Dear reader,

Welcome to 005 of our newsletter, Demand Change. We are sharing how we, our customers and the economy as a whole is working towards full decarbonization. We'll be covering subjects within carbon accounting, climate policy, climate tech innovation and sustainable finance.

tl;dr

Offsets are (still) (mostly) bullsh*t

CDR's big week

Lana Del Rey

Offsets are bullsh*t

As much of a crass simplification as it is, we stand by it. Carbon offsets are best case greenwashing, worst case outright scam. The same applies to corporate net zero pledges reliant on offsets. The amount of attention these instruments have received over the past couple of years have warranted a backlash.

The recent stumblings of various attempts to "boost the market" and "sweep the floor", like the Task Force for Scaling Voluntary Carbon Markets (arranged by big names) and the Toucan Protocol (organized as a crypto DAO) highlighted the fundamental issue: only a fraction, less than 5% of currently available carbon offsets go towards actual emission reductions.

Surely, in the case of the remaining 95%, the funding from the purchase of these credits might have some limited effect of additionality and might provide some co-benefits to the communities developing such projects, but for the purpose of carbon accounting, these credits can no way be used to neutralize or cancel out the emissions that companies or individuals are responsible for, as in the case of these, adequate permanence and additionality requirements can't be established.

So what's up with that 5%?

More than 4% of these credits are afforestation and reforestation which according to the latest IPCC report is an absolutely crucial effort to reach the global climate goals. And the issues are rampant. Many of these forests would have been planted anyway and they often burn down.

Should the prescribed afforestation & reforestation efforts be funded via offsets? And should we allow companies to use them in their carbon accounts? The answer is possibly, but only with way more rigorous mechanisms for quality and integrity on the supply side and rigorous rules and standards on what the demand side can claim. Quality obviously correlates with price and most of the cheap offset credits are currently scooped up by corporates who use their PR machine to make claims about "carbon neutrality" and use them for greenwashing towards customers and investors.

Hope is a dangerous thing to have

Where does that remaining 1% leave us? Most interpretations of the various emission reduction pathways of the latest IPCC report (AR6 WG3) concluded that the world will most likely need Carbon Dioxide Removal (CDR) technologies at scale.

CDR is an umbrella term for negative emission technologies, engineered efforts to suck CO2 out of the air and store them permanently. In theory, CDR would solve all the above mentioned issues with offsets. However, these technologies are unproven, expensive and don't exist at scale. That's is why this week's news made such big waves when Stripe, Alphabet, Shopify, Meta & McKinsey & Co. announced their new $1bn initiative to fund a portfolio CDR initiatives in the form of Advanced Market Commitment, meaning that if the experiments succeed, they will become customers of these projects.

There's plenty of rightful skepticism even about CDR, mostly that it's a distraction from the real goal, which is to reduce emissions by 50% by 2030. But if CDR proves to be scalable, it will become a much needed component of global climate action to compensate for hard-to-abate emissions (like aviation or steel) and even suck residual carbon out of the atmosphere to bring the CO2 concentration down to reach the 1.5C target.

This meme filled twitter thread correctly summarizes the situation, and as it is often the case with complex issues, it concludes that dualities doesn't have to be dichotomies. We need rapid emission reduction and gigaton scale CDR. So let's make sure that we deliver on the emission reduction goals. And let's hope that CDR will work with reasonable energy needs, at scale, in case we need it. To quote Lana Del Rey:

Don't ask if I'm happy, you know that I'm not But, at best, I can say I'm not sad' Cause hope is a dangerous thing for a woman like me to have Hope is a dangerous thing for a woman like me to have

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As always: stay tuned, stay safe, demand change!

- Adam & The Variable Team