THE system of compensation has occupied an important role in human lives. Based on the principle of justice, it offers people the opportunity to right a wrong. However, whether the system is indeed just and effective depends on the situation. In the wake of the escalating impact of the climate crisis, the use of carbon offsetting as a form of compensation has gained traction. The term ‘carbon offsetting’ essentially implies making up for one’s increased carbon footprint by financing emissions reductions elsewhere. For example, a fossil fuel-based industry could compensate for its emissions by paying someone to plant trees elsewhere to act as carbon sinks. Thus it allows individuals, businesses and nations to address their impact on the planet.

However, the controversial aspects of these offsets has called its effectiveness into question. The most basic and evident problem with offsets is that it doesn’t offer a solution to the climate crisis. All it does is allow rich nations and businesses to buy their way out of the problem. Rather than changing course and switching to sustainable practices they are merely paying someone else to reduce emissions. It wouldn’t be wrong to compare it to a hypothetical situation where people are allowed to murder others while paying blood money to compensate for it.

In the recent COP-26 conference, offsets were widely discussed but activists called it a scam and an attempt at green-washing. The idea of carbon offsets actually gained traction long ago, after the Kyoto Protocol, under which carbon offsetting was introduced as a flexible mechanism to reduce greenhouse gas emissions. It required developed nations to finance emission reduction projects in low-cost developing nations and trade the emission reduction credits to compensate for their pollution.

From a sustainable development perspective, such offsets offer a lucrative solution to help poor countries achieve sustainable development goals along with reducing emissions through financing and technology transfers. However, from an environmental perspective the mechanisms suffer from numerous lacunae.

There are controversial aspects to carbon offsets.

The biggest issue with offsets is that it ignores the principles of justice. At a point in time where climate change has become an existential threat, it is highly unjust to allow rich nations to continue polluting at the expense of most vulnerable poor countries like the island nations on the verge of destruction. Their only lifeline is complete decarbonisation, and not offsets.

Secondly, the quality of carbon offsets is extremely important in determining its effectiveness. Investing in low-cost projects like planting trees, solid waste management, incinerators etc is less effective. For example, the forestry sector is one of the biggest recipients of such funding. But despite their potential of absorbing carbon, trees face a high risk of being cut down or destroyed in wildfires. Thus it makes the offset less permanent and thereby less effective. On the other hand, financing renewable energy projects is very effective but least invested in due to their high cost.

Additionally, there is no effective mechanism for measuring emission reductions. The models are oversimplified and suffer from problems of overstating and double counting of credits.

Lastly, the idea of carbon offsets goes against the principles of net zero emissions and even the Paris treaty. As the world has pledged to achieve net zero by 2050, carbon offsets are merely delaying progress on achieving carbon neutrality.

There are, however, sectors like aviation where not many sustainable options are available and thus offsetting be­­comes inevitable. But such offsets must be encouraged in areas such as renewable energy which is most effective due to its permanence and better quality.

Offsetting in itself, then, is not bad, but it should not be used as an excuse to keep burning fossil fuels and delaying net zero. It becomes a big green lie when it’s used as a distraction from the goal of transitioning to clean energy or electrifying the transportation sector.

In order to effectively mitigate the climate crisis, the world is in dire need of absolute reductions and decarbonisation rather than carbon offsets. As illustrated above, offsets are ineffective when used as an excuse for inaction elsewhere. Moreover, the offsetting market requires regulation and oversight so that, instead of buying the cheapest way out possible, high quality and more permanent offsets are encouraged.

The world has delayed climate action for decades and it cannot afford to do so for much longer. Thus the sooner we start acting on achieving net zero the better. Carbon offsets in such a case can only be effective if used to further net zero rather than delay it.

The writer is an economist, environmentalist and sustainable development enthusiast.

Published in Dawn, July 28th, 2022