Climate Now

(1/3) The Voluntary Carbon Offset Market

December 19, 2023 James Lawler Season 1 Episode 133
Climate Now
(1/3) The Voluntary Carbon Offset Market
Show Notes Transcript

The voluntary carbon offset market (VCM) – in which customers can pay for third-parties to avoid emitting CO2 or remove it from the atmosphere on their behalf – has existed for over 30 years, and has been controversial for nearly as long. On the one hand, the VCM can provide a path for hard-to-decarbonize sectors or businesses to reach net-zero emissions goals, and it can help finance development of important carbon removal technologies, like direct air capture. On the other hand, the market is rife with opportunities for exploitation and the sale of ineffective carbon credits.

In the first of a three-part episode exploring the current and future state of the voluntary carbon offset market, Climate Now is joined by Dr. Colin McCormick, Alex Dolginow, Derik Broekhoff and Dr. Mark Trexler – four experts in the VCM space, to examine why it is so difficult to create an effective and reliable carbon offset market, and whether there is a path forward for doing so.

For a full transcript and sources, go here: 

Editor's note: At 30:12, Derik Broekhoff mentions "carbon credit rating agencies." Here are some of these which he shared with us after the recording:

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James Lawler: [00:00:00] Welcome to Climate Now, a podcast that explores and explains the ideas, technologies and the practical solutions that we’ll need to address the global climate emergency. I'm your host, James Lawler. At Climate Now, one of our main priorities is helping our listeners to understand the latest developments in the climate space.

We do this through our weekly climate news recaps, Climate News Weekly, our bi weekly deep dive episodes, and our weekly newsletter. As 2023 comes to a close, we'd like to thank you, our listeners, for choosing us, among all of the other climate related media out there. We're very appreciative to have such loyal listeners, and we're always excited to read your comments, messages, and your emails.

Thanks for your support. We're wrapping up 2023 with a three episode series. covering a 30 plus year old climate solution that has been central to the way governments, companies, and even individuals think about carbon emissions, which is the Voluntary Carbon Offset Market, also known as the VCM. Over the course of the next three episodes, [00:01:00] we'll explore the VCM in depth.

In this episode, the first in our series, we're digging into what the voluntary carbon offset market is, why it came about, and some of the challenges it has faced in recent years. In episode two, you'll hear from three providers of offsets, and learn how they work and where they fit in the larger market.

Finally, in episode three of this series, we'll take a close look at the dynamics of the market, what verification really means for offsets, and what directions the market might be going in in the future. Thanks for joining us. 

To set the stage for this series, we'll start by answering the question, what is a carbon offset? While carbon can be captured by trees, dirt, carbon dioxide sucking machines, and rocks, how does that chemical process translate to a credit that can be bought and sold on the market? In July of 2021, Climate Now released an episode titled What's Wrong With Carbon Offsets? where we invited two carbon offset experts, Derik Broekhoff and Mark Trexler, to give us a brief history of the [00:02:00] VCM and their take on the promises and pitfalls of the market and the technology it revolves around.

Specifically, Derik Broekhoff shared a great explanation of what a carbon offset is. Here is a clip from our July 30th, 2021 episode. 

Derik Broekhoff: So in the most generic sense, carbon offset is the removal of carbon dioxide from the atmosphere or the reduction in the emissions of greenhouse gases that is used to compensate for emissions that are occurring somewhere else.

So, what happens is a buyer of a carbon offset will have a certain target, let's say, for reducing their emissions, or they have some amount of emissions that they simply cannot reduce themselves, but they want to get to a level of net zero emissions. So they go out and they pay other parties to reduce emissions or take CO2 out of the atmosphere.

And then they claim that reduction or that removal against their [00:03:00] own greenhouse gas emissions. The catch here is that in order for that kind of claim to be valid, right, there has to be a causal connection between your paying someone else to reduce emissions or remove CO2, uh, and that reduction or removal actually happening.

James Lawler: If you haven't heard it yet, we highly recommend taking a listen of this episode featuring Mark and Derik from 2021. You can find it on your podcast app and on the Climate Now website. While that episode covered many basics on the VCM, a lot has changed since, and today, the future of the voluntary carbon offset market is in flux.

