Curious about someone in the industry's opinion, but the problem sounds like carbon offsets should actually be treated as carbon offset futures.
I.e. the value is determined at the time of delivered carbon offsets, and the instrument's price floats on the market before that time, including relative to how likely / valuable the delivery is
If company A buys a carbon offset from entity X, and it becomes increasingly apparent that entity X isn't going to be able to deliver the face value in terms of carbon, the instrument bought by company A should decrease in value.
Consequently, next time around, company A would not purchase from entity X.
Which is exactly what you'd want to happen!
Corollary: Verification by third party should be required, with less measurable schemes less valued.
Multiple satellites confirming forests intact? Proof. Direct air capture or weathering? Proof.
Some nebulous walk through how this might have influenced this other thing? Eh...
The problem with carbon offsets is worse than that.
First, there is no real way to tell if someone was going to do something anyway. You have an existing operation which is already cost effective to modernize because the fuel savings exceed the cost, so you were going to do it anyway, but now you get to sell credits even though the modernization would have happened regardless. So you have a significant amount of preexisting supply without motivating any real emissions reduction.
Second, not everyone is required to buy them, so the demand side is artificially low.
The result is that credits are available for less than $2/ton, or to put it another way, less than $0.02 per gallon of gasoline. This is obviously not going to provide any meaningful incentive to reduce emissions.
The decarbonization game is extremely tricky. This whole notion of "were they going to do it anyway", how the heck do you build that in. And how the heck does demand happen, who wants to pay for invisible, mostly useless gas?
The key question at the root of this is this: do we need to win the decarbonization game? Or can we just set down the game and walk away?
To me it looks like we need to win the decarbonization game to maintain a stable climate. So then all these attempts, failures, and mind bending problems all become challenges to overcome. Not "if", but "how".
The prize is a stable climate, a thriving civilization, and the specific players that beat the game probably get trillions of dollars of prize money.
GP was speaking about the problems with carbon offsets today. You're talking about the need to decarbonize without acknowledging or addressing the points that GP made. Most are not stupid enough to say that we should set down "the game" of decarbonization and walk away. Many intelligent people are saying that carbon credits don't seem to be working to date as part of "the game". Rather than point out the obvious of how important carbon decarbonization is, it would be better to discuss what GP gets wrong about carbon credits or offer an alternative solution.
"Man, my weight and health are difficult to manage, there are all these challenges I find difficult to handle, many of which aren't even directly related to nutrition or physical activity."
"Having a physically healthy body is important, you should take your nutrition and exercise seriously."
In your analogy, yes, I'm the person that sees nutrition as exercise as the only levers, and so then my alternative solution is "well we need to get it right then". Open to other ideas for levers too.
You have completely missed my point and I am not sure how to get you to see it. My point is that you did not respond to what someone has said, you ignored it and went on your own tangent. And you did it again.
First off, yes, agree, fixed problem, open on solution, "how" could be anything, including doing a funny dance that inspires every person on the planet to just stop emitting so much.
Hmm, say more about this. I said this to another commenter, I'm pretty sure all a carbon tax does is solve for the "demand" side of the equation. Fundamentally you would still need an accounting system for carbon, thus carbon credits of different sorts. Or am I missing something?
With a carbon tax there is nothing to exchange with other people. If you buy gasoline or coal, you pay a tax and the money is evenly distributed to everyone. People who have existing coal-fired power plants don't get free credits to allow them to sustain their operations, they just pay the tax and then become uncompetitive with non-carbon generation methods. So they go out of business as fast as alternative generation methods can be constructed. In the meantime ordinary people have the refund to compensate for the temporarily higher price of electricity.
Oh I get it. You tax emissions with no way to lower the tax besides lowering emissions. That means there's an underlying accounting for carbon, but like you said there's not something like market or exchange. So in this model air travel for example would 2x in price, but 1x of that would go towards the carbon tax which is then redistributed to everyone. Sounds interesting, are there any particular strengths or weaknesses to this model?
