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  • Practical Sustainability: Impactful Carbon Trading

    June 13, 2022
  • Barbara Haya, director of the Berkeley Carbon Trading Project and a research fellow at the California Institute for Energy and Environment discusses impactful carbon trading. The discussion covers procurement of high quality offsets and the offset market.

    Hosted by Jeff Kavanaugh, VP and Head of the Infosys Knowledge Institute.

    “One thing that's important to remember with offsets, they're often presented as tons of emissions reductions, but offsets are inherently a trade.”

    “If you're a company looking to procure high quality offsets, the best thing that you could do is to do due diligence on specific providers and specific organizations, and really build a relationship with a specific project developer that you trust.”

    “We know how to measure emissions. But it's much harder to measure emissions reductions. The offset market is a perfect storm for poor quality.”

    “The most important thing to do is to prioritize direct emissions reductions before buying offsets so these aren't truly tradable.”

    - Barbara Haya

Insights

  • Carbon offsets allow an emitter, whether it's a company or even an individual that wants to reduce their carbon footprint, the chance to pay someone else to reduce emissions, to cover their own emissions, or to help them meet their target for reducing emissions.
  • There are five different offset registries globally that create the large majority of the offset credits that are available to companies and others to purchase. These registries do not make sure that the methods for estimating project impact are based on the best science and are not over credited. So what that means is that the buyers really need to do due diligence on the quality of the credits that they procure.
  • Companies, universities, cities, and others take on climate targets and carbon neutrality goals. The presence of the offset market means that there's a really easy way for them to meet their target by just buying these credits of the market. Carbon offsets demotivates action in this way, by offering this cheap, easy option for meeting a target.
  • The most important thing is for companies to reduce their own emissions directly. It is a lot easier for major companies to do the due diligence and the research and build connections with organizations doing work on the ground that they can support. For medium and smaller size companies, if you want to support climate mitigation beyond reducing your own emissions, do your due diligence on a company or an organization or a project that you want to support that does climate mitigation. They might or might not create offsets. Choose the project carefully.
  • The best way to ensure that your offset investments are really making a difference is to build your own projects or get new activity off the ground, because then you know that you're really having a difference and you can know that you can estimate the emissions reductions effectively.
  • There're two different types of the highest quality credits on the market. One is these high sustainability projects where you're putting funds into helping improve people's lives in ways that also reduces greenhouse gas emissions. Second is a category of the higher quality credits that are more the high potency, targetting greenhouse gases from industrial processes and chemical processes.
  • The offset market is a perfect storm for poor quality. Offsets are inherently uncertain. We know how to measure emissions. It's much harder to measure emissions reductions because you have to measure them against a counterfactual scenario that never happened and therefore is unmeasurable.
  • That substantial uncertainty is being deliberated by the second point and that is that everyone who's making decisions has a conflict of interest. Everyone has an interest in a larger and therefore poor quality market. Buyers of credits want cheap credits, sellers of credits want to sell more credits and make more money, the third party verifiers want to be hired again and the registries that are writing the rules also benefit from more market share.
  • This whole system is also buffered by complexity and lack of transparency, which sort of buffers the whole system from scrutiny and researchers, where it's just really hard to understand the quality of these credits. We are in a low quality loop, there's a trade off between creating an effective financial incentive for climate mitigation and ensuring that the credits are real and not over credited.
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Show Notes

  • 00:00

    Jeff introduces himself and Barbara

  • 00:45

    Of all the interesting insights innovations, what's perhaps been the most surprising insight you've discovered in this research journey?

  • 01:37

    Carbon offsets have taken off as a method for organizations to reduce their carbon footprint. However, companies need to ensure they're investing in offsets to make a real difference. Where do organizations go wrong in their approach to adopt or implement these programs?

  • 03:14

    Sounds like organizations could actually do harm if they don't approach carbon offsets properly. What are some of the negative environmental and societal consequences of a poorly run offset program?

  • 04:24

    So between a false sense of security and virtue signaling, I guess it's somewhere in the middle there, but in all seriousness, is that a real risk that deviates from the hard work of real reduction, and it's more that these appearance of this coverage or purchasing your way through them?

  • 05:43

    What does a credit cost?

  • 06:17

    Do you see carbon taxes emerging as an alternative to the trading scheme?

  • 07:27

    Do you have any guidance from your research about medium and small companies and how they can take steps as well?

  • 08:44

    Can you walk us through what a really good carbon offset or trading program looks like?

  • 10:19

    A few years ago, you had written a paper on managing uncertainty in carbon offsets. You made some insights from the standardized approach taken to California. What are the main points or the insights that you found from this report?

  • 12:28

    Who are the highest quality offerers out there? Who do you recommend as the highest quality?

  • 14:08

    Which protocol or small number protocols do you recommend as some of the ones sort of doing the least amount of over crediting? Or maybe they're doing the best job of crediting and more accurate?

  • 17:01

    What do you think is the most important thing to get this message from the lab out to the market? What is needed so that the broader market and society hears it and acts on it?

  • 20:27

    What is the one thing or the main thing that a corporate leader can do to improve the quality of these carbon offsets and carbon credits?

  • 21:16

    What are some good carbon trading and offset resources that you recommend for people to follow?

About Barbara Haya

Barbara Haya is a research fellow at both the Goldman School of Public Policy and the California Institute for Energy and Environment at the University of California Berkeley. She directs the Berkeley Carbon Trading Project, which combines research and outreach on the effectiveness of carbon offset programs. Barbara holds a PhD from UC Berkeley’s Energy and Resources Group.

Connect with Barbara

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