The Promises and Pitfalls of Carbon Markets
For people looking to align their money with their values, the carbon markets present a curious opportunity. Can we really ‘offset’ our personal emissions in 10 minutes online? To what extent can we expect this to solve climate change? All this and more will be answered below.
New in Shareholder Activism 🌶🥵
Activist investor calls for BlackRock CEO to step down over ESG ‘hypocrisy’
This year BlackRock has been accused of pushing a biased ESG agenda by conservatives. This past week, Bluebell, which holds a tiny stake in Blackrock, Bluebell called attention to the “reputational risk (including greenwashing risk) to which BlackRock under the leadership of Larry Fink have unreasonably exposed the company.” Is Bluebell justified in claiming this?
Vanguard quits net zero climate effort, citing need for independence
One of the largest asset managers in the world, Vanguard, is pulling out of a major investment-industry initiative on tackling climate change. Vanguard explained it wants to demonstrate independence. Vanguard’s withdrawal is a crushing blow to the Net Zero Asset Managers initiative, which encourages firms to reach net zero by 2050.
Regenerative Vibes 🌱🌞
What are offsets? 🌲
At the core of carbon markets is the idea that instead of personally doing something to take carbon out of the atmosphere, a person or organization can pay another entity to do it on their behalf. We call this an ‘offset’. Pretty great, right? This is more efficient than having to go out and personally plant a tree yourself. But it gets more complex. Consider this scenario.
I plant a hundred trees on your behalf*. Congratulations, you’ve put a dent in climate change while barely lifting a finger. For that, you pay me a few hundred dollars. I’ll even send you a certificate, so you can show your friends what a green legend you are.
You: “what’s stopping you from selling the offsets from those same 100 trees to other people?”
Me:“Well, we have a database that shows all of the offsets as well as their owners. It’s called a registry.”
You: “Jolly good, take my money! I’m sure there aren’t other registries that also account for these 100 trees and that you’ll plant other trees if anything happens to those.”
Me: “Perfect! And what if I told you that these weren’t new trees being planted on your behalf, but they were being ‘saved’ on your behalf? ”
You:”What do you mean saved?”
Me: “Well, this Palm Oil company is threatening to chop down these beautiful trees and we’ll ensure they don’t do that by buying the land ourselves with your money.”
You:”That’s fine, I wouldn’t want that company to chop down those beautiful trees!”
Me: “Me neither, the best part is they were never going to anyway!”
You: “What?”
Me: “Well, that corporation actually has a deal with another company that’s selling the carbon offsets. They didn’t actually plan to cut down those trees, but now you feel good for saving the planet and they feel good with a few extra bucks.”
This hypothetical aims to point out the three main problems with the carbon markets:
Double-accounting—are the offsets I’m buying being sold to another person.
Additionality—are the offsets being produced actually new or is it a repackaging of made up assets?
Duration—how long do these offsets offset? This requires verification.
For all its flaws, the carbon markets still present a tool in the growing portfolio of solutions needed to address climate change. Many companies are attempting to address the problems above.
Startups like Toucan Protocol are solving the double-accounting problem by putting offsets on the block chain.
MRV—measurement reporting and verification companies are working to ensure the integrity of offsets. For example, Pachama, uses satellite imagery to verify forest-based offsets are indeed being conserved, and to better estimate biomass and carbon sequestration capacity.
More information
The Carbon Offset Problem - [Video]
Voluntary Carbon Markets Report from S&P - [Report]
Wren - Carbon Offsetting Platform - [Site]
If you want to maximize your impact with stocks you already own, check out our site
That’s all for this week✨
Leave your thoughts below or reach out