A controversial new report says carbon offsets are a dangerous gimmick.

From the international Kyoto Protocol to the recent energy bill that passed the US House of Representatives, carbon offsets have been a centerpiece of policies designed to make countries responsible for the amount of CO2 they’re allowed to produce.

The general idea behind carbon offsets suggests US polluters send money overseas in exchange for promised – and often pretend – pollution reductions elsewhere.

Michael Despines, Climate Resilience Campaign Coordinator for the US chapter of Friends of the Earth.

For example (in) the United States, our per capita emissions is still about 19 tons per person. The world average is only 4 tons per person and in the developing world, it’s only about 2 tons per person.  So we’re still emitting much, much higher than our fair share and with offsetting, it sort of locks that unfair ratio in place.

According to their report, Friends of the Earth recommends the US clean it’s own house by reducing emissions by 40% by the year 2020 before paying for the cleanup of our neighbors.

For a look at the full report and extended interview with Michael Despines, click here.

Illustration by Will Etling.

Carbon offsetting seemed suspect from the get-go.

Say you’re a coal burning power plant somewhere in the US and now, out of the blue, the government is telling you to produce 40% less CO2.  While it doesn’t make sense for you to cut 40% of the power you’re supplying, your alternative is to swap out the equivalent of your pollution by paying for some unseen, unregulated, unmonitored so-called clean energy development in a far off country.

This is the murky premise upon which carbon offsetting is based and supported in both international and domestic climate policy. A report published by the international climate action group, Friends of the Earth, entitled, A Dangerous Distraction – Why Offsets Are a Mistake the US Cannot Afford to Make, identifies the tragic flaws in carbon offsetting.

Michael Despines, Climate Resilience Campaign Coordinator for the US chapter of Friends of the Earth and co-author of this report, joins us in a discussion.

GA: Carbon offsetting, carbon credits, carbon tariff… these are all terms that are poorly understood by the great majority. What is offsetting exactly?

MD: It’s a great question and it can be a bit hard to understand so basically, if you care about climate change, you’ll want to understand what offsets are and particularly international offsets.  So the idea is, we know that our climate’s changing rapidly, temperatures are rising and that’s being caused by the emissions that we’re putting into the atmosphere like carbon dioxide and other gasses that trap heat in our atmosphere.  So what scientists are telling us is that we need to reduce our emissions as quickly as possible and many of the policy scenarios that are being put forth in the Congress and the Senate are putting forth ideas that, yes, we should reduce emissions – that’s the good news.  The bad news is that man of our policy options right now rely heavily on this idea of using offsets.  So offsets, what they mean is rather than a polluter here in the US, say a factory or a coal plant, rather than reducing their emissions here, what they’ll do is pay for a project in a developing country typically and that project will then pay a factory or a plant there to reduce their emissions at the equivalent amount.  And so the polluter here in the US gets credit for that and the allure of offsets is very enticing, it definitely seems like a win-win-win situation: We get to reduce emissions globally so the world environment wins; economically, you make the reductions where it’s most cost effective in countries where typically things are less expensive, so it’s very economically powerful and efficient; and then third, offsets are put forth as a way to finance sustainable development in the developing world.  And so, it’s very compelling to people but once you look into it and you see how it’s actually done in the real world and look at offsetting schemes that are out there, you find that offsets, particularly international offsets, they very rarely deliver on these promises and actually often can make climate change worse because emissions actually rise.

GA: This all started with something built into the Kyoto Protocol called the Clean Development Mechanism, an article which allows flexibility in the way that emission reductions could be achieved.  According to your report, the flaws in CDM offsets has started the domino effect of this misguided approach to global carbon reduction responsibilities.  Does this then nullify the Kyoto Protocol?

MD: I don’t think it nullifies it, I think the idea, the goal of the Kyoto Protocol is still very valid – we definitely need to reduce emissions around the world, all industrialized countries, everybody does.  The offsetting was added, as you said, as a flexibility mechanism to try and give as many options as possible and find creative ways to reduce emissions.  And as I said, in theory, it sounds great.  If we can reduce emissions, say, in China, as opposed to Indiana and it’s more cost effective, why not do that?  There are huge pressures on these offsetting schemes to produce lots of credits; there’s huge political pressure, pressure from governments, from industry, and just the way these mechanisms are set up, you have to fund thousands and thousands of projects all around the world and it’s virtually impossible to verify if these projects are real.  There’s a growing amount of data out there showing that many of these projects are not producing real emission reductions.  Estimates range anywhere from 1/3 to 2/3 of the projects simply the emissions are not real, so that means that the end result is that emissions are actually rising.  We need to reduce emissions but we need to do it at the source where it’s coming from.  Offsets are not the way to go.

