Speaker 1: Welcome to zero. I am Kshatrati. This week Labradoodle's carbon
Speaker 1: offsets and the Emperor's new clothes. Think of the last
Speaker 1: time you bought a plane ticket and the airline offered
Speaker 1: you the opportunity to spend some more money to offset
Speaker 1: the emissions from your trip. If you didn't take it,
Speaker 1: you did right. That offer is part of a market
Speaker 1: known as the voluntary carbon market, worth two billion dollars today,
Speaker 1: and it hasn't really proved to work. It's a place
Speaker 1: where you and companies like Shell can buy credits from
Speaker 1: projects such as a solar facility in a developing nation, that,
Speaker 1: in theory, will avoid putting carbon into the atmosphere. At
Speaker 1: face value, these offsets might seem like a good thing.
Speaker 1: We want more solar plants, but the difficulty is improving
Speaker 1: whether paying for these offsets was the reason the solo
Speaker 1: plant was built. Many of these green projects would have
Speaker 1: gone ahead anyway, and thus your offset has not really
Speaker 1: provided any additional carbon benefit. It is why experts have
Speaker 1: pointed out that most of the credits on the current
Speaker 1: voluntary carbon market don't work still, as more companies sign
Speaker 1: up for net zero plans rather than actually reducing emissions,
Speaker 1: they find it easier to buy cheap offsets instead, and
Speaker 1: the voluntary carbon market will get a boost because it's
Speaker 1: receiving a stamp of approval from the US government itself.
Speaker 1: At COP twenty seven, the US Special Presidential Envoy for
Speaker 1: Climate John Kerry announced a new offsets program that will
Speaker 1: help developing countries transition to clean energy through purchases made
Speaker 1: by big corporate polluters. This was an unenviable task, especially
Speaker 1: in front of a global audience of environmental experts. You
Speaker 1: hear him acknowledge this throughout the conference. Unfortunately, some past
Speaker 1: abuses have in many minds, discredited the use of a
Speaker 1: carbon credit. No double counting, no greenwashing. We shouldn't let
Speaker 1: the mistakes of the past keep us from employing a
Speaker 1: powerful tool for steering private capital where it is most needed.
Speaker 1: What Kerry is getting into is a market that's been
Speaker 1: around for more than thirty years, and it's full of trouble.
Speaker 1: The first common credit project was created in nineteen eighty eight,
Speaker 1: and the man who created it was Mark Trexler, my
Speaker 1: guest today. This is a commodity that you can't see,
Speaker 1: you can't smell, you can't feel, and unless you're very
Speaker 1: careful with how you manage that commodity or regulate that commodity.
Speaker 1: You really are just selling a lot of emperors invisible clothes.
Speaker 1: But a lot of people have a lot of money
Speaker 1: at stake in doing just that. Mark is not a
Speaker 1: fan of what carbon offsets have become, and he is
Speaker 1: in a top position to explain why they don't work.
Speaker 1: That's important because the US and many giant corporations are
Speaker 1: doubling down on offsets as a solution. I spoke with
Speaker 1: Mark this summer for an article about the bogus offsets
Speaker 1: that companies buy so that they can claim to be
Speaker 1: carbon neutral, and to learn if there's anything that can
Speaker 1: be done to fix them. How did a good idea
Speaker 1: go so wrong? Mark, Welcome to zero, Thanks very much.
Speaker 1: Before we even start talking about carbon let's break down
Speaker 1: the idea of what an offset really is and where
Speaker 1: that idea came from. Well, an offset is basically the
Speaker 1: idea that instead of installing an expensive piece of equipment
Speaker 1: to control pollution on your power plant, you could do
Speaker 1: something somewhere else that would have the same impact, and
Speaker 1: so you would save the money of the expensive technology
Speaker 1: that you might otherwise have to attach to your power plant,
Speaker 1: and this this got started with the sulfur dioxide program
Speaker 1: in the United States. The term now is pretty widely
Speaker 1: used for sort of compensation of something you're doing in
Speaker 1: one place by something you're doing someplace else that is
Speaker 1: supposed to negate it. Given how big the market for
Speaker 1: offsets has become is likely to become, and that more
Speaker 1: and more people are going to come across the usage
Speaker 1: of offsets in some way. Already people are being hawked
Speaker 1: buying offsets when they buy their plane tickets. It's fascinating
Speaker 1: to know the history, and you've been there from the
Speaker 1: very start, but I do want to ask you a
Speaker 1: very blunt question at this point, do you regret participating
Speaker 1: in this industry that has not really helped the climate agenda? Yeah? Yeah.