As you'll learn, while the market has been rocked by a series of investigations, reports, and critiques, a lot of companies are buying offsets. Our questions include, what impacts is the VCM having on climate? Are the changes this market is facing helping to ensure that offsets are in fact offsetting what they are meant to? Or what else might be going on in this market that we should understand? So, let's dive in. 

Since we released our first episode on carbon [00:04:00] offsets two years ago, the voluntary carbon offset market has slowed, at least in terms of total carbon credits traded. In 2022, traded carbon credits dropped 51 percent from their 2021 peak, according to the State of the Voluntary Carbon Markets report by Ecosystem Marketplace.

And again, all links that we cite on the Climate Now podcast are available on our website so you can go and read for yourself. According to that report, this change in traded carbon was due to many factors, including a rise in scrutiny into the myriad carbon offset providers that have cropped up, concerns about the validity of major offset projects, and a growing understanding that the average price of an offset at the time, $4, is surely not enough to actually offset a real ton of carbon dioxide when the social cost of each ton of carbon dioxide is likely close to $200 per ton.

While trading decreased between 2021 and 2022, the average price of a carbon offset rose by more than 80% from $4 per ton to [00:05:00] $7 per ton. This change meant that the total value of the voluntary carbon market was able to remain relatively steady at just under $2 billion per year. The number of carbon offsets traded in the first half of 2023, more or less match the same period in 2022 at 143 million tons according to a report by research agency Climate Focus.

Now, to explain one thing that you might be asking, $4 and $7 a ton seems very, very low, especially as compared to some of the credits that we'll talk about in this series, which trade at well over $500 per ton of CO2 stored. So, why is that? Well, CO2 can be stored, and carbon credits can be traded for a wide variety of different types of offset projects. The vast majority of these are forest offset projects, where the cost per ton is significantly lower. Again, one one hundredth of some of the other types of projects and higher quality projects, which might be underground storage or mineralization, where the CO2 is very clearly [00:06:00] captured and stored for geologic time. We'll get into more of that later. 

For the first episode in this series, we're drilling down on what the VCM is. To do so, we invited two sets of guests to give us two different ways of thinking about the voluntary carbon offset market. First, you'll hear from Alex Dolginow and Colin McCormick, who both work at Carbon Direct, a firm that helps other companies decide what carbon offsets are best for their goals.

We discuss how Carbon Direct works to ensure carbon offsets are actually effective at reducing net CO2 emissions, what makes for a good credit, then you'll hear a conversation with Derik Brokaw and Mark Trexler, our guests from our 2021 episode on carbon offsets, whom we invited to come back on the show to give us an updated take on what the VCM looks like today, what's been working and what hasn't since our 2021 conversation.

Alex Dolginow and Colin McCormick work at Carbon Direct, a firm founded in 2019, whose stated mission is quote, making carbon science actionable. Alex Dolginow is head of portfolio [00:07:00] diligence and Colin McCormick is chief innovation officer. Welcome guys. 

Colin McCormick: Thank you. 

Alex Dolginow: Thanks for having us. 

James Lawler: So let's talk about Carbon Direct just quickly to understand the business.What is the business model of Carbon Direct, Colin? 

Colin McCormick: Well, part of the business is an advisory services firm. So we describe ourselves as a science based carbon management company. On the advisory side, we have clients who pay us usually on an engagement basis, over pretty extended engagements, that might be several months and we'll dig in with them, maybe looking at the landscape of decarbonization options in transportation or looking at sustainable aviation fuels, helping them understand what the technology pathways are there. 

The other side of the business is the platform. There we do shorter engagements. We help companies do their corporate carbon foot printing, that tends to be on a, on a faster turnaround basis. Other parts of that platform are related to our portfolio of science vetted carbon [00:08:00] removal offsets, and Alex can tell you a little more about that. 