GA: Why doesn’t offsetting work?

MD: Intrinsically, in the definition (of) offsets, the idea is that you’re trying to stop something that might have happened in the future.  The best way to do this is with an example: Somebody will invest in a project where they’ll pay for a plant again in China to close down, it’s a dirty factory and they’ll pay the funding to shut the plant down.  Maybe that plant was going to shut down anyway because it was going bankrupt or maybe they were gonna shift their production to another factory in a different part of China.  And so the end result is that emissions actually have not been reduced globally and because the polluter in the United States is still polluting and the offset project didn’t actually work, the end result is emissions are rising.

GA: Doubled.

MD: Doubled, exactly.  And you often see with the offsetting schemes, the only way you can get offsetting funding is if your project is it’s outside.  There’s no policy or regulation that says you have to stop polluting, so it actually has this perverse effect of encouraging governments to not pass good environmental laws.  Again, using China as an example, they generate huge revenues from these offsetting projects; they tax those revenues.  And so China now has incentive not to pass laws that would reduce pollution that’s causing climate change and it’s also encouraging the creation of some types of factories and industries that will create this pollution just so that they can turn around and request funding, creating polluting factories just so they can get offsetting funding.  There’s a lot of perverse side effects noone really thought about.

GA: How do offsets affect developing countries in terms of injustice?

MD: There are several problems: One is that offsetting is institutionalizing the idea either making emissions reductions here or there, somewhere else.  Scientists have made it very clear that we need to make dramatic reductions in our emissions everywhere, everybody needs to be reducing.  We’re not gonna make it if it’s either here or there, it’s gotta be both – it’s gotta be everywhere right now.  The other issue is this idea of equity. We developed and became very wealthy by exploiting these dirty fossil fuels and other types of energy that were generally dirty and we’ve used up a big part of the atmosphere, this carbon space.  We only represent 5% of the world’s population but we’ve contributed about 25-30% of all the man-made carbon that’s in the atmosphere.  So we’ve taken up a larger share than our fair space.  These other poor countries that are trying to develop, they don’t have that carbon space any longer to develop.  People are living on a dollar, two dollars a day, it’s not very fair to ask them to reduce.  For example (in) the United States, our per capita emissions is still about 19 tons per person. The world average is only 4 tons per person and in the developing world, it’s only about 2 tons per person.  So we’re still emitting much, much higher than our fair share and with offsetting, it sort of locks that unfair ratio in place and it still allows us to continue polluting at a higher ration than what is fair and it locks the poorer countries in a ratio of per capita emissions that just is not fair and it’s going to be very difficult for them to break free from poverty and achieve a basic quality of life.

GA: What are some recommendations you have for the global community to reduce carbon emissions without offsets?

MD: One of our fundamental recommendations is just that we need to set very serious and ambitious target reduction goals, for example by 2020, the US should set it’s targets at least at 40% compared to the 1990 levels, below the 1990 level, and do that without offsetting.  If we could do that alone, it would be a huge accomplishment because it’s quite far from what current policy proposals are before the House and the Senate.  We’re also recommending that (we) reject any proposals that would create any new offsetting schemes or ones that propose to expand current offsetting schemes.  And then, our third major recommendation is just that the US should be supporting financial mechanisms that can promote sustainable development in the developing world in a manner that is comparable to the scale needed in the developing world and also a way that’s equitable and fair.  In terms of the developing world, they’re the ones who are suffering the most from the impacts of climate change already.  There’s are thousands, potentially millions of people who are being displaced because of the changes in the climate, increases in mortality because of the rise of infectious disease, etc.  So we really need to support the UN mechanism and provide the funding that’s required to help these countries adapt to the new climate reality.

GA: So it’s still okay to fund sustainable development in developing countries, we just need to make sure there’s a system in place to keep in on eye on how these funds are being used.

MD: Absolutely.  Again, most people think that offsets are the great idea because there are all these financial flows going into offset projects taking place in the developing world, so that must be helping to promote sustainable development.  Well, actually again, many of the projects that are being funded through offsetting schemes are actually going to fossil fuel projects that are only marginally better than the traditional fossil fuel projects.  One of the problems is we’re helping to lock in this high-carbon infrastructure in the developing world which is gonna be there for decades and that’s not good for anyone.  Often the financial flows from offsetting is actually quite small compared to what the needs are and besides that, most of the funding is gonna go to private developers, it’s not really going to the economies and really promoting sustainable development.  So we need to focus on mechanisms that really get the money to were it’s needed and to support projects that really promote a transition to green technology.

Photos courtesy of AFP: Jewel Samad, United Nations Environment Programme, GREEN WAY, and World Bank.