Speaker 1: This is sort of like the recent inventor of the
Speaker 1: labradoodle apologizing to the world for inventing labradoodles and all
Speaker 1: of the other doodles because it's become a Frankenstein in
Speaker 1: the dog world. When this first started, this was a
Speaker 1: great idea, and carbon offsets were a way of getting
Speaker 1: electric utilities to talk about climate change and tackle climate
Speaker 1: change before regulation was on the table. Once you start
Speaker 1: doing carbon offsets, it becomes a lot harder to deny
Speaker 1: climate change, and so I don't regret being involved in
Speaker 1: it at that point. But no one ever envisioned the
Speaker 1: idea that voluntary carbon offsets were going to be the
Speaker 1: way that we solved climate change, which is what we're
Speaker 1: talking about today and what a lot of people are
Speaker 1: saying today that was never part of the conversation. And
Speaker 1: you were there when the first carbon offset project was
Speaker 1: created in nineteen eighty eight. How did you get involved?
Speaker 1: I was hired into the World Resources Institute to develop
Speaker 1: the methodology for that project, which was literally the first
Speaker 1: carbon offset project entirely voluntarily done. And w r I
Speaker 1: had selected this agraforestry project in Guatemala before I was
Speaker 1: hired in, and so that's then the project that we
Speaker 1: proceeded with and did a number of others with as
Speaker 1: after that. Now, what is a YES and why were
Speaker 1: they interested in carbon offsets at all? Well, AYES was
Speaker 1: a small company at the time, an independent power producer
Speaker 1: Applied Energy Services is what they were called at the time.
Speaker 1: They were headed up by Roger Sant and he directed
Speaker 1: a YES for many many years, and he was already
Speaker 1: concerned about climate change. He knew that building a coal
Speaker 1: fired power plant was not ideal, but in his view
Speaker 1: and the numbers certainly bore this out. At the time,
Speaker 1: there wasn't anything else he could build to generate power
Speaker 1: given sort of the laws and the rules and the
Speaker 1: economics in the US in terms of his business model,
Speaker 1: and his business model was small power plants. They ended
Speaker 1: up being coal fired power plants and gas fired power plants.
Speaker 1: And he came up with the idea or went to
Speaker 1: the WRII for help with the question of what can
Speaker 1: I do to sort of make sure that I'm not
Speaker 1: having a damaging impact on climate change? And that's how
Speaker 1: the idea of carbon offsets was born. Now, the idea
Speaker 1: of offsets, which the word offset itself, came earlier into
Speaker 1: the lexicon and had been used for sulfur emissions. Did
Speaker 1: the CEO as just turn around and said, well, they've
Speaker 1: done it for sulfur, why not do it for carbon.
Speaker 1: I don't think he went in with any preconceptions, but
Speaker 1: he went in and said, I'm building these power plants,
Speaker 1: they're going to emit carbon dioxide. Is there something we
Speaker 1: can do? John Kerry was active at this time too.
