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Carbon Offsets Get a Green Light in Glasgow – Energy Institute at Haas

Summary

Provocative new research delivers a carbon offset reality check.

There’s lots to unpack from the COP26 meetings in Glasgow. One development that has economists talking is an agreement on how countries can work together to meet their emissions reductions targets. After years of gridlock, negotiators managed to hammer out consensus language that allows countries to partially meet their targets with cross-border transfers of carbon offsets.

This may sound like blah blah bla…….

Provocative new research delivers a carbon offset reality check.

There’s lots to unpack from the COP26 meetings in Glasgow. One development that has economists talking is an agreement on how countries can work together to meet their emissions reductions targets. After years of gridlock, negotiators managed to hammer out consensus language that allows countries to partially meet their targets with cross-border transfers of carbon offsets.

This may sound like blah blah blah. But a centralized system for compliance offsets could channel trillions of dollars into forestry projects, renewable energy in emerging markets, and other mitigation investments. If done right, this will significantly reduce the global costs of climate change mitigation. If done wrong, low-quality carbon offsets could undermine real progress towards national climate commitments.

Skeptics are right to be concerned about the worst-case scenario. In contrast to carbon permit markets, where emitters must pay for carbon emissions that can be directly measured, carbon offsets award credits on the basis of emissions that would have happened absent the offset transaction. This is a tricky accounting exercise. Partly because it involves estimating highly uncertain outcomes. Partly because both sides of the transaction have an incentive to over-estimate emissions reductions.

This week’s blog digs into some new research that finds evidence of significant over-crediting in two of the world’s most important compliance offset markets. These findings are discouraging. But I see some room for optimism. With new data and new analytics, researchers are devising new ways to carefully evaluate the GHG impacts of offset projects. Along with sobering punchlines and cautionary tales, this work could provide inspiration for future offset protocols that incorporate rigorous project evaluation before carbon offsets are awarded (versus after the carbon offset horse has left the barn).

To see how this might work, let’s dig into the research. First stop, India.

Wind energy offsets in India

The first paper takes a deep dive into the world’s largest GHG offset program. Under the Clean Development Mechanism (CDM), industrialized countries could meet part of their Kyoto protocol emissions reduction obligations by subsidizing emissions reductions in other countries.

Source

Allowing countries to offset some of their own GHG emissions with credits purchased from CDM projects presumes that the CDM projects actually deliver additional (and permanent) GHG reductions. To qualify for CDM credits, CDM projects have had to demonstrate that the investment would not/could not happen without the CDM subsidy. In other words, they must demonstrate that the project is marginal.

With the benefit of hindsight, these authors assess the evidence on whether CDM projects have in fact been marginal projects. They focus on wind power in India where many projects have been supported by CDM.

Wind capacity investment in India (Source)

The authors argue that, if a CDM wind project is marginal, we should not see less productive wind projects built …….

Source: https://energyathaas.wordpress.com/2021/11/22/carbon-offsets-get-a-green-light-in-glasgow/

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