Alex Dolginow: Yeah, so in general, many of the clients that carbon credit serves are interested in trying to find high quality carbon credits, and we had sort of a number of experiences where folks came to us and said, hey, we're just looking for some good credits, can you tell us which those are? And we had the kind of unsatisfying answer initially of, well, we can run a long process for you to try and figure out which credits are good and, you know, go through this sort of elaborate thing. But sort of out of those questions stem this idea of we can offer some credits pre-vetted that we, we as carbon direct have looked at very carefully and decided okay these meet our bar and we make those available to um anyone who wants to purchase credits.

James Lawler: When you say high quality credits that your clients are coming and accessing the platform for what do you mean [00:09:00] by that?

Alex Dolginow: Yeah, it's a great question and one we, we think about a lot. So when we say high quality credits, we generally look for about six different criteria to basically be robust in terms of the scientific integrity and in terms of how it impacts communities and environments. 

Colin McCormick: One way to think about this is if you're doing a carbon removal project, there's a lot of ways to mess it up. There's a lot of ways to do it wrong and, uh, many of those different ways dramatically reduce the climate benefits of doing the carbon removal project. So to start with, there’s this concept we've used in the past called additionality, which is basically saying if there weren't a carbon project here, if there weren't any carbon credit dollars on the table, what would have happened anyway, what's the counterfactual? 

Along with additionality, we think a lot about what we call baselines. So particularly in cases of forestry, when you want to understand what would have [00:10:00] happened in, again, in the counterfactual, and what kind of forest growth might have happened without the carbon project, you need to establish a scientifically valid baseline. So you can't assume a counterfactual of no growth. You can't assume a counterfactual that that's extremely unrealistic in order to inflate the carbon claims. 

Um, we also focus a lot of what we call carbon accounting so that's ensuring that all the life cycle emissions of the project are included. That might be, there might be diesel vehicles that are moving on site, there might be materials that are supplied and have an upstream emissions factor. All of that needs to get rolled in to the full carbon map and make sure that the tons, total tons, removed include that as well. 

There's more to this list, but the last one i'll touch on is this concept of leakage, economic leakage. You may be doing carbon removal in a particular location, but if market demand remains the same then that activity may simply shift somewhere else that could be logging that could be forest clearing for cattle.

So understanding whether there's economic leakage going on and [00:11:00] how that might erode the carbon benefits of the project is really also very important for the high quality nature of the project. 

James Lawler: So what about a scenario where I've decided to form a company and I'm going to spend money to purchase land in the Amazon and put up fences around it so that it won't be deforested, right? And so you can see on a map that everywhere around my parcels have been deforested. So you have some case to say, Oh yeah, the fact that he bought that land and put the fences around it probably saved that forest. Okay, is that a project that would pass muster or not? 

Colin McCormick: First of all, there's a lot, there's a lot more that we would need to know about that project.

I think as you've established the thought experiment, it does seem fairly convincing that that land was at risk of deforestation before you bought it. Okay, so I don't, I don't think that would necessarily be in question. A set of questions around what's your plan for management and long-term fate of that of that land. Are you just buying it this year to get some carbon credits and then [00:12:00] you're going to cut it down next year? So we have a kind of an issue there. There's a, there's a leakage question of great, maybe you protected that parcel of land, did just one more hectare of forest get cut down somewhere else, and understanding those dynamics is very challenging. There's an ecological question of, depending on how large the plot you have is, can it, can it continue to be viably a forest with it, if it's deforested all the, in all the areas around it, so that's, that's a separate issue. 

So all of those are entangled or all of those need to be addressed. So just the scenario as you've painted, it would certainly not pass muster with us as a fully described project. And as you've described it, we would absolutely reject it or at least ask a lot more questions to try to get the basic information we need to compare it to our standards. 

James Lawler: Got it. So maybe you could talk us through some of the other categories of carbon removal or carbon credit creation that you look at and perhaps just sort of touch on some of the key considerations or [00:13:00] issues with each type just to help sort of flesh out the picture of what some of the concerns are with each of these types.

Colin McCormick: Sure. One of the types we look at is biochar. It's in the portfolio. Biochar is the result of taking woody biomass and pyrolyzing it, heating it in the absence of oxygen. You get out of that syngas hydrogen, which you can use for power or heat and the residual that's left behind is a very recalcitrant, long lived carbon product. That can be added to soils, which is a long duration storage of carbon also can help improve soil pH, particularly in acidic soils. So applying a biochar that comes from a feedstock that we think is sustainable can be a, can be a very good carbon removal pathway. There's a number of other, other ones we look at in the moving. I'll shift over a little bit to the engineered side where I focus a little more.

