By Chris Lang
A new report by the UN’s Principles for Responsible Investment makes the claim that, “forest-related Nature-Based Solutions (NBS) could generate US$800 billion in annual revenues by 2050, worth US$1.2 trillion today in NPV [net present value] terms, surpassing the current market capitalisation of the oil & gas majors”.
The report is titled “An investor guide to negative emission technologies and the importance of land use”, and was written by a UK-based consulting outfit called Vivid Economics, with funding from the Moore Foundation’s Finance Hub.
The Principles for Responsible Investment was launched a year after the then-UN Secretary General, Kofi Annan, invited a group of institutional investors to develop the principles. That was in 2005. Since then, more than 3,000 investors have signed on, and the PRI’s investors manage a total of US$86 trillion.
Negative Emission Technologies
To begin to make any sense out of this extraordinary claim of what could happen in 30 years’ time, we have to go back to the
Article 2 of the Paris Agreement aims to limit “the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels”.
And Article 4 states that,
In order to achieve the long-term temperature goal set out in Article 2, Parties aim to reach global peaking of greenhouse gas emissions as soon as possible, recognizing that peaking will take longer for developing country Parties, and to undertake rapid reductions thereafter in accordance with best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, on the basis of equity, and in the context of sustainable development and efforts to eradicate poverty.
Vivid Economics ignores the bit about “global peaking of greenhouse gases”, and “rapid reductions” and focusses instead on “removals by sinks of greenhouse gases”:
In 2018, the Interfovernmental [sic] Panel on Climate Change (IPCC) set out four representative pathways that align to a global temperature rise of 1.5°C, and even the most ambitious emissions reductions scenario, P1, relies on NETs [Negative Emission Technologies] to sequester 2.5 GtCO2/year by 2050. As policy responses to reduce emissions are delayed, NETs will inevitably grow in importance in keeping global temperature rise to well below 2°C.
Vivid Economics notes that, “Companies realise the need for NETs to decarbonise their value chains and hence meet their net zero targets.” Another way of putting this is that companies exist to maximise their profits and that companies are extremely unlikely to risk their bottom line by proposing massive reductions in consumption. Under the current neoliberal economic system governments are also extremely unlikely to attempt to put regulations in place that would change the system under which companies operate.
Vivid Economic’s guesstimates for the size of the nature-based offset market by 2050 are ridiculously high. Bloomberg notes that Julio Friedmann, a researcher at Columbia University, estimates that “the carbon removal industry’s revenues in 2050 are likely to be closer to US$500 billion”. But that’s also just a guess. The voluntary carbon market today is worth somewhere between US$150 and US$300 million.
Noah Deich, executive director of Carbon 180, a carbon removal NGO, told Bloomberg that predicting the size of a market 30 years in the future is a “highly speculative exercise”.
Vivid Economics highlights nature-based solutions. “An entire new industry may emerge that values carbon stored in vegetation and soil,” the report states, “unlocking new business models and investment opportunities for avoided deforestation, reforestation and afforestation (hereinafter re/afforestation), and land restoration.”
Back in 2006, the Stern Report argued that “Curbing deforestation is a highly cost-effective way of reducing greenhouse gas emissions and has the potential to offer significant reductions fairly quickly.” In 2012, I asked Stern whether he still believed this to be true. Stern didn’t reply.
But by 2020, even nature-based solutions enthusiasts like Vivid Economics can’t make this sort of claim about REDD. “Thanks to its low cost, natural forest restoration looks likely to emerge as the earliest feasible investment opportunity,” Vivid Economics writes. Avoided deforestation is “further from commercialisation” than natural forest restoration, “as it involves more complex compensation mechanisms”.
Nevertheless, Vivid Economics anticipates that by 2050 revenues from forest restoration could reach US$190 billion, compared to US$610 billion for avoided deforestation.
Vivid Economics produced a graph to show how this new market will grow:
The entire projection is based on guesswork about what could happen in the future. Vivid Economics even acknowledges that the calculations are “very rough”. The graph reminds me of one that the carbon credit scammers Advanced Global Trading put in their brochure to show how the price of carbon credits just keeps going up.
Vivid Economic’s report is critical of bioenergy with carbon capture and storage (BECCS) because it could threaten biodiversity, reduce the carbon sequestration potential of land, and compete with food production for land. Tree planting schemes, of course, raise similar problems. A 2019 paper in Nature found that of the commitments made under the Bonn Challenge almost half of the area proposed to be planted would become industrial tree plantations.
Tucked away in an Appendix to the report, Vivid Economics notes that in their 2017 paper “Natural Climate Solutions”, Bronson Griscom and colleagues,
estimate that the maximum CO2 removal potential of re/afforestation could reach 17.9 GtCO2/year if the land available is constrained by human demand for food and fibre, but not costs. However, reaching this potential would require significant dietary shifts in order to release free grazing land for forestry.
And Vivid Economics notes that “Human and natural disturbances, such as legal and illegal logging, fires, attacks by pests, and drought may release CO2 stored in forests, requiring additional resources for protection and maintenance of large forest areas.” But there’s no mention of the fact that tropical forests have already tipped from being a sink to being a source of carbon, and that tropical forests are losing their ability to store carbon.
Big oil and Big tech
“Big oil and Big tech have already started to channel their resources into forest related NBS to achieve new net-zero targets — and in turn this is driving demand for NBS carbon credits,” Vivid Economics writes.
Oil corporations and US-based tech companies are already buying carbon offsets from nature-based solutions schemes. Vivid Economics provides this partial list (the graphic above provides a few more examples):
- Shell is buying carbon credits from tree planting in the Netherlands and an 800-hectare regenerated forest in Australia. In a 2019 press release Shell announced it will invest US$300 million in “natural ecosystems”.
- BP is buying carbon credits from a 40,000 hectare REDD project in Zambia.
- Total has promised to spend US$100 million per year on forest protection.
- Apple is buying carbon credits from an 11,000 hectare mangrove forest project run by Conservation International in Colombia.
- Microsoft is working with a firm called Pachama to buy carbon credits from REDD projects and forest conservation projects in the US.
- Amazon has launched the Right Now Climate Fund, investing US$100 million in nature-based solutions. In April 2020, Amazon announced the first project: US$10 million to restore and conserve 1.6 million hectares of forest in the US.
Vivid Economics comments that “corporate net-zero commitments are driving the demand for NBS carbon credits”, but makes no mention of the need to leave fossil fuels in the ground. For every carbon credit sold, one ton of CO2 is emitted somewhere else. Obviously, Vivid Economics doesn’t bother to calculate what the impact on the climate would be of a US$1.2 trillion market in nature-based carbon offsets by 2050.