Speaker 1: He helped lead the foundation for using market mechanisms to
Speaker 1: offset pollution. It started with sulfur emissions from coal plants,
Speaker 1: which contributed to acid rain, and the market solution was
Speaker 1: to create a cap and trade system. I led the
Speaker 1: fight in the nineteen eighties when I was chairman of
Speaker 1: a Governor's Task Wars as a non governor as lieutenant governor,
Speaker 1: and we put together the acid rain response. And that's
Speaker 1: when cap and trade was born because we took it
Speaker 1: from the American Enterprise Institute Conservative entity, which had designed
Speaker 1: a market based solution to the problem of sulfur. I
Speaker 1: guess what it worked. We saved it. You don't hear
Speaker 1: about acid rain. Now back to mark of the nineteen eighties,
Speaker 1: WRI teamed up with a relief group called CARE that
Speaker 1: was already operating in Guatemala to see if they could
Speaker 1: set up a carbon offset program. And so the AES
Speaker 1: money went to CARE to expand the work of CARE
Speaker 1: in agriforestry. You know, this involved helping landowners put in
Speaker 1: hedgerows and putting together small tree farms to come up
Speaker 1: with huge numbers of seedlings that could be planted on
Speaker 1: the land. So it tried to build a whole economy
Speaker 1: in rural Guatemala around sort of reforestation integrated into the
Speaker 1: agricultural system. And the methodology that I ended up developing
Speaker 1: was that the carbon sequestration wasn't based on the agricultural systems.
Speaker 1: It was based on protecting the natural forest that otherwise
Speaker 1: would have been cut down as these farmers had to
Speaker 1: abandon their lands in one place as they got depleted
Speaker 1: and move into new lands. So what does a methodology
Speaker 1: for a carbon offset project really entail? Well, the methodology
Speaker 1: that I developed for that project, by today's standards, would
Speaker 1: be seen as laughable. So you know, I did some calculations,
Speaker 1: I made some assumptions. I wrote it all all up
Speaker 1: in a very nice way. Methodologies today, for almost any
Speaker 1: kind of project, there are a whole bunch of things
Speaker 1: they have to address. There are all sorts of tests
Speaker 1: for additionality, and you have to discuss permanence, and you
Speaker 1: have to discuss leakage. None of that existed for the
Speaker 1: first methodology. But the basic idea behind the methodology is
Speaker 1: to say, here's a project, whether it's agraphores ary, whether
Speaker 1: it's cook stoves, whether it's energy efficiency, here is how
Speaker 1: it's going to reduce or remove carbon emissions. And here
Speaker 1: is how we're going to measure the difference between what
Speaker 1: would have happened otherwise the baseline and what happens with
Speaker 1: the project, and how we're going to calculate the difference
Speaker 1: between those two, which is the number of offset credits
Speaker 1: that that project is then allowed to sell. Now, could
Speaker 1: you explain those three terms? Additionality, permanence, and leakage. Right,
Speaker 1: these terms came out of law that already existed in
Speaker 1: the US for other plutants regulated by the Environmental Protection Agency,
Speaker 1: and so we took several of the terms from those
Speaker 1: rules and applied them to the idea of carbon offsets.
Speaker 1: And the three really key criteria for what makes a
Speaker 1: legitimate carbon offset our additionality, permanence, and leakage. Because what's
Speaker 1: happening with an offset is you're in effect permitting a
Speaker 1: ton of CO two to be emitted in one place.
Speaker 1: That's what the offset is, at least in principle, making possible.
Speaker 1: And so the characteristics of the offset have to be
Speaker 1: such that you're compensating for the real characteristics of the
Speaker 1: ton that has now been emitted, and so you have
Speaker 1: to be doing something that wouldn't have other wise happened.
Speaker 1: You have to do something that is quote unquote permanent
Speaker 1: because the ton that's being emitted is going to be
Speaker 1: in the atmosphere for one to two hundred years. So,
Speaker 1: for example, if you're putting a fence around a forest
Speaker 1: to protect that forest, that might be additional because it
Speaker 1: wouldn't have been otherwise protected. It might be permanent if
Speaker 1: you assume that you can permanently protect that forest. But
Speaker 1: all the pressure that there would have been to exploit
Speaker 1: that forest, hasn't that just gone someplace else? And if
Speaker 1: it is exploiting forest someplace else, then the carbon benefit
Speaker 1: of that first project to protect the forest is leaking.
Speaker 1: And then after you go home, what happens to carbon offsets?
Speaker 1: Do you think that you're going to keep hearing about them?
