Does Carbon Offsetting Even Work?

It's complicated

Photo by Marek Piwnicki on Unsplash

Recent research has found that the oil giant, Chevron, has been using worthless carbon offsets to meet its phoney climate pledge. In fact, some of these offsets are so crap that they actually contribute to climate change! Needless to say, nobody is surprised to see such extensive greenwashing from this less-than-moral billion-dollar oil producer. But it begs the question, do carbon offsets even work? Are they a viable way for an organisation to reach net-zero? Or do we forever need to be wary of carbon offsetting?

When I say oil giant, I mean it. Chevron is the US’s second-largest oil company, with annual profits of over $35 billion! This has put them in the spotlight over the past few decades as climate action has become more and more pressing. As such, Chevron has said it “aspires” to achieve net-zero upstream emissions by 2050.

To achieve this, Chevron isn’t pivoting away from oil towards carbon-neutral energy technology. Why would it do that? It’s not like they have the funds available to make such a transition, and it isn’t like this would future-proof the company for decades to come. Instead, they are buying carbon credits to offset the emissions from their oil.

But, Corporate Accountability, a non-profit watchdog organisation, found that 93% of the 5.8 million carbon credits Chevron has bought between 2020 and 2022, were so environmentally problematic that they have effectively zero value.

A carbon credit is meant to offset a tonne of carbon dioxide from the atmosphere, so between 2020 and 2022, Chevron paid to offset only 5.8 million tonnes of carbon dioxide. For some context, In 2021, Chevron had an annual carbon footprint of 697 million tons of carbon dioxide. This means that Chevron is currently only offsetting around 0.43% of its emissions! So, they have a long, long way to go to meet their climate aspirations.

But not all carbon credits are made equal. For example, take a carbon credit sold by the Direct Air Capture (DAC) and storage company Climeworks. Their machines pull carbon dioxide out of the air and store it away as carbonate rocks beneath the ground. Their process is easy to measure and has been thoroughly verified by a third party, so you know your carbon credit is actually offsetting a tonne of carbon dioxide.

But, these types of well-verified carbon credits are rather expensive. To offset a single tonne with Climeworks costs around $1,300 (though larger orders have a discount). This has led to less-than-reputable, far cheaper carbon credits flooding the market, like forest protection or green energy projects, which stop additional carbon emissions entering the atmosphere. These are the ones which Chevron is gobbling up.

But why are these carbon credits nearly worthless? Well, they have very low integrity. Let me explain.

Deforestation and using fossil fuels for energy both pump carbon dioxide into the atmosphere. So paying for an area of rainforest to be protected, or paying for a green energy project, will stop these potential future emissions. Now, this doesn’t actively reduce the carbon dioxide in the atmosphere, and as such, it can’t be used for the whole of society to reach net zero. What’s more, rainforest protection and green energy rollout are happening regardless of the sale of carbon credits, as green energy is now cheaper, and the health of these vital ecosystems feeds millions of people around the world. So using these projects as “carbon offsets” isn’t entirely accurate.

What’s more, some of these projects are very dubious. For example, hydroelectric damns, which make up a good chunk of Chevron’s green energy carbon credits, can severely damage the local environment through droughts and floods on either side of the dam. Many forest protection projects that sell carbon credits are under fire for marginalising indigenous communities, and the vast majority of them have zero carbon offset value, and such has a negative ecological and humanitarian impact. This is why some of Chevron’s carbon credits do more damage than good.

It’s also incredibly hard to verify how much carbon dioxide has been offset with these types of credits. Rainforest protection projects rely on comparing their area to nearby unprotected areas to calculate how much they have “offset”. But this is incredibly susceptible to exaggerated interpretation or cherry-picking data. Equally, with funding green energy projects, you need to figure out baseline carbon emissions from energy to measure against. But the energy mix is constantly changing, and green energy projects aren’t always used to replace fossil fuel energy. So again, the amount of carbon offset can be greatly exaggerated, and comparison data can be carefully cherry-picked. So even though these credits are advertised as offsetting a tonne of carbon dioxide, the actual amount is far, far less.

As such, many organisations such as Corporate Accountability and even the UN see these types of carbon credits as unsuitable for carbon offsetting as they can be greatly misleading and enable turbocharged greenwashing, just as we are seeing with Chevron.

But, can carbon credits ever work? Yes, just not like this, and not for companies like Chevron.

Let’s say Chevron used the more reliable DAC-derived carbon credits to offset its downstream emissions and be net-zero. Well, right now, we don’t have the DAC capacity to capture their vast 697 million tonnes of annual carbon dioxide emissions. But let’s assume this problem is solved. Such a bulk order would have discounts; take the recent $20 million J.P. Morgan deal with Climeworks to offset 25,000 tonnes of carbon dioxide. That put’s the price of each carbon credit at $800. So, to offset their 697 million tonne emissions using Climeworks, it would cost Chevron roughly $530 billion! Or, to put it another way, 15 times more than their annual profits!

Quite simply, verifiable, reliable carbon credits will never be cheap enough to enable a net-zero oil industry. The only way this could possibly work is by passing on this expense to the consumer, but then a gallon of fuel would cost over $15

This is because fossil fuels have a very low value-to-emissions ratio. But industries with a high value-to-emissions ratio, such as the data processing that J.P. Morgan does, can easily afford to offset their emissions.

This means that Chevron’s aspirations of being net-zero by 2050 via carbon offsetting are nothing more than greenwashing, or at the very least, a truly misguided pipe dream. But companies that can afford to use the more reliable DAC-sourced carbon credits can still use offsets to reach verifiable net-zero emissions. So, yes, carbon offsetting can work. However, only for certain industries and only if they use high-grade carbon credits, such as those from DAC. Still, there is no governing body that stops corporations from buying up these low-grade, shoddy carbon credits and claiming to offset their emissions or, worse, be entirely carbon-neutral. So, we must stay vigilant and be sceptical of any carbon offsetting program.

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