By Chris Lang
In October 2020, Peru and Switzerland signed a carbon offsetting deal. Peru’s then-Environment minister, Kirla Echegaray, and Swiss Ambassador to Peru, Markus-Alexander Antonietti, signed the deal, under which Peru reduces its emissions and Switzerland counts the reductions against its national targets.
The deal took two years of negotiations. At the signing, Echegaray said,
This agreement constitutes an example — at the international level — of how to fulfil the carbon market-based approaches proposed in the Paris Agreement and, thus, facilitate their implementation in favour of sustainable development.
The 2015 Paris Agreement doesn’t actually mention carbon markets or carbon offsets. Instead of offsets, Article 6 of the Paris Agreement refers euphemistically to “internationally transferred mitigation outcomes” (ITMOs).
Governments have not yet completed negotiations at the UNFCCC on the rules of a new carbon trading mechanism under Article 6. Agreeing the “Article 6 rulebook” is one of the items on the agenda of the postponed COP26, due to take place in November 2021 in Glasgow.
Nevertheless, Peru and Switzerland put out a “Joint Statement on bilateral Cooperation under the Article 6 of the Paris Agreement”. The Joint Statement explains that this is “the first treaty of this nature under the Paris Climate Agreement”.
Switzerland’s CO2 law
In September 2020, after three years of debate, Switzerland passed a complete revision of the country’s CO2 law. The new rules include a tax on flying, rules on energy-efficient cars, taxes on diesel and petrol, and emission limits for buildings.
The CO2 law allows for 25% of the country’s emissions reductions targets to be achieved through offsets generated outside Switzerland.
On 12 January 2021, campaigners against the CO2 law handed in 110,000 signatures against the law. Under Swiss law, if more than 50,000 signatures are collected within 100 days of a law being passed in parliament, then a referendum will be held. On 13 June 2021, Swiss citizens will vote either for or against the CO2 law.
The campaigners against the law include economic, transport, and energy interests. They are supported by the right-wing Swiss People’s Party – the largest political party in the country. Greenpeace and WWF have come out in favour of the law.
The KliK foundation
Under the CO2 law, importers of motor fuels to Switzerland have to offset up to 90% of the emissions from burning these fossil fuels. A fee is added to the price of motor fuel at petrol stations in Switzerland which goes towards buying offsets.
In 2012, the Swiss Petroleum Association (since renamed as Avenergy Suisse) set up the Foundation for Climate Protection and Carbon Offset (Stiftung Klimaschutz und CO2 Kompensation – KliK).
Under the CO2 law, the KliK Foundation has the mandate to buy 35 million carbon offsets in the period 2021 to 2030. (Switzerland’s Nationally Determined Contribution allows a maximum of 54 million offsets.)
Switzerland will fund an energy-efficient cooking stoves project in Peru called “Tuki Wasi”. The project claims that the reduced deforestation from more efficient cooking stoves will generate 100,000 carbon offsets by 2030.
The KliK Foundation has issued several calls for proposals for the procurement of ITMOs. In each case, REDD and LULUCF (land use and land-use change and forestry) are specifically excluded. The first call for proposals, dated 1 April 2019, explains why:
In principle there are no restrictions as to countries and technologies. However, activities involving biological carbon sequestration such as REDD+ or LULUCF are not admitted in this call for proposals since their eligibility has not yet been sufficiently clarified in the light of the ongoing national parliamentarian consultation and of international negotiations.
A Question and Answer attached to a call for proposals from the KliK Foundation, dated 1 November 2019, gives a slightly different reason for excluding REDD:
ELIGIBILITY
1. Do you recommend submitting REDD+ activities, despite them being excluded from the eligible activities?
Indeed, this CfP exludes REDD+ and LULUCF. Hence, an eventual submission of a REDD+ activity in response to this call would be disqualified and not considered.
As soon as there is clarity if and how forest projects can be treated under Art. 6 the KliK foundation will consider launching specific CfPs for REDD/LULUCF activities.
Offsetting does not reduce emissions
Even if this offsetting deal results in reduced emissions in Peru (and that’s a very big “if”), it will not result in reduced emissions globally. Every carbon offset generated in Peru will result in one ton of greenhouse gas emissions continuing to take place in Switzerland.
Offsetting does not reduce emissions.
The offsetting deal between the two countries will help Switzerland to meet its emissions targets, but it will make it more difficult for Peru to do so. The offsetting deal also creates a perverse incentive. The lower that Peru sets its emission reduction targets, the more carbon offsets will be available for sale. Meanwhile, the rich in Switzerland can continue to drive their big polluting cars.
This post is part of a series of posts on REDD-Monitor looking at REDD and environmental injustice in the Andes Amazon.
Offsetting DOES reduce emissions if it is not used to emit more or delay climate action, but to “offset” current emissions that are not yet able to be reduced.
Example: Company A has 1m tons of GHG emissions. They sign up to SBTi and aim to reduce 5% per year to reduce 50% in 10 years.
If they they commit to “offset” their as yet unabated emissions, ie 95% in year 1, 90% in year 2 etc., then they will thus finance reductions undertaken by a 3rd party that would otherwise not have happened.
Clearly, offsetting in this case reduces emissions compared to a scenario where the company does not provide any 3rd party finance. In year 1 these offsets have a 19x higher climate benefit than the 5% in-house reduction.
Do you really prefer they would not do that?
Let’s therefore please a bit more specific in criticising companies that allocate part of their profits to results-based finance activities, and differentiate between companies who use offsets as excuse, and other who show leadership.
Generic statements such as “offsets don’t reduce emissions” are not doing decarbonization efforts any favour.