land which would have released X tonnes of carbon dioxide into the atmosphere however, the land owner decided not to clear the land and applied for and received carbon credits) it is problematic. Think about what is happening here. By not clearing the land, the land-owner is avoiding releasing the carbon stored in the trees. That is good. However instead of chalking that up as a lowering of the country's greenhouse gas emissions the carbon credits are sold on to another party. Say the carbon credits are sold to a fossil fuel based electricity producer. That electricity producer is going to be able to produce electricity for, say, a day, belching out X tonnes of carbon into the atmosphere. But because the fossil fuel based electricity producer has bought these carbon credits the electricity producer will claim that the electricity produced is clean and green because the producer has offset the carbon produced. However X tonnes of carbon dioxide has still been put into the atmosphere. There has been less lowering of emissions. Because the land owner has sold the carbon credits those X tonnes of carbon belong to the landowner. While they initially lowered their greenhouse gas emissions by avoided deforestration with the  return of the "purchased" carbon emissions effectively the carbon emissions from the land is the same as before they entered into the carbon trading scheme. I am concerned in that I don't know whether this is taken into account when calculating Australia's total carbon emissions. I am concerned that the carbon decrease from avoided land clearing and other pollution reduction carbon credits may be effectively counted twice.

Take landfill gas mitigation. It is the same issue. A filled landfill may be releasing methane from vegetable matter anaerobically breaking down. A company comes in, puts in the hardware to capture the methane that would have otherwise gone straight to the atmosphere, and either uses it to produce electricity or to flare it (that is burn it). Both processes result in the creation of carbon dioxide. While carbon dioxide is a greenhouse gas it is much less potent than methane (by a factor of 20 to 85 times, depending on what time period you consider the impact over). By avoiding the release of methane the company is able to claim carbon credits which they can then sell on to other companies so the other company can offset its emissions. The company that buys the carbon credits will release the carbon (equivalent) that the landfill gas capture scheme avoided. They will claim they have net zero carbon emissions. And what's more the owner of the landfill may also claim that they have zero carbon emissions - because it is all being captured onsite. But the carbon emissions still goes into the atmosphere.

What the company or person that generates the carbon credit by these methods (avoided land clearing and landfill gas mitigation) is doing is stopping carbon pollution that they are generating but then sells the right to produce that volume of carbon and pollute to someone else.

For the farmer wanting to clear land they should be prevented by regulation from doing this. Perhaps there could be some government compensation if it effects the productivity or the value of the land. However if a landowner has had the land in his possession for say over 10 years and has not cleared it or there is already regulation/ title restriction in place preventing clearing then no compensation should be payable.

In the case of the landfill gas and other situations where the owner or user is creating carbon pollution what should be happening is that if they keep on producing methane/carbon pollution they should be charged an amount, a carbon price, for the carbon dioxide equivalent they are releasing into the atmosphere. In that way the benefit they get from stopping their pollution of the atmosphere is that they no longer have to pay  the carbon tax.

It is illogical to me that some companies that are producing carbon pollution can decrease their pollution (mainly from landfill and land clearance) and in the process produce carbon credits and some carbon polluting companies can't.

Schemes that provide a company with carbon credits for stopping a company's own pollution is not a pathway for the country (or the world) to ever get to net zero green house gas emissions.

However there is another source of carbon credit that can result in a genuine carbon offset. These are credits from genuine carbon sequestration. An example of this is from tree plantation that will not die in the next drought - unlike the example mentioned above. There is also soil or sea carbon sequestration processes and geological sequestration from some form of carbon capture from the atmosphere or elsewhere. These sequestration processes actually lower the amount of carbon dioxide in the atmosphere. They are superior to the earlier cited pollution reduction carbon credits.

I will provide further explanation by way of an example of why sequestration credits are superior to pollution reduction carbon credits.

Take the example of three companies: Company A will generate carbon credits (ACCUs) by lowering its carbon pollution by 100 tonnes (generating 100 ACCUs). Company B will provide carbon credits by sequestering of 100 tonnes of carbon directly from the atmosphere. Company Z is currently polluting the atmosphere with 100 tonnes of carbon and has determined that the cheapest (though definitely not the best) way to lower its carbon pollution is to buy 100 tonnes of carbon credits. Which company, A or B, should Company Z buy from? (The carbon credits, ACCUs, usually go through a formal marketplace where there is no differentiation of the source - but I will keep the concept of buying direct for illustrative purposes.)

