Carbon offsetting may be a crucial tool in humanity's effort to combat climate change — albeit one we've massively mishandled by focusing on solutions that are susceptible to problematic financial engineering and fraud. But perhaps there’s still a way to take Occam’s razor to the issue and create real offsets that provide tangible benefits.
One option I've come across, being tested out in Alaska, is for companies to purchase individual heat pumps and take carbon credits for the resulting emission reductions. It’s not a bad idea.
The economics of carbon offsetting are sound and elegant. Certain economically valuable activities (aviation, steel production) generate emissions that are extremely difficult and costly to reduce. Other economically valuable activities (energy generation, home heating) generate emissions that are comparatively easier and cheaper to mitigate at their source thanks to cost-effective and readily available technologies (renewables, heat pumps).
If humanity's goal is to achieve more emission reductions faster, it is economically sensible to make industries with difficult-to-reduce emissions pay for emission reductions where they’re easier and cheaper. The problem is that, in practice, the messy reality of human greed complicates the abstract elegance of offset economics.
As report after report demonstrates, rather than actually reduce emissions, enterprising fraudsters have rampantly gamed voluntary carbon markets by selling cheap, fake offsets to companies happy to boast on-paper emission reductions. This is popularly accomplished by selling trees supposedly planted or protected in far-off places. However, in reality, these trees are often either not planted or not protected.
At the same time, nature-based offsets create perverse incentives. They encourage governments and corporations to hold forests and other carbon-sequestering natural ecosystems, such as peatlands and coral reefs, for ransom. (“Pay up or we’ll log this whole forest!”)
Worst of all, who actually benefits from these offset sales near term? Typically, financial engineers and fraudsters.
But what if average, everyday people could palpably benefit from carbon offsetting?
Here is the policy proposal: companies that need to offset emissions — whether due to regulation, consumer expectation and/or investor pressure — could contribute to a public, private or hybrid fund. Low- to middle-income and affordable rental property owners who usually need to replace fossil-powered furnaces or boilers every 15 to 20 years could apply to the fund for partial or full coverage of what it would cost to replace their current system with a low-emission heat pump.
Ideally, this subsidy would make heat pump replacement of older, fossil-powered heating the obvious economic (and eco-friendly) option. It could function like Canada’s Greener Homes Grant, but funded by private companies rather than taxpayers. And the offset would be calculated based on emissions avoided per property.
So, who would administer the fund? What companies would pay into it?
Administration by a reputable environmental non-profit would be advisable considering the notorious bureaucracy of government and policy inconsistency across different administrations over time. The Alaska program, for example, is administered by the non-profit Alaska Carbon Reduction Fund.
As for who pays, the program would preferably be restricted to industries facing the greatest challenges in reducing emissions with current technology, such as the aviation and materials production industries. The program shouldn’t provide a get-out-of-emission-reductions-free card for oil and gas, banks or other sectors that realistically can and must reduce emissions.
Co-operation with federal and provincial carbon pricing authorities would be recommended, so industries could make use of the program with respect to industrial carbon pricing system obligations. The program’s offsets could also be used in the context of the carbon contracts for difference we’re starting to see employed in Canada.
This still leaves open the question of whether an offset program like this would be economically feasible, particularly if it must compete with low-cost offset options that only exist on paper. But if paper offsets are virtually free, can anything compete with them? A regulatory framework effectively banning likely fake paper offset options may be required. Or sponsorship opportunities could fill potential cash gaps ("This heat pump was brought to you by Air Canada").
As various offset-related scandals have proven, the devil is always in the details. However, offset programs, managed properly, could be an extraordinary tool in fighting climate change. It would be unfortunate to completely abandon or squander their potential if effective and genuinely beneficial programs remain possible.
Marc Z. Goldgrub is the founding lawyer at Green Economy Law Professional Corporation, a boutique Toronto-based law firm specializing in sustainability, psychedelic, and housing law. He holds a JD from the Benjamin N. Cardozo School of Law and a GPLLM from the University of Toronto’s Faculty of Law. Before launching the firm in 2020, he worked as a resident associate at the premier New York entertainment law firm Grubman Shire Meiselas & Sacks. He is a member of Toronto Community Bikeways Coalition, Citizens’ Climate Lobby, and sits on the board of VegTO.
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Is this proposed to be a one
Is this proposed to be a one-time credit or ongoing?
If one-time, how much credit is bought; the equivalent of the avoided emissions for the lifespan of the heat pump or something less? What if a heat pump is replaced or “hit by a bus” before its life expectancy is reached and ceases to provide the offsets already claimed? Or offsets claimed more than once for the same device or, in fact, by 'fake' devices or installations?
If ongoing, who is going to monitor and manage day-to-day credits and operations of millions of heat pumps?
One phrase in this rubbed me
One phrase in this rubbed me the wrong way: "the notorious bureaucracy of government". Well, the US has private health insurance, Canada has public health insurance, the US has 10 times as much health bureaucracy. PPPs, where you pay the private sector to build the infrastructure and then let the private sector own the infrastructure, involve massively more bureaucracy (and giveaways to the financiers doing complicated packaging on the whole thing) than the traditional public approach. So, "notorious" here means "why bother finding out if it's true?"
Otherwise a pretty good article.
It's noteworthy that heat
It's noteworthy that heat pump tech is working its way into clothes dryers (no venting required), on demand hot water systems, EV interior heating systems and even large scale district heating plants.
Why not impose a windfall
Why not impose a windfall profit tax on the big oil companies? This, according to the Observer's own John Woodside, would generate $4.2 billion dollars. This money could then be used to replace or supplement oil and gas fired heating systems with heat pumps and other renewable sources on a large scale. Since the oil companies are primarily responsible for increasing Canada's emissions they should be forced to help mitigate the environmental damage they are causing.
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