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An All-Solutions Approach Is Needed to Meet the Looming Demand for Carbon Offsets

As we race to achieve net zero, let’s ensure we aren’t making the same mistakes that got us here. Tech solutions do not deliver the same co-benefits as nature — and clearly cannot substitute for the loss of ecosystems. Nature-based solutions are cost-effective and can make an immediate difference.

Given the urgency of the climate crisis, we need to be using all available, proven solutions to take credible action. Alongside drastic reductions, this includes investments in carbon-removal technologies — but also driving down emissions outside of one's own operations and reinforcing a just transition for all. This is something that can be done by purchasing carbon credits from certified emissions reduction projects that help support the UN Sustainable Development Goals.

2020 was a strong year for carbon markets and the pace of growth shows no signs of slowing down. Estimates predict that the market could be worth $50 billion by the end of the decade and as much as $100 billion a year by 2050. While global momentum to reduce emissions continues increasing in the form of commitments from companies and governments, including the US’s recent re-joining of the Paris Agreement, demand for carbon offsets will grow exponentially. There are now concerns that there isn’t enough offset inventory to meet demand — and more importantly, not enough offset projects in place to help transition the global economy to net zero.

From a carbon-management perspective, offsets play a critical role in the net-zero transition for two key reasons: unavoidable residual emissions and a lack of critical carbon-neutral technologies.

Even by employing energy-efficiency measures, switching to renewable energy, and finding interchangeable low-carbon solutions throughout a company’s operations, there will always be a residual amount of carbon that is emitted — simply because it’s impossible to eliminate the production of carbon in totality. Further, some of the technologies needed to change the carbon-intensive systems of today to the net-zero-carbon future of tomorrow are currently being developed, tested and scaled. The purchase of carbon offsets provides financing, which helps to fund the development and scaling of these new technologies; all while actively avoiding more emissions from being released or pulling carbon out of the air.

Developing offset projects that meet the highest standards (such as the Verified Carbon Standard or Gold Standard) is a time-intensive and rigorous process; yet the fact that this year was the first time since 2017 that more offsets were retired than issued shows that project developers have huge potential for growth on the horizon. The Taskforce on Scaling Voluntary Carbon Markets (TSVCM) estimates demand for carbon credits could increase 15-fold by 2030 to $50 billion.

The sector is already feeling pressure to meet demand in time for 2030, the year that most entities have designated as their first major carbon reduction milestone; and efforts are afoot to scale new solutions.

Scaling investments in novel climate technologies

Technological removals received a lot of attention this year when Bill Gates made the rounds promoting his new book, How to Avoid a Climate Disaster.

Gates has talked favorably about the need for high-tech solutions that capture and store carbon, while questioning nature’s abilities. Gates seems most fond of geo capture: “ can go into the atmosphere where it’s currently 410 ppm and pull it out there. The beauty of [this] approach is that you can put your capture plant anywhere, particularly somewhere it’s easy to liquify it and put it into a geological formation and keep it out of the atmosphere...[which is] super expensive today.” The tone of Gates’ language inspires an image like that of the Apollo moonshot — but it took quite a while to get it right before that first trip to the moon.

Technological removals and the market for it are in their infancy. But to achieve net-zero emissions by 2050, we need to start building a credible carbon-removal industry — which does not yet exist.

New initiatives have been announced — such as South Pole and Mitsubishi Corporation’s partnership to develop a next-generation carbon-removal purchase facility, which aims to procure at least US$300-800 million worth of certified carbon-removal credits by 2030. The facility will purchase and retire certified carbon-removal credits from nascent carbon-removal technology projects that can deliver permanent carbon storage and that show the potential for significant cost reduction over time.

While technological removals will continue to bring new solutions that transform products and supply chains, there’s already effective and proven solutions right in front of us.

Valuing the role of nature

With an enormous amount of carbon needing to be removed from the atmosphere, we must use all the tools in our toolbox — and that includes nature. To dismiss nature would be missing out on a solution that managed our climate quite well for centuries — including when our forests were more abundant, our ecosystems were more intact, and our oceans in a healthier state.

Nature-based solutions (NBS) — such as planting trees and protecting forests — can provide over a third of the cost-effective climate mitigation needed between now and 2030 to stabilize warming to below 2°C, achieving nature’s mitigation potential of 10-12 gigatons (Gt) of CO2 per year. To put that into perspective, nations may need to remove up to 1000 Gt of CO2 by 2050.

