‘I hope the voluntary carbon offset market will come to an end’

Many carbon offset projects aim to curb deforestation (photo shows a forest in Côte d'Ivoire). Keystone / Legnan Koula

For those thinking of offsetting flight emissions by financing climate projects abroad, expert Carsten Warnecke has one piece of advice – don't do it. The co-founder of the NewClimate InstituteExternal link argues it’s an illusion that the carbon offset market can help solve the climate crisis and spares Switzerland no criticism.

SWI swissinfo.ch: I recently flew from Seville to Geneva and offset the carbon emissions by funding a reforestation project in NicaraguaExternal link. Can the emissions from a flight be balanced out by planting trees? Or is this marketing for passengers who want to clear their conscience?

Carsten Warnecke: It is not possible at all to offset emissions in this way. The production of jet fuel disrupts the long-term carbon cycle, which stored the carbon underground for millennia. Planting trees, on the other hand, means storing carbon in the short term.

No one can guarantee that the tree I plant today to compensate for my flight will still be there in 20 or 30 years. Climate change itself is a threat to forests, as shown by increasingly frequent wildfires, droughts and pests. It is already a big challenge to preserve existing forests. And the potential for biological carbon storage is limited: nature would at best allow us to compensate for historical emissions or emissions that we now consider unavoidable. So-called nature-based solutions are not suitable or available at a scale that we can use them to compensate for today’s emissions.

We do not need nice pictures of green trees and projects that give us the impression that we do not have to change our behaviour. We need drastic images, like those on cigarette packets, which show the real impact of our actions.

SWI: Offsetting organisations and companies offer numerous international environmental projects, from recycling plastic in Romania to installing energy-efficient stoves in Kenya. Consumers can support these voluntarily. How can they choose the project with the greatest impact?

C.W.: Even for those who are well informed, it is impossible to select the most effective projects. Some projects are presented well, but it is impossible to know whether the information given is correct, unless you go to the site and check. The ineffective projects are so numerous that it is difficult to find your way around.

Carsten Warnecke is co-founder of the NewClimate Institute, a non-profit organisation based in Cologne, Germany, that focuses on climate policy and global sustainability. NewClimate Institute

In general, it is illusory to think that this market can develop projects or activities that can really compensate for your emissions without any negative climate impact as if the emissions had not originally occurred. To those who want to invest in these projects just to offset their emissions, I can only say one thing – don’t do it.

SWI: What would be an example of a ‘good’ project?

C.W.: Forestry projects make up the vast majority of offsetting projects and are also the most problematic for compensation purposes. However, there are some interesting projects to reduce emissions from industry and households, or to improve energy efficiency. Many have good potential when they launch, but it all depends on by whom and how they are implemented.

SWI: A recent investigationExternal link showed that most of the certificates issued to protect forests were worthless. That is, they did not represent real reductions in carbon emissions and, in some cases, only shifted the problem of deforestation elsewhere. The Swiss company South Pole was also involved in a controversial project in Zimbabwe. How did this situation come about?* 

C.W.: Many standards and methodologies currently used in the so-called voluntary carbon markets to define a project are extremely weak and defined by the market itself. That’s why the market should instead be called the “unregulated market”. The emissions that these projects promise to offset or avoid are very often overestimated. Sometimes there is bad project management or controls only take place after a decade. Too much time passes before problems are identified and many certificates have already been sold.

As for deforestation, it is well known that it cannot be avoided simply by protecting certain areas. Defining limits within which trees are protected in the name of climate only increases the pressure on the surrounding areas. You cannot stop deforestation without addressing its drivers, and you cannot claim to have a positive impact on the climate just because you protect a small area of land.

SWI: Behind the carbon credits we buy to offset our emissions is a long chain of intermediariesExternal link that includes trading companies and certification bodies. Who makes the most money in this market that was worth over $2 billion by 2021External link?

C.W.: It is hard to say who earns more. What is certain is that most of the money in many projects never reaches the project or community level.

The market for carbon credits has existed for some 20 years. There have been periods when the value of credits was almost zero because projects were developed for which there was no demand. It is a trade: some people buy credits cheaply in the hopes that the price will rise. There are people who bought credits for a few cents and now sell them to companies who think they are offsetting their emissions this way and contribute to climate finance flows to the Global South which is often hard to prove.

SWI: What is the real benefit to those at the beginning of the chain, namely local populations and their environment?

C.W.: It depends on the type of project and the intentions of those implementing them. The fact that project implementation is triggered by carbon markets does not help. Alternative funding without pressure from market forces might have the same if not higher potential to deliver on the promises they make.

