Offsets for mitigating climate change: opportunity or myth?

Air travellers who want to ease their ecological conscience usually compensate for their flight emissions by buying carbon credits. These certify that somewhere, often in the Global South, they have offset their own contributions to the climate crisis. Environmentalists and development experts have long looked askance at offsetting, describing it as greenwashing and a modern method of selling medieval Catholic indulgences.

Their criticism was reinforced by revelations in the Guardian and Die Zeit early this year. The papers exposed that saved carbon emissions from forest protection projects in South America that were sold as emissions certificates to companies and individuals worldwide brought practically no benefit to climate protection (see box).

"The scandal doesn't surprise me at all," says David Knecht who leads the energy and climate justice programme at the Swiss NGO Fastenaktion. "The rules are prone to wrong assessments. Moreover, I've always wondered how it can be possible to credibly demonstrate that protecting a forest today will ensure it will exist for over 50 or 100 years, and so help to permanently save a certain amount of CO2." Knecht does not fundamentally oppose emissions certificates because Fastenaktion also sells them. "For us, it was interesting mainly from a financial perspective. We recognised it as a new opportunity to finance our activities to support disadvantaged people in the Global South."

Knecht, however, says there is a big difference between offsetting emissions that may potentially be reduced in the future by saving rainforests, and emissions that were actually reduced in the past, for example, because trees were not cut since people were provided with alternatives for cooking.

Fastenaktion has supported such alternatives in the rural region of Kitui in Kenya since 2013. Together with the local Caritas organisation it has replaced over 17,000 open fireplaces with efficient cookstoves that require only half as much wood. Consequently, fewer CO2 emissions are produced and people are not exposed to the harmful smoke. Fastenaktion sells the saved CO2 emissions as certificates to private individuals, companies and church communities via the klima-kollekte.de platform. About 23,515 stoves have been built to date, according to Knecht. This helped save 71,413 tons of CO2 by the end of 2020, and the certificates sold were worth about CHF 970,000. The certification is Gold Standard compliant, which validates the high quality of CO2 savings, and is verified on-site by external auditors. "But Klima-Kollekte has never offered a label for companies to designate themselves and their products as climate neutral. That's a myth," emphasises Knecht.

Apart from companies and individuals, even governments use carbon offsets to reduce their carbon footprint. Switzerland plans to offset 25% of its national emissions abroad in line with its current CO2 Act. To this end, it has signed bilateral agreements for emissions reductions with 11 countries since 2020. Such agreements are provided for under Article 6.2 of the Paris Agreement to support partner countries in areas such as renewable energies, energy efficiency, e-mobility, agriculture and waste management. The Federal Office for the Environment (FOEN) which is responsible for these agreements has specifically excluded projects related to carbon bio-capture and reductions in deforestation and forest degradation. These are the kinds of projects that have been severely discredited since the revelations early this year.

Ever since the Paris Agreement, however, it is not just the developed nations but also countries in the Global South that have committed to consistently reducing their CO2 emissions so as to achieve the Paris goal of 1.5°C. If climate action projects in Malawi or Ghana are credited to Switzerland through emissions certificates, then the countries themselves will no longer be able to claim those emissions reductions because double counting is not permitted. Swiss projects must consequently clearly be distinguished from, and additional to the partner country's plans for greenhouse gas reductions. This is not always easy.

Switzerland had planned to provide assistance to Georgia for retrofitting public buildings to enhance energy efficiency and claim the carbon credits for itself. The New Climate Institute, a non-profit organisation that provides inputs on climate policy, criticised that such reductions were already mentioned in agreements with the EU as well as in Georgia’s own emissions reduction plans. Moreover, such agreements would result in wealthy developed countries depriving less developed countries of the low-hanging options to achieve their own climate goals under international agreements.

Of the 11 countries, the FOEN has bilateral agreements for emissions reduction with, two (Malawi and Georgia) are currently priority countries for the SDC. "We are still a little hesitant and cautious about carbon offsets," says André Mueller, SDC programme manager in the climate, DDR and environment section. They undoubtedly constitute an interesting source of finance for projects that are not self-sustaining but deliver tangible reductions in greenhouse gas emissions. "In practical terms, it is often difficult to clearly distinguish between financial flows that originate from the purchase of CO2 certificates to reduce national greenhouse gas emissions – which countries have committed to under international treaties – and development cooperation funds." Yet this is precisely what the OECD has asked its member states, including Switzerland, to do.

But still, Mueller thinks there are some potential options. For example, an SDC project for promoting solar energy in rural regions that was financed through development assistance funds could be continued and scaled up by the FOEN under bilateral agreements. Another option might be to provide technical assistance to enable partner countries to issue CO2 certificates at a later stage. Finally, carbon credits could also be used to provide an additional source of income to farmers in SDC partner countries who have adapted their farming to climate goals. "That would be quite interesting from a development perspective," says Mueller, "but there is still a lot of uncertainty about how CO2 reductions in such projects are calculated."

Knecht considers carbon offsets to be an outdated method despite the fact that the cookstoves project in Kenya is self-sustaining today through the sale of CO2 emissions certificates. "By 2025, at the latest, we will switch over completely to climate financing." This means that individuals or companies investing in improved cookstoves in Kenya will no longer be able to obtain credits for the emissions saved. They will merely be able to demonstrate their contribution to reducing greenhouse gases in a partner country. But Knecht is positive that this would allow such companies or communities to showcase their climate responsibility without snatching away the best opportunities to reduce national emissions from partner countries.