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Is there room for carbon credits in our climate strategy?
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Is there room for carbon credits in our climate strategy?


Many companies, large and small, have invested in carbon credits to offset their carbon emissions as they face a worsening climate crisis. This abstract currency may not be the solution that we think it to be.

We’re heading towards another unusually hot summer.

This statement is becoming more common every year. Many of us are now wondering what we can do to stop the rising levels of carbon dioxide within our atmosphere.

One solution is to negotiate in the language polluters know: money. Carbon credits are a pseudocurrency that promises carbon footprints will be erased without touching the feet. 

Although it sounds like a miracle drug the practice has been heavily criticised by those who want more fundamental change. Even still, the government has placed a lot of faith in the efficacy of this market-driven solution – faith that some are calling misguided.

But what are carbon credits?

Called “New Zealand units” within our emissions trading scheme, carbon credits are tokens that can be spent to offset a certain volume of emissions. Each credit is worth one metric tonne carbon dioxide. However, they can also be used to offset other emissions. A tonne methane, which has a 25-fold higher potency than CO, is equivalent to 25 metric tonnes.2To offset this amount, it would cost approximately 25 carbon credits 

The goal is to be “carbon neutral”, not by preventing emissions from entering the atmosphere but by making up for it once they do.

These credits are distributed for a number of reasons, though they all boil down to: “less carbon dioxide in the atmosphere”. The best way to get credits is to plant trees that convert CO2.2to organic matter as they grow. Another way is to keep that CO out of the environment.2You should not escape in the first place.

When carbon farmers earn credits they can sell them to anyone they please, whether that’s the government, a private company, or a particularly concerned individual. These transactions have led to the creation of an entire industry, which is now managed by agencies that specialize in carbon trading. 

One such agency is Ekos, which Sean Weaver runs. His company is just one of many that cater to this market, but not everyone is.

Certain industrial sectors, such as energy, are required to offset their carbon footprint by law (Image: Tina Tiller)

Some volunteers, some comply

“Here in New Zealand, the government has instructed a certain number of companies that they have to acquire credits to match their emissions. That’s called the compliance carbon market,” Weaver says. “Then you’ve got another market, called the voluntary carbon market.”

Certain industrial sectors, like energy, are required by law to offset their carbon footprint as per New Zealand’s emissions trading scheme. Companies in this sector must purchase enough carbon credits to offset their total emissions, regardless of whether they wish to do so.

This obligation should, in theory, force companies like Genesis, Mercury, and Meridian to examine the true cost of coal or fossil fuels. As Weaver says, “the price of carbon helps to drive decisions about reducing emissions”.

Historically, though, that price hasn’t been high enough. Carbon credits could have been purchased for $5 each as recently as 2015. Six years later, they’re worth $70.

“If the carbon price is really low, like it was in 2015, there’s no incentive to reduce emissions,” Weaver says. “If the price is $100 a tonne, it’s no longer a ‘get out of jail free’ card.

“I’m encouraging the price to be as high as possible.”

Some opportunists feel exactly the same. Ekos and other traders make their money from service fees, while others see the rapidly rising cost of carbon credits as an opportunity to speculate. “A lot of buyers in government auctions are [speculators], that does happen,” Weaver admits. “While one could argue that’s really a bit shonky, another could argue that without those people the market wouldn’t be as robust.”

These speculators, even though they stand to benefit from environmental degradation, play a natural part in driving demand and prices upward. In any case, Weaver reserves his moral judgment, “I’m not certain of how good or evil it is,” he says. “If that wasn’t an option it would certainly change the dynamic of the market.”

Carbon credits are also popular with more charitable buyers. The voluntary carbon market is an important demographic for carbon traders.

The Spinoff, for example, is an organisation that purchases carbon credits to offset any emissions it creates during its operations. For these customers, Ekos quantifies their carbon footprint and calculates the number of credits necessary to reach “net zero”.

Photo: Getty Images

Is offsetting always a good option?

