Friends of the Earth: Why It's 'Suicide to Base Our Future on Offsets'

Letting wealthy greenhouse gas producers buy their way out of cutting emissions with offsets is “profoundly unjust” and “threatens to make a mockery of science-based target setting,” environmental group Friends of the Earth writes in a scathing report released today.

The group argues that international offsetting results in fewer emissions reductions globally, is largely unverifiable, and doesn’t ensure positive sustainable development in developing countries.

“Offsetting does not work, will not work, and must be scrapped," said FOE President Brent Blackwelder.

"Instead, the world needs developed countries, especially the United States, to cut their own emissions first and fast and provide financing for adaptation and mitigation in developing countries.”

The international community created offsets in the 1997 Kyoto Protocol to give big greenhouse gas emitters more flexibility in meeting their reduction targets. The proceeds were intended to help developing countries pay for emission-cutting projects, such as hydroelectric dam construction, that wouldn't have happened without financial assistance.

In practice, however, offsetting has allowed wealthy countries to continue polluting while paying developing nations to make their emissions cuts for them, often with project that would have been built anyway, meaning extra emissions cuts are lost, FOE writes.

The Siren Song of Offsets

In many cases, buying offsets has proven to be cheaper for major emitters than paying for the technology to cut their own emissions at home. Offset credits purchased for Kyoto’s Clean Development Mechanism (CDM) projects currently cost around $19 per metric ton of CO2-equivalent reduced, and that price is likely to fall to around $15 later this year, according to a forecast from analyst Trevor Sikorski of Barclays Capital. In contrast, the cost for California cement producers to switch from coal to cleaner natural gas would be close to $119 per metric ton of CO2 reduced, Stanford researchers calculate.

According to the FOE report, so many offsets are now being purchased through the CDM that offsets are likely to shift the burden for about half of the European Union’s promised carbon reductions through 2020 to developing nations.

The U.S. now appears to be headed down the same path: The American Clean Energy and Security Act (ACES) that passed the House in June would allow up 2 billion offset credits a year, equal to about a quarter of all annual U.S. emissions. A recent ACES analysis by the Energy Information Administration suggests that, given the potential of offsets as a low-cost compliance option, any emissions cap would likely be met less by reductions of CO2 at home, and more by offsets used aboard.

International offsets are also on the verge of expanding. When world leaders meet in Copenhagen in December, adding offsets for forest projects, through REDD, and other sectors such as nuclear power will be on the table. The EU is recommending credit banking and sectoral credits be added, as well.

Offsets Abroad, Pollution at Home

These growing numbers of offsets don't cut global emissions as effectively as Kyoto supporters assumed, FOE and experts say.

“Between a third and two-thirds” of CDM offsets do not represent actual emission cuts, estimates David Victor, head of Stanford’s energy and sustainable development program.

Part of the problem, write Victor and colleague Michael Wara, is that the CDM executive board relies on third-party verifiers, who are paid by the project developers, and there is scant oversight of the process.