In other words, nature itself is the solution that was designed to handle this very problem and one that we have at hand right now. After all, climate change is really the outcome of an imbalance between human activities and nature. So, while some underestimate the idea of planting trees and other nature-based efforts that can sequester carbon, repairing the damage that’s been done to the world’s forests and nature itself is one of the keys to our carbon problem.

Forests have always been the climate’s regulator. Despite the fact that as much as 80 percent of the world's forests have been destroyed or irreparably degraded, in their current state they still absorb approximately one-third of CO2 released annually from the burning of fossil fuels. How would our current situation be different if we had two or three times as many trees populating the earth as we have now?

The largest and most immediate potential for carbon reduction is stopping deforestation. Our planet’s forests contain more carbon than exploitable oil, gas and coal deposits combined. Preventing emissions from deforestation and land-use change is just as urgent, if not more so, than transitioning away from fossil fuels. Protecting a standing forest prevents the carbon emissions that would result if they were torn down, enables them to continue removing carbon from the air, and is the cheapest solution for CO2 reduction. Planting new trees is the second-best option.

Though technological solutions are needed, relying on them alone neglects the complicated issues that are impacting nature and causing the carbon imbalance in the first place including: deforestation, poverty in critical biodiversity hotspots, clearing of forests for industry and agriculture, and other issues. Natural ecosystems are complex; but smart nature-based solutions, such as regenerative land-management practices that easily restore soil to support reforestation or more productive agriculture, can yield significant carbon reductions.

Technological solutions also simply can’t offer an immediately available solution, and we need climate action today. Many of the available technologies are expensive and will take a long time to develop, test, garner public trust and implement; and throughout this process, it’s critical that they are developed with an eye towards unintended consequences.

The effort to employ systems change to reduce waste provides a good example of the potential unintended consequences that can occur. To address waste, we were told that we needed to reduce, reuse, and recycle — in that order. Instead, the business of creating recycled products boomed — to the point that even reusable items were swapped out for disposable, recyclable options. Just look at most quick-service restaurants today.

Business is an important tool to solving the issue; but somewhere along the way, the business community and consumers lost sight of the waste-reduction goal. This has led to a massive increase in global waste and pollution — which is overwhelming our ability to recycle it, while exponentially increasing carbon emissions and deforestation. Our increased reliance on recyclable packaging and goods has led our primary partner, China, to turn away our trash — even the recyclable kind. The intention was to reduce waste; but instead, we're drowning in an ocean of supposedly recyclable materials.

Cost is another major factor. While the potential for carbon-removal technologies is compelling, the current cost of associated removal credits is still a roadblock for many companies that need carbon-removal options in order to reach net zero. As of today, the cost of technological carbon removals ranges from US$50 to over US$400/ton of CO2 removed, compared to about $10 per ton for NBS. And it will take time before the cost of technological removal credits comes down.

NBS also provide what is known as a maximum-impact ROI. While nature-based solutions are busy removing carbon from the air, they add value to everything around them by providing “ecosystem services.” The co-benefits they provide — including biodiversity, protecting coastal communities from flooding, sustainable economic development, and many others — are an opportunity to tackle the impacts of human activity on our environment. Investment in NBS also help scale new technologies better designed for our existence — such as, for example, biochar. And they result in economic value for the communities where they’re located because they abate deforestation by replacing the income generated through harmful uses of forests with alternatives, and often result in social justice outcomes.

Meeting the future demand of credible carbon management

Over the past 18 months, an increasing number of businesses with ambitious net-zero targets have shown a higher willingness to pay for high-quality carbon-removal technologies. This pull from the carbon market can make a crucial contribution to the development of a new carbon-removal sector that we urgently need.

But as we race to adopt solutions in order to achieve net zero, let’s ensure we aren’t making the same mistakes that got us here. Technological solutions do not deliver the same co-benefits as nature — and clearly cannot substitute for the loss of forests and ecosystems. Nature-based solutions are cost-effective and, most importantly, can make an immediate difference. Let’s make sure we take an all-solutions approach when it comes to meeting global climate targets and the growing demand for credible tools for climate action.