Speaker 1: Because other people would adopt this idea. The popularity of
Speaker 1: carbon offsets grew rapidly. For example, electric utilities in the
Speaker 1: United States, especially cold fired electric utilities, they anticipated that
Speaker 1: their greenhouse gas emissions would be regulated by the mid
Speaker 1: nineteen nineties. Of course, they were off by decades, but
Speaker 1: they were very interested and very motivated to try and
Speaker 1: come up with alternatives to being forced to directly reduce
Speaker 1: their emissions because they had no idea how they were
Speaker 1: going to do that. And so within three or four
Speaker 1: years you had all kinds of companies doing all kinds
Speaker 1: of projects to sort of test out the idea of offsets.
Speaker 1: And after that, offsets got integrated into pretty much every
Speaker 1: policy proposal to tackle climate change at the federal level
Speaker 1: in the US, and they took then they took on
Speaker 1: a life of their own at international fora And was
Speaker 1: there any skepticism about combon offsets during that period early years?
Speaker 1: The skepticism did start to arise relatively early, and it
Speaker 1: was quite active. For example, around the period of the
Speaker 1: Kyoto Protocol, were you there by the way, I was
Speaker 1: in Kyoto. I was not in the negotiating room because
Speaker 1: I was not part of a delegation, but there were
Speaker 1: a lot of us in terms of the non governmental organizations.
Speaker 1: There were hundreds of us, you know, milling around the
Speaker 1: conference center all night waiting for the people in the
Speaker 1: negotiating room to try and come to a final document.
Speaker 1: So people knew that there would be market mechanisms, they
Speaker 1: knew there would be offsets, but there was some real
Speaker 1: concern in the environmental community at the time, parts of
Speaker 1: the environmental community. So you had some parts of the
Speaker 1: environmental community, the groups that were out doing work in
Speaker 1: the field, they saw offsets as a way of funding
Speaker 1: their activities, and this would be the CARES, the Rainforest
Speaker 1: Action Coalition, the Nature Conservancy. But you did see other
Speaker 1: environmental groups that were very concerned that sort of forestry
Speaker 1: would take over and swing the market away from the
Speaker 1: energy side, where they thought a lot more attention needed
Speaker 1: to be delivered and distort sort of the overall effort
Speaker 1: at mitigating climate change. So let's talk about the Quote Protocol,
Speaker 1: which was you know, first agreed upon in nineteen ninety seven.
Speaker 1: But what was the goal when the Quote Protocol was
Speaker 1: being discussed and how did offsets become a part of it. Well,
Speaker 1: the Kyoto Protocol is a protocol to the United Nations
Speaker 1: Framework Convention on Climate Change, which had been approved earlier.
Speaker 1: It didn't place mandates on anyone to do anything in particular.
Speaker 1: It was more of a rhetorical document, you could say.
Speaker 1: The Kyoto Protocol was specifically intended to give some keith
Speaker 1: to the UNFCCC. And so the Quote Protocol said, we
Speaker 1: have annex one countries. These are basically industrialized countries. They
Speaker 1: will have a treaty based mandatory obligation to reduce their
Speaker 1: emissions from a historical base line. We have developing countries
Speaker 1: Annex two countries. They will have an obligation to at
Speaker 1: least report on their emissions, etc. With the idea that
Speaker 1: they eventually start reducing their emissions and carbon offsets and
Speaker 1: market mechanisms generally, because there were a couple different kinds,
Speaker 1: Joint implementation and the clean Development mechanism were a way
Speaker 1: to tell the industrialized countries, this won't be as expensive
Speaker 1: as you think, because you can buy these credits, and
Speaker 1: you could tell the developing countries you're getting something for
Speaker 1: this because a lot of money will flow to these
Speaker 1: projects in your countries. So the idea of these market
Speaker 1: mechanisms was quite key to the final structure of the
Speaker 1: Kyoto Protocol. Now that sounds ideal, right. It would be
Speaker 1: great to find a way in which wealthy countries could
Speaker 1: transfer some of their wealth to developing countries and help
Speaker 1: developing countries not tap into the fossil fuels that really
Speaker 1: powered the developed countries to be developed, and put all
Speaker 1: these emissions into the atmosphere and what you're describing with
Speaker 1: the use of offsets, there is in some way this
Speaker 1: acknowledgement from the developed countries that perhaps the goals of
Speaker 1: reducing emissions that they are setting themselves up for may
Speaker 1: be too stringent, and they needed a way out, and
Speaker 1: carbon offsets provided this way out. The real challenge with
Speaker 1: carbon offsets since the very beginning, is that carbon offsets
Speaker 1: are trying to do two different things, and to some
Speaker 1: extent those things are potentially contradictory. The first is mitigate
Speaker 1: climate change more cost effectively. The other real motivation and
Speaker 1: driver is to reduce the cost to the companies or
Speaker 1: the countries for complying with whatever the rules end up.