We've mentioned direct air capture. There's a lot of different kinds of direct air capture, but they all characteristically move [00:14:00] ambient air through some sort of, usually chemical process, sometimes cryogenic process to separate out CO2 from ambient air and purify it and then either send it for some utilization or store it. Look at that very carefully. There's a lot of energy that needs to go into that, and we tend to really focus on the questions of where that's where that energy is coming from. 

And last thing I'll say is we've, we've spent a lot of time looking at, but we haven't endorsed yet, ocean-based carbon removal techniques, particularly ones that try to apply some of that carbonate chemistry to sea water are extremely interesting, but to date it's been very difficult to find ones that have a an MRV, a monitoring reporting and validation mechanism that's robust and reliable where we could really quantify the carbon that was removed and get a full lifecycle carbon number that we can rely on.

James Lawler: Okay, so we have different kinds of credits tied to different methods of carbon dioxide removal that companies can buy to offset their [00:15:00] emissions. But are companies just using this as an excuse to continue releasing emissions? Should that offset money instead go towards emissions reduction efforts, let's say, as opposed to purchasing credits, especially credits for reduction efforts? 

Colin McCormick: One observation I'd make is that the idea of carbon removal for a long time was, uh, somewhat held off the table.

There was this concern that investing too much in carbon removal technologies would, um, undermine, uh, emissions reductions or mitigation efforts. And, and one of the consequences of that is that there, while there was progress kind of on the academic end of things, the deployment stage of some of these carbon removal technologies was delayed. And we've seen now in IPCC reports this really unequivocal understanding that we're going to need both massive emissions reductions and carbon removal at scale. And at scale means multiple gigatons a year for the second half of the century.

 So the position we find ourselves [00:16:00] in recently is this kind of explosion of interest, innovation, and investment in carbon removal with a change in understanding in the, in the important role that it's going to play. So that's cool, we're really excited to see these innovative ideas and this capital flowing into these technologies and pathways, but it's important to understand that context of what that was like only a few years ago. 

James Lawler: Well, thank you both guys. This has been a lot of fun, I've learned a lot and really appreciate your time today, thank you.

Colin McCormick: Thank you. 

James Lawler: Earlier in the episode, we discussed some of the criticisms that the voluntary carbon market has faced more recently as it continues to evolve. Firms like Carbon Direct, as we've heard, are helping companies overcome those obstacles and invest in verified carbon offsets that are more likely to do what they say they do.

Yet, some critics are far less optimistic. A study published in 2023 in the journal Science surveyed 18 forest-based carbon offset projects accounting for 89 million active carbon credits. The study found that only 6 percent of those carbon credits [00:17:00] were linked to additional carbon reduction. This was forest carbon offsets, though, and there are a lot of offset options, as we've heard, that should be more reliable than forests, but this is just one of dozens of articles, reports, and analyses published over the last three years highlighting concerns with the voluntary carbon offset market. 

Some critics believe there should be no VCM at all. In early 2023, a group of more than 60 activist groups formed the Alliance Against Carbon Offsets. One member, Ben Lilliston, Director of Climate Strategies at the Institute for Agriculture and Trade Policy, said, quote, “Carbon offset markets are fatally flawed. The scientific consensus does not support them. They are riddled with fraud.” Our next two guests, Mark Trexler and Derik Broekhoff, fall somewhere between the VCM optimists and those who think it should be abandoned altogether.

For this new series, we wanted to hear an update on the thoughts they shared with us in 2021 concerning the potential and pitfalls of the VCM. Mark Trexler was one of the creators of the first carbon offset project in [00:18:00] 1988. He would go on to develop offset projects at World Resources Institute, or WRI, and he eventually co-founded The Climatographers, which is a climate risk management firm that helps clients around the world factor the climate crisis into their decision making. Derik Broekhoff is a senior scientist with the Stockholm Environment Institute, or SEI. The voluntary carbon market is one of his specialties at SEI, but he has spent his entire career in climate change mitigation, including stints with the Climate Action Reserve in California, which is a carbon offset registry, and at World Resources Institute.