Firstly Company A. Initially Company A is putting 100 tonnes of carbon into the atmosphere. Company Z is also putting 100 tonnes of carbon into the atmosphere. That is a total of 200 tonnes of carbon (equivalent) going into the atmosphere. Company A stops its pollution and generates 100 tonnes of carbon credits (assuming it is eligible to do so and the carbon credits are legitimate under the rules). These carbon credits are sold to Company Z to offset its 100 tonnes of pollution. So is there no carbon pollution being produced? NO. There is still the 100 tonnes from Company Z going into the atmosphere. Who is responsible for that 100 tonnes of pollution? Company Z will claim that they aren't responsible, they have bought the carbon offsets so in their minds their company is green and clean. Is Company A now the owner of the 100 tonnes of pollution in the atmosphere? I doubt whether they would accept that. So there is now still 100 tonnes of additional carbon pollution in the atmosphere for which no one accepts responsibility. However it is not all bad. Originally there was 200 tonnes of carbon pollution being released into the atmosphere. There is now "only" 100 tonnes of carbon pollution being released into the atmosphere. It has been halved.

(A real issue is whether Australia's carbon accounting system counts that 100 tonnes that is still being emitted or whether it too somehow succumbs to double counting. I don't know enough about how the accounting system works to determine that.)

Now lets look at purchasing the carbon credits from Company B. Company B was producing no carbon pollution. They then sequester 100 tonnes of carbon pollution. This is a genuine reduction in atmospheric pollution by 100 tonnes. Their carbon production is negative 100 tonnes. They produce 100 tonnes of carbon credits. Company Z, still putting out 100 tonnes of carbon pollution, buys the 100 tonnes of carbon credits from Company B. The total carbon released into the atmosphere is negative 100 tonnes + 100 tonnes = 0 tonnes. The carbon pollution from Company Z has been genuinely offset. There is 100 tonnes less carbon in the atmosphere compared to purchasing the carbon credits from Company A.

The Carbon Credits (Carbon Farming Initiative) Act 2011 only includes a very limited range of sequestration options (in living biomass; dead organic matter and in soil). There is no option for geological sequestration under this Act which would limit some of carbon capture projects. There may be other Acts covering this? If not this should be rectified.

You can see from this comparison that the sequestration carbon credits produced by Company B are by far superior to the pollution reduction carbon credits produced by Company A. Of course this assumes the carbon sequestration is long term and genuine. Ideally sequestration carbon credits should be the only type of credits accepted in the carbon credit scheme. Reduction in pollution should not receive carbon credits and instead the producer of the pollution should be incentivised to reduce their pollution by a "carbon price" or some other mechanism. However we do not have this mechanism in place at present. It is not ideal but perhaps there is currently a place for pollution reduction carbon credits because, as shown in the Company A example above, it did result in a 50% reduction in carbon pollution. So long as country wide carbon accounting system still counts this.

As an interim stage to phasing out pollution reduction carbon credits I propose that the superiority of the sequestration credits be recognised by the lowering of the carbon reduction value of the pollution reduction carbon credits to 50% of the value of the sequestration credits.

Penultimately, pollution reduction carbon credits need to cease - say sometime in the 2030s - because, as I said, it is impossible to get to net zero carbon by using pollution reduction credits.

To confirm this imagine that it is 2040 - I am being optimistic - and the last two companies with carbon emissions are Companies A and Z. As per the example Company A eliminates their carbon emission from pollution reduction and creates 100 tonnes carbon credits. Company Z buys those carbon credits and then releases 100 tonnes of carbon into the atmosphere. Even though Company Z is nominally at net zero emissions, still 100 tonnes has been released into the atmosphere and Australia is not at zero emissions. I am hoping this scenario would not be counted as net zero.

Ultimately, we should be aiming at not using any carbon credits, especially not pollution reduction carbon credits but also including sequestration carbon credits, to offset other carbon emissions but use the sequestration carbon credits to lower the total amount of carbon dioxide in the atmosphere - without putting the carbon back from another source.

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