Carbon offsets are incompatible with the Paris Agreement

The Paris Agreement Crediting Mechanism (Article 6.4) faces the same problems, and the same governance structure, as the Clean Development Mechanism.

PHOTO Credit: The opening and closing plenaries of the third meeting of the Methodological Expert Panel are available here.

The third meeting of the Article 6.4 Methodological Expert Panel is taking place this week in Bonn, Germany. The panel is working on the development of methodological standards and guidelines for the Paris Agreement Crediting Mechanism, or Article 6.4.

Danny Cullenward, a Senior Fellow with the Kleinman Center for Energy Policy at the University of Pennsylvania, is a member of the panel. Before leaving for Bonn, Cullenward wrote a commentary on the Kleinman Center website titled, “Will Carbon Offsets under the Paris Agreement Be Different?”

Cullenward is concerned that the Paris Agreement does not repeat the mistakes of offsetting mechanisms under the 1997 Kyoto Protocol, including the Clean Development Mechanism. Cullenward writes that,

Unfortunately, academic studies have shown that credits from most major CDM market segments suffer from serious quality concerns. From a climate mitigation perspective, the program has largely been a failure.

Cullenward notes that the Clean Development Mechanism and the Paris Agreement Crediting Mechanism “share a nearly identical governance structure”.

Cullenward’s table of UNFCCC carbon market governance illustrates the similarities:

In addition, he writes, several people are simultaneously members of the Article 6.4 Methodological Expert Panel and members of the CDM Executive Board or the CDM Methodologies Panel.

About 2,000 CDM projects have applied to transition to the Paris Agreement Crediting Mechanism. Projects will be able to use the flawed CDM methodologies until the end of 2025. By 2026, the project must be compliant with Article 6.4.

Cullenward writes that the 2,000 CDM projects could bring almost one billion carbon credits into the Paris Agreement Crediting Mechanism.

Carbon Market Watch points out that these “junk CDM credits” would be “rebranded as 6.4ERs”.

Carbon offsets and the Paris Agreement

In September 2023, Cullenward was lead author of a paper published in One Earth, titled “Carbon offsets are incompatible with the Paris Agreement”.

Cullenward and his co-authors, Grayson Badgley and Freya Chay, both of whom work with CarbonPlan, write that,

To support the Paris Agreement’s commitment to limit global warming, climate policies must reach and sustain near-net-zero CO₂ emissions in perpetuity. Today’s carbon offsets are not only inconsistent with this goal, but the majority actually frustrate temperature stabilization efforts. A growing literature reveals that carbon offsets rarely achieve the climate benefits they claim. Even if they did, vanishingly few lead to long-duration carbon removal, which is needed to counteract any unabated CO₂ emissions. Meanwhile, carbon offsets are primarily used to justify ongoing emissions, rather than reduce them. And on top of that, private offset claims are poised to double-count climate benefits reported under the Paris Agreement’s emissions accounting system.

They write that any one of these problems would be enough to undermine the Paris Agreement. All of them remain unresolved.

There is a “widening chasm between what carbon offsets deliver and what the Paris Agreement requires”, Cullenward, Badgley, and Chay write. They argue that carbon offsets were designed to “introduce flexibility” about where emission reductions take place, in order to lower the cost of hitting initial climate targets, as well as to address political opposition to legally binding climate policy.¹

Cullenward, Badgley, and Chay write that carbon offsets may have seemed promising when the aim was modest emission cuts, as envisaged under the Kyoto Protocol.

But today, they write,

[P]lanetary temperature stabilization under the Paris Agreement requires global CO₂ emissions to fall to near-net-zero levels. This goal cannot be achieved when governments and companies justify their own ongoing pollution by paying someone else not to pollute.

They highlight five “critical challenges” that require an urgent response:

• “Carbon offsets rarely deliver the benefits they promise.” This is a problem with CDM projects, REDD projects, renewable energy projects, and improved forest management projects.

• “Most carbon offsets claim to avoid emissions, such as building a wind farm instead of a coal power plant, rather than remove CO₂ from the atmosphere.”

• “Carbon storage must be durable enough to mitigate the near-permanent warming effects of CO₂, but nearly all credited carbon storage is only temporary.”

• “Buyers of imperfect carbon credits are making unsubstantiated claims.”

• “Even the most robust carbon offsets are poised to be double-counted.” Under Article 6.2 carbon trades between governments include a corresponding adjustment to make sure that only one government can claim the emissions reductions. However, under Article 6.4, “trades between private parties do not require the seller’s host country to make a corresponding adjustment. If private buyers make international offsetting claims without a corresponding adjustment, they will double-count the same benefits the seller’s host country reports under the Paris Agreement.”

Cullenward, Badgley, and Chay set out three “transformative changes” that are needed for carbon offsets to support the Paris Agreement:

1. “Carbon offsets need government regulation and independent scientific oversight.”

2. “The carbon offsets market must shift its focus from avoided emissions and temporary carbon storage to long-duration carbon removal.”

3. “Companies and governments must resolve the Paris Agreement’s double-counting problem, which arises whenever a carbon offset is transferred across national borders.”

Cullenward, Badgley, and Chay conclude that, “What matters most in climate mitigation is the rapid and deep reduction of CO₂ emissions. Today’s carbon offsets undermine that goal.”

They add that, “To support the Paris Agreement, nearly everything about them must change.”

Rather than changing “nearly everything” about carbon offsets, I’d suggest that the only possible way that carbon offsets could support the Paris Agreement would be to abolish them.

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1. I disagree that this is the purpose of carbon offsets. As Larry Lohmann points out,

Carbon markets are not designed to reduce emissions. Their function, in the Paris Agreement and elsewhere, is to extend the life of the fossil fuel economy and, indirectly, an exploitative and unequal system of extractivism and nature degradation. That is why they are backed by so many fossil-driven corporations and capitalist states. Carbon markets have coexisted very happily for more than 20 years with a catastrophic increase in emissions.