Neither Mark nor Derik currently have investments in VCM. In fact, they are critical of the markets generally and believe that it's a long way from becoming a serious weapon against climate change. That said, they do acknowledge the potential of the voluntary carbon market, or something like it, if it can be imbued with stronger, better oversight, regulation, and verification methods. Mark Trexler and Derik Brokaw, welcome to Climate Now.

Mark Trexler: Good morning.

Derik Broekhoff: Great to be here. 

James Lawler: So you both came on our show [00:19:00] Climate Now a little over two years ago, and that episode is called What's Wrong with Carbon Offsets. Over the last two years, how has the voluntary carbon market changed and stayed the same? Mark why don't you take that one first? 

Mark Trexler: Yeah, it's, you know, it's a tough question to answer in the sense that carbon offsets and the voluntary markets in particular have run into a buzzsaw in the last two years and, and literally every day there is a new news story or report on sort of the problems with the carbon offset market.

And so, uh, you know, the, the volume has fallen substantially in the last year, at least. in part, apparently because of these concerns that are being raised all the time, 

James Lawler: That that refers to all types of carbon offsets, that's the whole voluntary carbon market? This is not just one particular area, like trees, for example.

Mark Trexler: Correct. So it's been a very [00:20:00] eventful two years and all sorts of upheavals and problems and resignations, et cetera, et cetera. On the other hand, nothing has changed at all because the markets are still sort of grappling with all the same issues that they have grappled with for decades and that they've been grappling with for the last, certainly two, three, four, five, ten years.

James Lawler: Let's get into that then. So on the surface of it, the notion is you're going to sell me a carbon offset. You're going to sell me a ton of negative emissions, emissions removal, essentially. I'm going to buy this ton of negative CO2 so I can add it to my positive emissions and I can claim a reduction in my net emissions, sounds pretty straightforward.

You know, I'm, I'm off here doing something, and I can point to the CO2 or I can model the CO2 in a very kind of precise way, ostensibly, and sell you that. So maybe Derik [00:21:00] and then Mark, what is wrong with that? Why, what are the fundamental problems with this exchange of value?

Derik Broekhoff: Yeah, the answer is it's deceptively uh, complicated. The premise is fairly straightforward. You pay someone to reduce emissions or remove CO2 from the atmosphere, and you get to claim that against your own emissions balance, you know, however that's determined, but the premise there is that had you not paid someone to reduce emissions, they would not have done so.

So, right, if you were to pay for an emission reduction that someone was going to achieve anyway, then that payment hasn't actually accomplished anything. So it then doesn't work to count that reduction against your emissions balance because total emissions elsewhere in the world haven't changed. Right.

So the fundamental challenge we have with these carbon credits is, are these emission reductions, what we call [00:22:00] additional, would they not have occurred in the absence of any carbon credit payment? And there's the related question about if this activity that's reducing emissions, even if it would not have happened but for your payment, what would the emissions have been in the absence of this activity?

And these are counterfactual questions, right? So they're not subject to empirical inquiry. We can't go into this alternate universe and determine, you know, precisely what would have happened and, and understand that. We have to basically make a best guess about that and that it's that fundamental kind of uncertainty about the nature of the reductions that we're quantifying here that has really dogged the market from the beginning and has, you know, engendered these endless rounds of questioning, development of standards, trying to find different ways to provide some assurance about these questions. And then, others coming in pointing out, wait a minute, your rules aren't quite [00:23:00] working the way you're expecting to. 

James Lawler: So can I wrap my mind around this with an analogy? Let's say I have a bathtub, it's full of water, faucet won't stop running, this tub is about to overflow and flood my house. Now, I'm trying to drain the water at least as fast as my broken faucet is adding water in. That represents achieving net zero emissions. So I'm going to pay a plumber to perform an intervention, which for the purpose of the analogy looks like sticking a siphon in the bathtub and removing water at the same rate it's coming into the bathtub and putting it somewhere else, so it doesn't flood my house.

