Marsh & McLennan Advantage Insights logo
Conversations and insights from the edge of global business
Menu Search
Climate Watch

Carbon Offsets Are Not Carbon Reductions

Photo of a factory emit a plume of smoke against the sunset

Carbon offsets are a growing part of the financial modeling around net zero targets. But some experts remain skeptical about both their value and their implementation.

Last March, BRINK spoke to Kate Dooley, an expert in carbon offsets, who argued that they were not contributing to the net zero goal. We recently asked her whether the system had improved following all the work at COP26.

DOOLEY: No, because the physical science of the carbon cycle doesn’t change based on COP26. Land-based offsets, i.e., sequestering carbon into forests and soils, don’t compensate for emissions from fossil fuel in terms of reducing long-term temperature increase. Temperatures won’t stabilize or reduce while we are still emitting fossil fuels into the atmosphere. 

At the same time, we do need land-based removals in order to remove carbon-dioxide from the atmosphere. But they should be thought of as a removal (i.e., something that reduces atmospheric CO2 concentrations), not as an offset that justifies further fossil fuel emissions.

Trading Is Not the Same As Offsetting

BRINK: So how do you feel about the growth of the carbon credit and carbon trading markets?

DOOLEY: Well, it is possible to have a carbon trading market without offsetting. The EU ETS is an example of a trading scheme that currently has no offsetting in it. That means that if one entity is above its cap, it buys credits from another one that’s under the cap. That’s not offsetting, that’s simply trading because they both have a cap to limit CO2 emissions.

Offsetting means buying credits somewhere else, from someone who doesn’t have a cap. And so you’re effectively bringing extra credits in from outside the cap. Offsetting is usually conducted via trading, but it doesn’t have to be; you could offset without trading, but usually it’s an extension of a carbon trading scheme.

BRINK: So am I right in thinking that you would approve of carbon trading that doesn’t allow offsets, but not of the other?

DOOLEY: There are a lot of other problems in carbon trading, but the issue I am focused on is offsetting CO2 removals for ongoing emissions. And the biggest problem in offsetting is when land-based removals are being used to offset fossil fuel emissions. In principle, carbon trading can lead to robust, verifiable emission reductions at greater efficiency and lower cost (the purported objective of carbon trading schemes), but in reality, carbon trading is often beset by verification and transparency issues.

In principle, carbon trading can lead to robust, verifiable emission reductions at greater efficiency and lower cost (the purported objective of carbon trading schemes), but in reality, carbon trading is often beset by verification and transparency issues.

Land Is the Most Uncertain Part of the Carbon Cycle

BRINK: There have been some advances in being able to measure whether a carbon sink is being effective or not. Is that helpful?

DOOLEY: There have been huge advances in the last few decades. Satellite technology, in particular, has brought advances in measuring land carbon fluxes, i.e., the CO2 emissions from land and the removals. 

But despite these advances, land remains the most uncertain component of the carbon cycle. The annual publication of the global carbon budget is our best understanding of the different components of the carbon cycle — the carbon fluxes between atmosphere, oceans, land and anthropogenic fossil fuel emissions.

In the global carbon budget, land is always orders of magnitude more uncertain than the other components. There is just a lot we still don’t understand or can’t measure about the terrestrial carbon cycle. That’s because land — forests and soils — are emitting and sequestering carbon all the time on a daily, monthly, yearly basis, which makes it difficult to measure. 

The Limitations of Satellite Carbon Measuring

BRINK: So when we read about satellite companies that are able to monitor forest cover and see how much carbon is being captured by that area of forest, are these helpful tools?

DOOLEY: Their ability to measure the amount of carbon or biomass in an individual tree is quite accurate, but that’s nowhere near the whole story about how much carbon is in the forest and what keeps that carbon in the forest. 

A tree is part of an ecosystem. And so the resilience of the carbon stored in a tree’s biomass, and whether it is lost due to climate change, drought, pests, wildfires, etc., depends on the overall health of the ecosystem. We know that biodiversity is an indicator of ecosystem health, and healthy ecosystems are more resilient to these external stressors. 

So measuring the biomass in an individual tree can be used to calculate carbon content, but it doesn’t tell you anything about ecosystem health. We’re treating trees like sticks of carbon, when in fact they’re part of a broader ecosystem, and keeping that tree, with its carbon storage potential, alive, depends on a healthy biodiverse ecosystem.

The second issue is the governance of that forest: Who owns the forest? What is the governance regime? What are the incentives and drivers to cut the forest down versus to keep it standing? I would like to see a lot more focus on governance and land tenure of forest areas rather than calculating carbon storage. There is a lot more at stake to keeping a forest standing than being able to measure the carbon in a tree.

The Importance of Like for Like

BRINK: In our last interview, you talked about how offsetting within a single sector, like agriculture, could be feasible. Has your thinking changed on that form of offsetting?

DOOLEY: Within a single sector, you don’t have the same problem of offsetting terrestrial carbon for fossil carbon. There is such a temporal difference between these two parts of the carbon cycle, they’re not commensurable. 

But you don’t have that problem if you are offsetting biogenic carbon because temporarily it’s equivalent. So we could go to net zero in the agricultural sector relatively easily, in terms of biogenic emissions, but not when including the fossil fuels that are being used in agriculture.

BRINK: Are there any schemes that have caught your eye or that you think are helpful in getting to a real net zero goal, given the hesitations that you have?

DOOLEY: I am not familiar with current carbon offsetting or removal projects, but I have been going through countries’ NDCs, their 2030 climate plans and looking at what they pledge to do in terms of land-use. Some countries have very well thought out plans for regeneration of degraded farming lands, degraded rangelands, and restoring degraded forest. 

Focus on Regenerating Agricultural Lands

Many countries mention restoring and expanding degraded mangrove areas. These kinds of activities are very beneficial for ecosystems, as improving the ecosystem health of these areas in turn improves agricultural productivity. This is particularly beneficial for countries that are heavily reliant on smallholder agriculture. There is the potential to sequester a lot of carbon through regeneration of agricultural lands.

While many countries will count that toward a net zero pledge, meaning they are effectively offsetting these actions against fossil fuel emissions, a lot of these countries don’t have significant emissions from fossil fuels. Their focus on regenerating degraded lands is the right approach, while we need to focus on phasing out fossil fuels starting with the biggest economies. 

The ultimate measure of whether any kind of climate action is effective is its contribution to limiting temperature increase over the long-term (usually measured as 100 years). Removing and storing carbon into forests, soils and other ecosystems, what is often referred to as natural climate solutions, won’t stabilize or reduce temperatures if we continue adding carbon to the atmosphere through burning fossil fuels.

Kate Dooley

Research Fellow of Melbourne University @katedooley0

Kate Dooley is a research fellow at Melbourne University’s Climate & Energy College. Kate has policy expertise on forest governance, climate change and carbon accounting and has almost two decades experience advising government and nongovernment organizations. She is currently researching the potential for ambitious restoration of natural ecosystems to remove atmospheric carbon. 

Get ahead in a rapidly changing world. Sign up for our daily newsletter. Subscribe
​​