Speaker 1: And so let's make this as low cost as possible.
Speaker 1: That ends up being the driver that gets the biggest
Speaker 1: seat at the table, as opposed to let's make sure
Speaker 1: this is actually mitigating climate change. There are far fewer
Speaker 1: people at the table trying to push that point, and
Speaker 1: unfortunately the cost containment has in effect one out. And
Speaker 1: you made this point that when you first started on
Speaker 1: this journey and you saw the idea of Flourish, there
Speaker 1: was a sense of offsets will eventually go away but
Speaker 1: now we're talking about the Kyoto Protocol and you're seeing
Speaker 1: all these countries wanting to adopt it more. It's getting
Speaker 1: further entrenched into the system rather than going away. What happened.
Speaker 1: You know, if all the countries of the world have
Speaker 1: all these policies in place to reduce emissions and encourage
Speaker 1: carboncy equestration, there is no room for an offset market,
Speaker 1: because an offset market is dependent on a supply of
Speaker 1: sets from sectors that otherwise aren't regulated or capped in
Speaker 1: any way. And so I think most of us would
Speaker 1: have assumed, and probably still do assume, that if we
Speaker 1: really were serious about climate change, we would be using
Speaker 1: public policies and measures to make that happen. People have
Speaker 1: become so frustrated with the lack of policy action on
Speaker 1: climate change that they're willing to grasp at almost any straw.
Speaker 1: Carbon offsets is one of those straws, and you know
Speaker 1: it's not going to work, but it gives people a
Speaker 1: sense that we're doing something when we don't seem to
Speaker 1: really be willing to do very much more. Up to
Speaker 1: the break and then the cure to protocols sort of
Speaker 1: get stuck right till two thousand and five countries do
Speaker 1: not ratify it put it into action. Of course, the
Speaker 1: biggest potential buyer of these offsets and potential emission reducing country,
Speaker 1: the US never ratified it. So would you say common
Speaker 1: offsets had their peak in the Kuto Protocol period. I
Speaker 1: think they're probably at a higher peak today, but at
Speaker 1: the time that was something of a peak. And two
Speaker 1: things that you've mentioned. One of them two things really
Speaker 1: sort of torpedoed this idea quite early on. The first
Speaker 1: was that the United States never ratified the Kuto Protocol,
Speaker 1: and the United States had been anticipated to be net
Speaker 1: demand of two billion tons a year for these markets,
Speaker 1: and so the fact that the US was not in
Speaker 1: the market just made the market much harder to envision
Speaker 1: how it was going to work. The other huge thing
Speaker 1: that happened was that the way the numbers were calculated
Speaker 1: for Annex one countries, which included Russia and Eastern Europe
Speaker 1: at the time, they got credit in a sense for
Speaker 1: the collapse of the Soviet Union, and they got credit
Speaker 1: for the collapse of the economy, and so suddenly you
Speaker 1: had this very large number of tons that in principle
Speaker 1: could be sold from Russia to the United States, if
Speaker 1: the United States wasn't buying, but you had this large
Speaker 1: number of tons, not really offsets and not additional because
Speaker 1: it had sort of happened by itself, and that really
Speaker 1: fouled up the market because you have to remember that
Speaker 1: to go out and develop good carbon offset projects takes time,
Speaker 1: it takes money, it's a risk. You're generating these offsets.
Speaker 1: Then over five years, ten years, fifteen years, if at
Speaker 1: some point you think the market might collapse because Russia
Speaker 1: sells a ton of credits into Western Europe, going to
Speaker 1: be very nervous about doing legitimate projects and taking that risk.
