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September 15, 2009

Report Calls Carbon Offsets a Disaster for Averting Climate Change
    by Robert Kropp

Friends of the Earth contends that international offsets allow developed countries to go on polluting, and delay the development of a global low-carbon economy. -- Under the Kyoto Protocol, greenhouse gas (GHG) emissions from developed countries can be offset by investment in projects in developing countries. The Clean Development Mechanism (CDM) was created to assist developed countries in the practice, and by March 2009, over 4,200 offset projects had been accredited by the CDM Executive Board. According to the United Nations Framework Convention on Climate Change (UNFCC), the CDM helps "stimulate green investment and (helps) Parties meet their emission targets in a cost-effective way."

International carbon offsets are financial instruments that allow companies and governments to mitigate their GHG emissions by funding renewable energy projects in developing countries.

But will emissions offsets help contribute to the reductions in global GHG emissions that the Intergovernmental Panel of Climate Change (IPCC) has determined is necessary to avert the impacts of climate change? According to a recently published report by the Friends of the Earth, offsets are unlikely to contribute to a timely response to climate change, and in fact, are "having a disastrous impact on the prospects for averting catastrophic climate change."

The report, entitled A Dangerous Distraction: Why Offsets Are a Mistake that the US Cannot Afford to Make, contends that "offsetting must not be included in US climate legislation or expanded at Copenhagen. New proposed offsetting schemes must be dropped from negotiations, and existing offsetting mechanisms need to be scrapped."

The report lists four arguments against offsetting. International offsetting leads to lower GHG reductions globally, by counting actions in developing countries as part of efforts in developed countries as well. In the absence of guarantees that offset projects would not have occurred without such offset finance mechanisms as the World Bank's Carbon Finance Unit (CFU), which purchases project-based GHG emissions reductions in developing countries on behalf of contributors from developed countries, GHG emissions are likely to increase, because the developed country is permitted to continue polluting in return for purchasing offsets.

The report argues further that international offsetting weakens incentives in the US and other developed countries to transition to a low-carbon economy in a timely manner. According to the report, offsetting provisions in the Waxman-Markey Climate Change bill "could allow domestic polluters to delay taking strong action up until 2029. Locking in a high-carbon infrastructure will have severe consequences for the global climate and for our economy."
Finally, the report contends that offsetting does not help developing countries support low-carbon development. In fact, according to the report, "Offsetting deepens inequality in per capita carbon consumption between developed and developing countries."

The report concludes with recommendations that the US government commit to reducing US-based GHG emissions by 40% below 1990 levels by 2020, reject proposals for new offset programs such as forest offsets, and help provide developing countries with funds to support their transition to low-carbon economies, without reliance on offsets.

The implications of such recommendations for companies that have used carbon offsets to mitigate their GHG emissions could be considerable, as it is likely that actually reducing emissions from operations instead will require significant re-tooling of business operations. The cost of doing so could prove to be far more expensive than mitigating through the purchase of carbon offsets.

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