So why doesn't the same principle apply to carbon offsets in the VCM? Aren't I just paying for a kind of carbon plumber to siphon out the same amount of emissions I'm putting into the air? Can you untangle that for me? 

Derik Broekhoff: So I guess you have to imagine a bathtub with, you know, all kinds of siphons, right, that may be draining water, and then you've got water coming into the bathtub. And so the question is if you're paying someone who's siphoning the water, right? If they were already siphoning it or if they were going to install the [00:24:00] siphon anyway, you're, you're not doing anything to increase the rate of water extraction or draining, increase, increase the rate of draining.

James Lawler: Now, why would they do it though? If I'm not being, if I'm not paying them, you know? 

Derik Broekhoff: Any, any number of reasons, right? There - renewable energy, for example, costs have come way down to the point where it's competitive with fossil fuels without any kind of subsidy, or at least without the additional subsidy of carbon finance. You have energy efficiency measures that save on energy costs that makes sense to do regardless of whether you're getting paid carbon credits for it. 

Improved forestry management activities can pay for themselves in many cases. So, there are any number of activities that reduce emissions relative to, you know, a scenario where people weren't doing those things, but they're happening for reasons that have nothing to do with the carbon credit finance.

James Lawler: I mean undoubtedly though if I pay someone to do a thing that removes co2 and let's just let's say [00:25:00] like I'm gonna take a bunch of woody biomass from a cornfield and I'm going to pyrolyze it and create like a biochar that I can bury. I'm going to do that, and so that's going to remove the carbon. Carbon was out in the atmosphere as CO2. It was absorbed through, it was processed through photosynthesis with, you know, in the corn stalks, and now it's in the form of these dried up husks. And I'm going to take that and make a char and, and do something with it.

So that intervention, that action takes CO2 from the atmosphere puts it underground. It helps my carbon accounting, helps my own claim of net zero. And it does something for the atmosphere, right? We want that to happen. I mean, that's a removal. So I guess the question is, isn't that an activity that we, we should want to stimulate through a market of this kind?

Derik Broekhoff: I mean, it depends on what you mean by a market of this [00:26:00] kind. 

James Lawler: Okay. 

Derik Broekhoff: This, this market is premised on the idea that through that payment to say a farmer who's applying biochar, you are inducing this practice. When it would not have otherwise occurred in the absence of that payment. It's a good thing for the climate, but again, that's neither here nor there.

As far as the question for the market, as far as the market is concerned, like are these payments that people are making for the carbon credits actually leading to additional mitigation action above and beyond what would otherwise have occurred in the absence of these markets. The challenge we have is how to ensure that, uh, these carbon credit markets are actually achieving mitigation above and beyond what would have happened if the markets didn't exist.

James Lawler:, Right. So if there was not a market, but there is simply government incentive, for example, to pay people to do these things, [00:27:00] that would be fine. 

Derik Broekhoff: Yeah, big, another big area of concern, which is a big area, a big chunk of the market, even today is renewable energy. So the idea is you build wind turbines, solar farms, and things of that nature that will displace fossil fuels and therefore avoid or reduce emissions.

But clearly in many contexts around the world, these, renewable energy, is actually cheaper than fossil fuels, or at least competitive, especially with other government policies in place to incentivize renewable energy deployment. So we've reached a situation where well over half of new capacity, electricity generation capacity going in around the world is renewables. 

So do these projects need further subsidy from carbon credits? Probably not, and there have been any number of examples. Studies of wind projects in India, for example, showing there are [00:28:00] projects receiving carbon revenues that clearly would have been competitive on their own, because you can point to examples of other projects in very similar circumstances facing all the same incentives that are not receiving current credits and they're going forward. 

Mark Trexler: I mean, we're you know, we're, neither Derik nor I are arguing that carbon offsets cannot work. I don't think we're arguing that. The question is are they working and are they working well enough because as Derik mentioned, you know, we're dealing with a counterfactual situation.