The strengths are that it's simple, hard to game, and doesn't harm ordinary people because the average person gets a refund of 100% of the money. (It's also somewhat progressive because people with more money tend to emit more carbon and so pay more tax, but only get the same refund.)
The main "weakness" is that it imposes significant costs on existing fossil fuel operations. Oil and coal companies would lose billions of dollars in value because they would both have to pay the tax and experience a surge in new competition from alternatives that can now underprice them. I don't regard this as a problem -- the writing has been on the wall for a long time now and if you've invested in these industries you could have predicted this was coming -- but it is an inconvenience because it causes those industries to lobby against it aggressively, which makes it harder to enact. (But the same will be true of anything with near-term effectiveness, because the whole point is to put them out of business.)
The other weakness is you can game it with international trade.
Produce a good in a country without the carbon tax, repackage it in a country that doesn't keep good origin manifests, lie about doing that, then send it to your destination on a solar powered boat (or whatever has the lowest carbon footprint).
We see the same game being played with slavery and child labor. Pick a favorite brand, add "slavery" and you'll find decades of shocked outrage and "commitment to do better"
Mind you, I still support broad carbon taxes. But this is a predictable outcome.
This is not really specific to a carbon tax though, is it? If the EU is using a cap and trade system or what have you, it still happens, because it's a problem of evaluating what is going on in someone else's jurisdiction.
My suggestion in another thread is to impose general tariffs on countries that don't have their own carbon tax, which, if it successfully pressures them to adopt one, avoids these kinds of games because now the high-emitting country charges the carbon tax itself regardless of whether its exports make a pitstop in Greenland, which it may do even if some of its exports were avoiding the tariff that way, so that all of them can avoid it.
But it's not obvious this is even necessary because if the largest economies (especially the US) did this, it would shift the economies of scale in favor of non-carbon energy sources to such an extent that they would become cost competitive on their own nearly everywhere else in the world anyway.
Fair point. There likely needs to be somewhat of a critical mass before it becomes super effective. This might be something that could be accomplished with an international treaty.
Which is why you have to pair carbon taxes with some sort of carbon import tarrif. The EU/EEA (who have high and increasing domestic carbon prices) have now created the legislation to introduce one - though it will be phased in very slowly over the next decade:
A boarder tarrif helps, but I'm talking about the situation where a country hides the origin country to skirt the tarrif.
For example, imagine a company manufactured something in Qatar (which has the highest per capita CO2 emissions), then they ship their product to Greenland, which has the lowest emissions per capita. Then they repackage their stuff and upon import to the EU, report that "yup, 100% a product of Greenland". Which will almost certainly have low or no carbon tarrifs.
(Not saying any of these countries would actually participate in such a scheme, just an example).
This sort of wheeling and dealing is how companies skirted US and China tarrifs.
2. A stable climate is a ridiculously hopeless pipe dream in a world dominated by the capitalist mode of production. The anti climate change industry is a fraud by definition.
> 2. A stable climate is a ridiculously hopeless pipe dream in a world dominated by the capitalist mode of production. The anti climate change industry is a fraud by definition.
Ok so what are you claiming here? That preventing climate change is impossible so we should give up and pollute as much as we like without worrying about it? Because if your position is that we can't prevent climate change without overthrowing capitalism, then given the history of the last few centuries of trying to do that, that sounds like what it boils down to.
Capitalism has only been the dominant mode of production for approximately 2 centuries, and people made all the same excuses for feudalism yet here we are.
Capitalism has only been the dominant mode of production for approximately 2 centuries but feudalism lasted for ~6, so what if you want to do something about climate change sooner than ~400 years from now?
It's also not obvious what you propose to replace it with, because the world has seen communist governments and they do not have a sterling environmental record.
It is always the same argument: things are not perfect, ok, but what we replace it with? Noone know, so we keep the thing going.