I am thinking, for example, of wastewater treatment that results in reduced greenhouse gas emissions but at the same time improves local water quality, reduces air pollution, and creates jobs for the local population.

Many of those who developed such projects in the early days of the carbon markets had good intentions but abandoned the market long ago. The market growth since then has been realised though projects that do not deliver what they promise.

SWI: Verra, the organisation that controls about three-quarters of the world’s carbon offset credits, argues that it will not be possible to meet climate goals without the funding generated from such offset markets. But you said you want to put an end to this systemExternal link. Does this not deprive developing countries of important funding from wealthier states?

C.W.: The voluntary carbon market, despite impressive marketing operations, is actually very small, almost niche. The amount of money mobilised is small compared to other financial flows. This market allows individuals and companies to declare themselves climate-neutral when in fact they do nothing for the climate. The damage it does to the climate is immensely greater than the funding it generates. There are already alternative funding approachesExternal link ready that would have potential to generate significantly more funding without incentives to delay domestic decarbonisation.

SWI: Besides individuals and companies, governments can also offset their emissions by financing climate projects abroad. Switzerland is a pioneer in this regard and has signed bilateral agreements with a dozen nations since 2020. These allow Switzerland to offset a part of its emissions while financing sustainable projects in developing countries, in what sounds like a win-win situation. Is this really the case?

C.W.: Financially, yes, but the climate does not benefit and that is a big problem. Switzerland acts within the framework of Article 6 of the Paris Climate Agreement [which allows for emission reductions achieved abroad] and is in this sense a pioneer nation because it developed activities before the rulebook was fully defined. But now it sets the rules itself and I doubt that these are ambitious enough.

“The international climate community expects a country like Switzerland to implement emission-reduction measures in line with the goals of the Paris Agreement.”

We looked at the agreement between Switzerland and GeorgiaExternal link, which aims to improve the energy efficiency of buildings. These are easily achievable measures, the so-called low- hanging fruit, that Georgia had already planned years ago. Now Switzerland is coming forward and says it will take care of the financing. This is certainly a win-win situation for Georgia, which does not have to invest, and for Switzerland, which can use the carbon credits generated as justification for not reducing emissions at home.

The international climate community expects a country like Switzerland, given its responsibility and means, to implement emission-reduction measures in line with the goals of the Paris Agreement, as well as to make a decent contribution to international climate finance. Switzerland is not on track for either, and Article 6 has the potential to disguise this important fact.

Problems with carbon credits have always existed, but with the transition from the Kyoto Protocol to the Paris Agreement, things have become even more complicated.

SWI: Why is that?

C.W.: Under the Kyoto Protocol, only industrialised countries had to commit to reducing emissions. They could then finance a climate project in the Global South, which was cheaper than action at home, and claim that it would not have been possible without financing through carbon certificates. This is referred to as ‘additionality’. However, this narrative no longer works with the Paris Agreement, because all countries, including developing countries, have reduction targets that must be progressively increased.

Developing countries must focus on the most easily achievable and cost-effective emission reductions themselves. For example, protecting forests does not require excessively expensive technology, and each country can do this on its own or by relying on other types of international support if it wants to.

If, however, it is developed countries like Switzerland that pay for these low-hanging fruits in the Global South, this creates a double disincentive: recipient countries do not set truly ambitious targets and donor countries can afford not to reduce emissions domestically.

The task of industrialised countries, as well as the voluntary carbon market, should instead be to finance the mitigation of the most difficult-to-reduce emissions, so the ‘high-hanging fruits’.

SWI: Regulation of the carbon credit market is among the topics being discussed at COP28 in Dubai. How could this market really help address the climate crisis?

C.W.: It could only do so if the text of the Paris Agreement is applied to the letter, with all the necessary safeguards. We need solid rules, right down to the details, and a really strict supervisory body that also takes into account countries’ ambitions. But I don’t see any signs of that. It is a political issue, and when so many countries are involved, a compromise is inevitable. But this is not the most ambitious result and is not likely to be in line with the temperature goals of the Paris Agreement.

SWI: Where is the carbon offset market heading? Will it reinvent itself or just ignore all the criticism and continue with business as usual?

C.W.: It’s hard to say. If it goes on as it has until now, claiming that the problematic projects and actors are just isolated cases, without recognising that there is an underlying systemic problem, then I hope that the compensation market will soon come to an end.

*This question was slightly amended on December 7 to include more context after South Pole said its Kariba project in Zimbabwe was not part of the original investigationExternal link on REDD+ projects certified by Verra.