Sunday, December 13, 2009

Carbon Credits - The Modern Indulgences

I have looked a carbon credits for about ten years now. On a first glance I thought they were an interesting way to finance projects that would improve the environment, but the more I looked into them, the more I was uncomfortable with how they work and how they are measured.

I have thought about writing about them from time to time over the last couple of years, but watching the Carbon Hunters on CBC today pushed me to move forward on the idea.

Carbon credits feel more like the indulgences the Catholic church sold in the past. The idea was that if you paid cash ahead of time, you could sin. Carbon credits means you can emit carbon but feel like a non-sinner about it. The medieval system was inherently corrupt and did nothing to convince people that living a moral life was a good idea. Carbon credits are much the same.

Carbon Trade Watch covers many of the issues I have with carbon credits, though they seem to come from anti-market point of view.

Carbon Credits May Not Reduce Emissions

There are various carbon credit ideas out there that are all about not doing something. As an example paying people not to cut down trees. Company X offsets Y tonnes of CO2 because someone is choosing not to cut down a set of trees. The level of emissions is no lower, but the company can claim to be carbon neutral.

The crazy thing is that these same trees that do not get cut can get carbon credits each and every year. Farmers that practice no till farming can get annual carbon credits.

If someone buys land in the Amazon and does not log it, they can get carbon credits. This ignores the fact that there has been reduction in the demand for more land to cleared in Brazil. There is no way this can be counted as a benefit, but it is. There is no net reduction of CO2, just a transfer of money from one business to another for a green washing.

At the end of the day the total global emissions has not been reduced, only the potential for more emissions.

Carbon Credits are Hard to Monitor

Much of the carbon offset business is based on the idea of someone doing something, but there is not a very rigorous audit and compliance system in place. If someone plants some trees, there is an assumption of the carbon credit value. It is rare to have anyone actually quantify the amount of carbon that has been captured by the trees.

On small projects it is all done on the basis of trust that the people will do as they promised. There is no consistent monitoring. In many developing countries the legal and business infrastructure is fundamentally corrupt and untransparent. In these countries there is no way to monitor what is happening. The best example is China, the nation is well known for not having any effective monitoring of anything. It is also well known as being impossible to enforce a contract. The government is one that spends huge energy on a fake image and does not allow scrutiny of actions. I highly doubt that third party monitoring will be possible.

The buying and selling of carbon credits moves people and businesses a long way away from the actions they are taking. They are not taking a personal responsibility for their actions.

Many Carbon Credit Projects Would Happen Anyway

The idea of a carbon credit project is that is either removes or avoids green house gas emissions. How do you deal with projects that would happen anyway? As an example, no till farming in Saskatchewan is better for long term farming the than the status quo, a smart farmer is already using no-till farming.

Micro-hydro in BC will dramatically reduce CO2 emissions in North America by displacing coal fired power, but these micro-hydro projects will go ahead without the money from credits because it makes financial sense to do so.

Large Scale Carbon Credit Projects are Dangerous

One of the reasons climate change is an issue because we are doing too much the global environment. If we take on some truly huge carbon projects that use natural systems to make them happen, we have a strong potential for unintended consequences. When messing with the global climate through plants or grandious for algae die offs in the ocean, we have too many unknowns in the equation.

Carbon Credits Will be a Disaster as Part of Cap and Trade

I will post about cap and trade in the future, I have no faith that cap and trade will make any difference to emissions. Carbon credits are an integral part of cap and trade. The idea is company A reduces their total emissions below their cap and they can sell the 'extra' as a carbon credit to company B.

Cap and trade has been a corrupt nightmare where it has been used
. The carbon credits coming from this source are worthless hot air.

How Can You Make Carbon Credits Work?

Simple, you physically capture CO2 or methane and sequester it. You do not capture it through a natural process such as growing trees unless there is a plan to long term harvest and sequester the timber. Ideally you would strip the CO2 out of the air and have an actual measurement of the CO2 captured. There are industrial processes for this and the more of a demand there is for this, the cheaper the process will get.

I would like to ideally see a carbon tax that uses the proceeds to pay for industrial extraction of CO2 from the air. This sort of connection will create a clear price that a carbon tax needs to be at.

It is also important that certified carbon credit projects occur in countries with a free press, democratic government and transparent processes.

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