I think this is what the parent commenter had in mind - we are just incapable of solving this problem, doesn't matter how we put it. Our climate will be gone and as a skeptic I would only ask: will we manage a slow degrowth or have a rapid system collapse?
You don't have to replace it with anything. The capitalist solution to climate change is a carbon tax. You price the externality and then the market takes care of minimizing it efficiently.
The problem is actually the governments failing to institute one. The problem isn't capitalism, it's democracy -- too many people work in the oil and coal industries to easily pass a law to delete them.
But degrowth is an even more ridiculous fantasy, because nobody is going to put up with that. It's probably the least palatable proposal to voters of any of the crazy nonsense people come up with. Not least because it isn't necessary -- it's just as good to install 100 GW capacity worth of solar panels or nuclear reactors than to reduce consumption by 100 GW.
Let's do the math here. The US power grid has about 800 GW of generating capacity from natural gas and coal. A 1 GW nuclear reactor, one of the more expensive methods at present, costs about $5.4B. So to replace the entire US fossil fuel generating capacity exclusively with nuclear would cost $4320B, amortized over 50 years this is $86B/year. By contrast, the COVID stimulus in one year was $5T, or more than the amount needed to decarbonize the entire US power grid. And mind you this is the total cost, not the incremental cost over the alternative (continuing to build and fuel carbon-burning power plants).
So the high end of that cost would be 0.3% of US GDP. There is no way you are going to eliminate 60% of US power consumption for less than that amount of money.
> There sort of is though, and both carbon off-setters and this study claim that they can
What they're talking about is determining if you've paid someone to not burn down a forest and then they do it even after taking the money. Which you could conceivably verify.
The problem is when someone already intends not to burn down a forest, or do whichever other thing counts for credits. Then they can sell credits in exchange for proceeding with their existing intentions. Everyone already intending to do any of those things can profit from selling the credits, so they do and the market contains tons of credits that are not actually making any difference.
> Also there is plenty of demand in this market, even dodgy credits are worth much more than $2
Offset are worth less than $2. "Credits" in the EU are worth significantly more, because they use "cap and trade", which results in significant carbon pricing but is manifestly unjust because it directly rewards companies for having been the largest polluters.
That doesn't really match the way people are using offsets. If you buy offsets for a flight and ten years later you learn that that they were ineffective... what? The least effective offsets having the lowest price isn't a good incentive either.
I don't believe the majority of VCM offsets are being purchased by end users. Are they? I thought they're typically purchased by corporate entities to support "net zero carbon by X year" pledges.
Apparently this stuff has matured a lot in the last 10 years, and I haven't been keeping pace with it.
There's already a concept of "vintage" (i.e. year carbon reduction realized in), but I still don't think they're being traded in a floating price futures model.
It sounds like the international community is leaning on certification-first, then sale of only certified offsets.
... which, doesn't feel like it fully harnesses the power of market investment in new technologies.
If a corporate buyer finds a new technology that has promise, they should be able to plow money into it! (At a cheaper per-offset-CO2-ton price than alternatives)
If that new tech delivers, the company just saved money. (For the same amount of CO2 offset purchase)
If the new tech fails to deliver, the offset buying company should be forced to realize financial losses.
Ergo, companies will be incentivized to invest in the most effective tools for future CO2 offsetting.
I.e. the value is determined at the time of delivered carbon offsets, and the instrument's price floats on the market before that time, including relative to how likely / valuable the delivery is
If company A buys a carbon offset from entity X, and it becomes increasingly apparent that entity X isn't going to be able to deliver the face value in terms of carbon, the instrument bought by company A should decrease in value.
Consequently, next time around, company A would not purchase from entity X.
Which is exactly what you'd want to happen!
Corollary: Verification by third party should be required, with less measurable schemes less valued.
Multiple satellites confirming forests intact? Proof. Direct air capture or weathering? Proof.
Some nebulous walk through how this might have influenced this other thing? Eh...