By Chris Lang
Compensate is a Finland-based carbon offsetting company set up in 2019 by Antero Vartia, an entrepreneur, actor, and former member of parliament. In 2020, Compensate created project criteria to evaluate the projects from which it buys carbon offsets. One year later, Compensate reported on its experience with the project criteria:
90% of evaluated projects fail the criteria. The reasons vary, but are all equally alarming. Some projects can not be considered additional, others have serious permanence risks. Some have unreliable baselines, because assumed deforestation is largely inflated. Worryingly, many projects also cause serious human rights violations.
“International carbon standards are fundamentally flawed”
Compensate’s report exposes some of the structural problems with the voluntary carbon market:
The voluntary carbon market is characterized by a plethora of actors, methodologies, project types, and standards. It’s a tough job for businesses, organizations and individual consumers to try to navigate this complex market. Outright opportunism and greenwashing are not uncommon.
Compensate points out that standards like Verra, Gold Standard, and American Carbon Registry exist to reassure offset buyers about the quality of the carbon offsets they are buying. “Still,” Compensate adds, “these leading standards leave a lot to be desired.”
Compensate writes that,
[N]ot even the most renowned international standards guarantee real climate impact. Compensate has come across projects with unbelievably overestimated impact, or, worse yet, no impact at all. The market is flooded with millions of essentially worthless credits. Still, these credits have the stamp of approval of the leading international standards, and offsetters keep buying them with no knowledge of the fact they’re engaging in a lie.
And Compensate writes that,
International carbon standards are fundamentally flawed, as they develop and accept project methodologies that allow for the issuance of millions of meaningless credits.
Compensate is critical of corporate promises to reach “net zero“:
While companies claim they only purchase carbon credits for offsetting unavoidable emissions, there is little transparency on companies’ efforts to reduce emissions from operations, and how much of net-zero targets are achieved by offsetting. Company emissions cannot simply be balanced out by purchasing carbon credits. It is known that emissions stay in the atmosphere for 300-1000 years, whereas a tree can sequester CO2 for several decades or until its logged and burned, then releasing all the CO2 back into the atmosphere. This is why the best way to mitigate companies’ climate impacts is to reduce emissions.
Which raises the obvious question: Why is Compensate in the carbon offsetting business?
Compensate’s report includes a section titled “Characteristics of a good carbon credit”. According to Compensate, the following characteristics have to be recognised: additionality, reliability (i.e. the climate impact is not overestimated), permanence, avoided double counting, and environmental and social net impact.
The section would have been better titled “Why offsetting cannot work”. Compensate acknowledges that many projects struggle with demonstrating financial additionality, and even fewer can tackle policy level additionality.
Permanence is a problem, Compensate writes, because “the majority of forestation projects have a lifetime of 30 years. If the protected forest is logged immediately after the project is completed, and the trees are used for energy, the CO2 will be released into the atmosphere.”
Compensate argues that “missing links between theory and practice have left room for double counting to happen quite often”:
Commonly, the two claiming parties are an organization offsetting its emission and the host country trying to reach its nationally determined contribution under the Paris Agreement.
Compensate acknowledges that “Project developers can influence the number of credits issued with the selection of the baseline scenario.” And that this baseline “could be artificially inflated”. Buying credits from a project with an artificially inflated baseline “could actually add carbon into the atmosphere”.
But the problem of counterfactual baselines is not something that can be resolved with “robust methodologies” or “stricter additionality criteria” as Compensate’s report suggests. Larry Lohmann of The CornerHouse points out, “the problem is not ‘bad baselines’ but the concept of counterfactual baselines itself. That reality does more than invalidate any particular REDD project. It invalidates REDD (and all other offsets) as a whole.”
91% of carbon offset projects fail
Compensate started using its criteria early in 2020. The company has evaluated more than 100 nature-based projects (mainly forest conservation and tree planting projects). All the projects are certified by international organisations such as Gold Standard, Verra, Plan Vivo, American Carbon Registry and Climate Action Reserve.
Only 9% of the projects passed Compensate’s evaluation process.
- Compensate found that 52% of the projects are not additional. Examples include selling carbon credits by protecting forests that were never in danger. Commercial timber plantations do not pass the financial additionality criteria “as the project could be implemented without the need for revenue from carbon credits”. Compensate argues that when project activities are already included in national laws and policies there is a lack of policy level additionality. Compensate gives the example of Indonesia and the Democratic Republic of Congo: “Examples include protecting a forest in a country where there is a moratorium on converting natural forests to palm oil plantations (Indonesia) or a moratorium on granting new timber concessions (Democratic Republic of Congo).” Leakage occurs when a government grants conservation concession status to the project area, but also grants a logging concession elsewhere.
- Compensate found that 16% of the projects it evaluated had permanence risks due to an unstable political situation and high risk of corruption, natural disasters such as floods or fires, postponing timber harvest until after the project ends, or illegal logging.
- 12% of projects had “unreliable baselines” according to Compensate’s evaluation. Artificially inflating baseline emissions generates more carbon credits for the project.But Compensate does not take into consideration the fact that all baselines are unverifiable because they are based on a counterfactual story about what would have happened in the absence of the project.
- 6% of the projects Compensate evaluated failed because of community conflicts, for example through human rights violations and evictions, or a failure to deliver the promised benefits.
- And 5% of the projects did not meet Compensate’s criteria because they offset emissions that take place today with hoped for removals in the future. Compensate gives the example of tree planting projects that calculate the amount of carbon the trees with sequester over the next 50 years.
Carbon markets need to be eliminated not reformed
Compensate is a non-profit organisation, but as a carbon broker, the company’s continued existence depends on selling carbon offsets. It’s a smart marketing ploy to claim that 91% of carbon offsets are flawed, in that it suggests that Compensate is particularly careful about selecting which projects it buys carbon offsets from.
Indeed, Compensate’s report states that,
Like investment managers manage a fund to deliver the best value, Compensate manages a diverse carbon capture portfolio to deliver the best possible climate impact.
Compensate doesn’t point out the fundamental flaw of carbon offsets. The companies buying carbon offsets are using them in order to continue burning fossil fuels. Offsetting does not reduce emissions, it just shuffles them around the world. Often it is the poorest of the poor who have to adjust their livelihoods in order that the rich can continue flying, for example.
And Compensate’s experts make no mention of the carbon cycle. At the end of 2020, 23 researchers and experts published an article in the Swedish newspaper Dagens Nyheter titled, “Misleading and false myths about carbon offsets”. The second myth that the authors highlight is that “We can compensate for fossil fuel emissions using so-called ‘nature-based solutions’ (such as carbon sequestration in vegetation and soils).”
The authors explain the carbon cycle as follows:
The carbon cycle has two parts: one fast cycle whereby carbon circulates between the atmosphere, land and seas, and one slow cycle whereby carbon circulates between the atmosphere and the rocks which make up Earth’s interior.
Fossil fuels are part of the slow carbon cycle. Nature-based solutions are part of the fast carbon cycle. This biological carbon storage is not permanent. Carbon stored in trees can be released by forest fires – something we are seeing more and more often as the climate heats up.