Speaker 1: And so the whole between the absence of demand from
Speaker 1: the US and between this potential availability of hot air supply,
Speaker 1: which is what it was called from Eastern Europe, it
Speaker 1: was really difficult for a legitimate offset market to get
Speaker 1: off the ground. But all along, the voluntary carbon market
Speaker 1: for corporations was still pretty active, and you were helping
Speaker 1: companies go carbon neutral through the use of offset. Right,
Speaker 1: there were a few companies at the time, this is
Speaker 1: the mid nineteen nineties that really face no threat of
Speaker 1: regulation at all, but that we're trying to figure out
Speaker 1: how to push the needle, so to speak, on mitigating
Speaker 1: climate change. And so there were a group of companies
Speaker 1: at the time, the Carbon Neutral Network, that was starting
Speaker 1: to explore the idea of what would carbon neutrality look like.
Speaker 1: Interface Carpet was a big player there, and Nike was
Speaker 1: a player there. But we had also been working with
Speaker 1: stony Field Farm Yogurt, which is now a subsidiary of danone,
Speaker 1: but at the time was its own independent company led
Speaker 1: by some very progressive people, and they came up with
Speaker 1: the idea of could we make our dairy and our operations,
Speaker 1: could we make them carbon neutral? Figured out how much
Speaker 1: carbon that all was, and then they went out and
Speaker 1: purchased carbon offsets to be able to say we're carbon neutral,
Speaker 1: and they were the first company to actually do that
Speaker 1: in nineteen ninety six. And because companies then start using
Speaker 1: these carbon offsets, people try to make them into a
Speaker 1: commodity in this voluntary market. And there's this climate exchange
Speaker 1: that was launched by Al Gore in two thousand and
Speaker 1: three called the Chicago Climate Exchange, And somehow then things
Speaker 1: went downhill. What happened Something I said at a conference
Speaker 1: of the Party early on was policymakers tend to forget
Speaker 1: that there are a thousand very smart people in the
Speaker 1: room next door just waiting to game whatever the rules
Speaker 1: are that policymakers come up with for carbon offsets, and
Speaker 1: so you have some people trying to have stronger rules,
Speaker 1: you have some people using weaker rules. That's really problematic
Speaker 1: because it ends up in a race to the bottom
Speaker 1: of the market. And I think a lot of people
Speaker 1: would argue that the Chicago Climate Exchange ended up reflecting
Speaker 1: that because they were embracing methodologies for soil carbon and
Speaker 1: for other things that were so weak that the carbon
Speaker 1: offsets involved were literally being sold for pennies a ton,
Speaker 1: And eventually that just didn't fly anymore and that fell apart.
Speaker 1: But it really illustrated this problem that if if anyone
Speaker 1: can go out and sort of figure out their own methodology,
Speaker 1: how do you maintain quality in a situation like that,
Speaker 1: Because if you go into the market saying I'm only
Speaker 1: going to do really high quality stuff, but all your
Speaker 1: competitors are selling lower quality stuff, you're not going to
Speaker 1: survive in that market very long. So it's turned into
Speaker 1: a very challenging market to be in. In full transparency,
Speaker 1: The first carbon offset project that I worked on. You know,
Speaker 1: we estimated the cost of that at two cents a ton.
Speaker 1: It's hard to imagine today, but at the time it
Speaker 1: made sense. And since then we've realized that these projects
Speaker 1: are actually a lot more difficult to implement than they sound.
Speaker 1: And so if you're able to buy these offsets at
Speaker 1: these cheap prices, and this is early two thousands, then
Speaker 1: why does the market not keep buying them? And why
Speaker 1: is the interest in offset sort of starting to decline?
Speaker 1: In the early twenty tents there were a lot of
Speaker 1: front page exposs and they those who have continued. So
Speaker 1: at some point companies say, is this really worth it
Speaker 1: to risk being charged with greenwashing for going out and
Speaker 1: buying these low cost offsets. We should just go back
Speaker 1: to focusing on energy efficiency programs and reducing our carbon footprint.