Weaver says that offsets can’t be used as a substitute for prevention. They should only be used to reduce emissions that are unavoidable such as worker commutes. “What wears the trousers in climate action is the reduction of emissions,” he says. “Voluntary offsetting is only meaningful as part of a carbon measurement and reduction strategy, where you reduce where you can and offset what’s left over.”

Much of the criticism levied against New Zealand’s carbon market is in how much our climate strategy relies on offsetting. “New Zealand has a clean and green image, but we’re way behind when it comes to genuine action towards emission reductions,” says Weaver. “Many in the government think they can rely on offsets, but that’s a fiction.”

Others are even more critical of the carbon credits discussion, claiming it is fundamentally misleading. “There’s been a lot of hype around trees,” says climate expert Kevin Trenberth. “But an old-growth forest, by definition, is neutral in regard to carbon.”

Trenberth points out that forests absorb carbon dioxide through photosynthesis. However, most of these gases are released during the colder months. “Twigs and branches, and even trees, fall down and decay on the forest floor and put carbon dioxide back into the atmosphere,” he says.

In that sense, trees exhibit a “breathing” effect wherein they absorb and release carbon dioxide seasonally. Although forests may consume carbon, what goes in one side must go out the other. This highlights a fundamental flaw with the mechanism of carbon offsetting. It is that CO2 isn’t being removed, it’s just being put in temporary storage. Carbon dioxide has an estimated lifespan of several hundred years, so that offsets are less effective and more of a deferral. 

This is especially concerning as the climate is getting worse. “The problem is, we have bushfires in Australia, wildfires in California, in Portugal, in Spain, and Russia,” Trenberth says. “All of a sudden those offsets are gone. They’re back in the atmosphere.”

Sean Weaver points to the fact that there are ways to mitigate these risks. “Forests can, and do, burn down. Carbon projects have to account for that and find a way to manage that risk,” he says. “[Offset projects will]As a buffer, you should keep a certain percentage of these credits in reserve. Credits in reserve can be used to replace credits that are lost in a fire. The lost forest can then be regrown to the same size it was before.”

Simply put, people who generate the offsets can replace damaged offsets with other offsettings. Though this safety net isn’t enough to make carbon credits a substitute for genuine action. 

Photo: Getty Images; Additional design by Tina Tiller

What can we do instead

Trenberth believes the only solution to New Zealand’s emissions is a strategy we’ve been putting off for years: a true push for renewable energy. “New Zealand has tremendous resources in terms of wind power,” he says. “Nobody’s even talking about off-shore wind power because we’ve yet to exploit the wind power on land.”

Solar power is another area of strong potential. Many territories within the United States, including Trenberth’s home state of Colorado, have a net metering policy. This means that excess power can be used later on, even if it is generated by renewable sources. 

“The way this is done in New Zealand is, I think, criminal,” says Trenberth. “Companies like Genesis, who set the rates, buy power back at $0.08/kWh and then sell it for somewhere in the range of $0.26-0.32/kWh.” In other words, excess power generated by solar panels must be repurchased from energy providers, leading many New Zealanders to ignore solar altogether or otherwise limit their usage to hot water.

“[As a result] there’s very little solar on rooftops here, and there are no building codes to encourage it,” he says. “Many countries around the world have seen an explosion of solar power and it just hasn’t been matched in New Zealand.”

One possible use for carbon credits is to temporarily offset car emissions while the country transitions towards electric vehicle infrastructure and greater public transport. Sean Weaver envisions a future in which cars are almost obsolete and cities are designed to encourage pedestrian access and a new public transportation system that incorporates electric scooters.

“[Instead of reinventing public transport] we’re building more highways, making life easier for the current model, the 20th century model,” Weaver says. “That’s not going to deliver the solutions we need. We need ambitious, transformative action.”

Though there is a place for carbon offsets within our climate change strategy, the experts say that place isn’t front and centre. Instead, offsets serve as a valuable supplementary tool for mitigating the effects of unavoidable carbon emissions or during transition periods. 

Carbon credits are not supported by critics or advocates. They cannot be used to address climate change on their own. True carbon neutrality is a future in which offsets are not necessary.


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