We can't actually ever know whether a given ton truly was additional, truly was being eliminated from the atmosphere because of the carbon market. If you ask people, are you doing this because of the carbon market? They will say, Oh, absolutely. But that doesn't mean that's true. And so the question is, how do you figure out what would have happened otherwise?

And that gets very complicated and can't really be tested [00:29:00] for and it raises sort of the fundamental question with carbon markets is you can't actually be sure. So, you have to decide what you're balancing. Somebody has to decide which is more important, how many false positives they're called in terms of “fake credits” are acceptable is 20 percent acceptable? 10 percent? Because you can never have perfection.

So somebody has to make these policy decisions about what the overarching structure is for the market. No one has ever made those policy decisions. Certainly not for the voluntary carbon markets, and in the absence of those fundamental policy decisions, the market just goes off in every which way, and you have no idea what's going on.

James Lawler: Right. And what would be some ways in which we could address some of the fundamental issues that you've just raised? Because it, seems as though we're facing this kind of [00:30:00] impossible problem of counterfactuals where you literally cannot go and say, what would have happened in the absence of someone paying dollars for these credits? That's impossible.

Derik Broekhoff: One new development the last couple of years is we have seen the startup of several, at this point, carbon credit rating agencies. It remains to be seen where this goes and what impact it will have on the market. But, I think they're already having an impact in terms of differentiating amongst different types of credits from different projects and in particular, I think making clear that the quality of these credits is not some kind of binary thing, like it's good or it's bad. Some projects fare better than others with respect to additionality, some fare better with respect to the certainty of the quantification with respect to permanence, so on and so forth. And so [00:31:00] as far as new things in the market, that is maybe one new thing that could, you know, point us in that- in the right direction.

But going back to where I started, right? There's another big set of criticisms around the market, which is more on the demand side. That is, how are companies using these credits? What kinds of claims are they making? And, in many cases, what they do with these credits is to say, look, now we are carbon neutral. Our net contribution to the atmosphere is zero at this point, or we have a product that is carbon neutral. And that's a very specific kind of claim, right? It implies this kind of precision between the emissions that you are producing as a company and the number of emission reductions that you've achieved through these credit purchases. And the fact is that both of those numbers are subject to to a fair amount of uncertainty.

And this, you know, the fact that [00:32:00] there is that imprecision there, yet companies make these claims, I think, is another big source of concern, criticism, you know, of this market that companies are misrepresenting their climate impact, essentially. And that's another one that's hard to know how to address but another, I guess, notable change in the market over the last couple of years has been folks calling for a shift in the claims that companies make associated with carbon credit purchases, moving away from carbon offsetting and it's interesting to see that a lot of companies don't even use that term anymore and towards this idea that, well, maybe what they're doing is just contributing to efforts to mitigate climate change. 

James Lawler: So if a company or government is just incentivizing these activities by funding them and not actually trying to offset their own emissions, this still works. But it's a very different market, not an offset market. Well, guys, thank you for your time, that was great. 

Derik Broekhoff: Thank you. 

Mark Trexler: Talk to you [00:33:00] guys later.

James Lawler: In this episode, we've gotten two rather different perspectives on the VCM. On the one hand, the potential of the VCM seems straightforward. A third party removes carbon from the atmosphere in exchange for money, and the buyer can claim a reduction in net emissions. On the other hand, many of these carbons offset methods are in their infancy, and some seem to be a long way off from being proven truly effective, if doing so is even possible.

In our next episode, we'll speak with experts who are actually developing and operating carbon offset projects, ranging from forest management projects to an ocean based technique and direct air capture. Our guests will explain their operations and strategies, and you'll hear their reactions to some of the tough questions we covered today so stay tuned for that.

And that's it for episode one in our three-part series on the voluntary carbon offset market. You can learn more about carbon offsetting strategies in our previous episodes on We love to hear from our listeners. You can email us at [00:34:00] Thanks and we hope you'll join us for our next conversation.

Climate Now is made possible in part by our science partners like the Livermore Lab Foundation. The Livermore Lab Foundation supports climate research and carbon cleanup initiatives at the Lawrence Livermore National Lab, which is a Department of Energy Applied Science and Research facility. More information on the Foundation's climate work can be found at