Speaker 1: Then twenty fifteen comes around, the Paris Agreement is signed,
Speaker 1: and suddenly offsets are back on the table. And now,
Speaker 1: of course we are talking in twenty twenty two, and
Speaker 1: it's a huge market, and so what causes companies to
Speaker 1: rethink this shame has suddenly the quality of offsets become
Speaker 1: not a problem. If only that were true. What's really
Speaker 1: happened is that everyone seems to have largely given up
Speaker 1: on the idea that governments and policymakers will solve this problem.
Speaker 1: So when the Kyoto Protocol basically failed in terms of
Speaker 1: there was no renewal of the protocol after its first term,
Speaker 1: we switched to a totally different paradigm with the Paris Agreement,
Speaker 1: where everything is suddenly voluntary. Everyone voluntarily comes in and
Speaker 1: makes commitments, and you hope that those commitments will add
Speaker 1: up to what is required. The IPCC, the Intergovernmental Panel
Speaker 1: on Climate Change, comes out and says that if we're
Speaker 1: going to meet the two degree target or a two
Speaker 1: degree target, if we're going to do that, we need
Speaker 1: to be net zero by twenty fifty globally, and that
Speaker 1: then led companies to say, well, why don't we go
Speaker 1: net zero? So this was sort of the next iteration
Speaker 1: from carbon neutrality. But as companies started to step up
Speaker 1: and say we'll go net zero because that's what needs
Speaker 1: to happen, then suddenly they realized, oh, we're going to
Speaker 1: need enormous numbers of offsets to be able to go
Speaker 1: net zero by twenty fifty, So let's get offsets going again,
Speaker 1: and can offsets get us to net zero. It sort
Speaker 1: of depends what you mean. You know, the potential supply
Speaker 1: of low quality, illegitimate offsets is virtually infinite. I mean,
Speaker 1: just for example, something that's happening right now in this
Speaker 1: market is that countries that have always done a good
Speaker 1: job of protecting their forests, their tropical forests, they have
Speaker 1: not been able to participate in offset markets because the
Speaker 1: forest has to be under threat. If a forest is
Speaker 1: not under threat, then you can't do an offset project.
Speaker 1: And the countries like Gabon for example, that have done
Speaker 1: for whatever reason, they've done a good job of managing
Speaker 1: their forests low deforestation rates, they have been very upset
Speaker 1: that they've been locked out of this mechanism. So they
Speaker 1: have now started selling carbon credits into the market that
Speaker 1: basically don't have any additionality. And if you start selling
Speaker 1: billions and billions of tons from standing forests that isn't
Speaker 1: under any immediate threat, yeah you could accomplish at zero,
Speaker 1: but it won't actually have the climate change benefit that
Speaker 1: you're hoping for because it's all just a mirage. But
Speaker 1: that's weird, right. You go through these phases where carbon
Speaker 1: offsets become an interesting tool, then there's sort of a
Speaker 1: boom bus cycle of the commodity life happening here and
Speaker 1: all the time. People have these problems that many become
Speaker 1: aware of them, somehow they forget, and then other groups
Speaker 1: of people become aware of why. Well, it's weird only
Speaker 1: in the sense that in an ideal world it wouldn't happen.
Speaker 1: I mean, we see this kind of thing happening in
Speaker 1: all kinds of areas all the time. Back in two
Speaker 1: thousand and eight, people were cold calling retirees telling them
Speaker 1: you really should invest in carbon offsets for your retirement
Speaker 1: funds because you'll make a lot of money. This was
Speaker 1: two thousand and eight. The market collapsed in two thousand
Speaker 1: and nine. Now people are out telling retirees you should
Speaker 1: be a investing in carbon offsets because you're going to
Speaker 1: make a lot of money, And maybe they're right this time.
Speaker 1: I can't predict the future better than anyone else. I
Speaker 1: can say that these markets are incredibly fragile. This is
Speaker 1: a commodity that you can't see, you can't smell, you
Speaker 1: can't feel. It's sort of like the Emperor's invisible clothing.
Speaker 1: So it's a very strange commodity. And unless you're very
Speaker 1: careful with how you manage that commodity or regulate that commodity.
Speaker 1: You really are just selling a lot of emperors invisible clothes.
Speaker 1: But a lot of people have a lot of money
Speaker 1: at stake in doing just that. I don't think people
Speaker 1: are going into this with nefarious intent, but you know,
Speaker 1: they're able to convince themselves that what they are doing
Speaker 1: is good for the planet, etc. But when you look
Speaker 1: at the whole picture, it is not having much of
Speaker 1: an effect. So officers don't work as they are intended to,
Speaker 1: yet they're everywhere. Is there any way to fix them? Well,
Speaker 1: I think the two ways you could go about fixing them.
Speaker 1: One is to go back to a decision that was
Speaker 1: made very early on in terms of a positive list
Speaker 1: versus the alternative. And the positive list was somebody would
Speaker 1: sit down and decide what offsets are good offsets, and
Speaker 1: those would go on to a positive list and only
Speaker 1: those could be brought into the market. And this was
Speaker 1: abandoned very early on in the process because no one knew, well,
Speaker 1: who's going to do it, how would they pay for it,
Speaker 1: how long will it take. Let's do more of an
Speaker 1: ad hoc system, which quickly turned into sort of a
Speaker 1: creative writing exercise to get projects proved. So the other
Speaker 1: thing that could make a significant difference is giving buyers
Speaker 1: the ability to differentiate between lower quality and higher quality offsets,
Speaker 1: and that could be done through a scoring system, and
Speaker 1: my team many years ago developed the first carbon offset
Speaker 1: scoring system, where basically all offsets would be ranked or
Speaker 1: scored between zero and a thousand to say, here's how
Speaker 1: much confidence you can have that this offset is satisfying
Speaker 1: the criteria of additionality, permanence, and leakage. Ideally, people would
Speaker 1: buy eight hundreds and would not buy two hundreds. So
Speaker 1: if we're going to have offsets, the idea of scoring
Speaker 1: offset seems to me an option that could do a
Speaker 1: lot of good. So, given all the problems we've talked through,
Speaker 1: you've still stuck with this market for thirty audios. Why
Speaker 1: this is by no means my primary focus. I'm focused
Speaker 1: on climate risk issues and how can we better communicate
Speaker 1: climate risk. But I do continue to get drawn back
Speaker 1: into the offsets issue just because I have been around
Speaker 1: it for so long. But I personally really do despair
Speaker 1: that will ever use offsets in the way that we
Speaker 1: could as a climate change mitigation tool. It's just too
Speaker 1: easy to do it wrong, and we just keep seeing
Speaker 1: that repeatedly. Mark, thanks for coming on the show. Thank
Speaker 1: you very much. I've been writing about carbon offsets for
Speaker 1: a few years now and I still haven't plumbed all
Speaker 1: the depths or grasped all the complications. However, talking to
Speaker 1: Mark has allowed for probably the clearest understanding of where
Speaker 1: things stand today. If you want to read more about
Speaker 1: the dodgy world of offsets and how big brand names
Speaker 1: continue to fall for them, check out a three part
Speaker 1: investigation that Bloombergreen published recently. You can find it at
Speaker 1: bloomberg dot com, slash green, or in the show notes.
Speaker 1: I want to recommend the podcast A Matter of Degrees,
Speaker 1: Doctor Catherine Wilkinson and doctor Leah Stokes talk about the
Speaker 1: forces behind climate change and the tools we have to
Speaker 1: fix it. They just put out a bunch of episodes
Speaker 1: about what individuals can do. I recommend part to the Professional,
Speaker 1: where you can follow along as an oil worker tries
Speaker 1: to change jobs and go green. Thanks so much for
Speaker 1: listening to Zero. If you like the show, please rate,
Speaker 1: review and subscribe, Tell a friend or tell a cabin
Speaker 1: trade expert. If you've got a suggestion for a guest
Speaker 1: or topic, or something you just want us to look into.
Speaker 1: Get in touch at zero pod at Bloomberg dot Net.
Speaker 1: Zero's producer is Oscar Boyd and senior producer is Christine
Speaker 1: riskoll Our. Theme music is composed by Wondering. Many people
Speaker 1: help make the stories we featured on the podcast special.
Speaker 1: Thanks to Natasha White and Demetrius Podcasts for their interminable
Speaker 1: attention to detail. I'm Akshatti back next week.