Carbon Offsets

Carbon offsets are emissions-saving projects intended to compensate for ongoing and increased pollution in industrialized, developed countries. The majority of these projects are undertaken by companies, international financial institutions, and governments. Offsets are usually part of capand- trade schemes, in which the cap is supposed to set a limit on pollution. Offset projects generate credits that allow pollution over and above this limit.

The United Nation’s (UN) Clean Development Mechanism (CDM) is the largest offsetting scheme, with almost 3,000 registered projects for third-world and developing countries as of April 2011 and over 3,100 further projects awaiting approval. Based on 2011 prices, the credits generated by approved schemes were scheduled to be worth over 11.5 billion euros by 2012.

In 2008, Stanford law professor Michael Wara and Laboratory on International Law and Regulation Director David Victor reviewed the world’s largest carbon offset market—the Kyoto Protocol Clean Development Mechanism. They discovered the following: (1) much of the current CDM market does not reflect actual reductions in emissions, (2) offsets were not likely to be effective costcontrol mechanisms, (3) the demand for credits in emissions-trading systems were likely to be out of phase with the CDM supply, and (4) the rate at which CDM credits were being issued in 2008—at a time of high demand—was only one-twentieth to one-fortieth the rate needed for the current CDM system to keep pace with the projects it had already registered.

In addition to the problems in carbon markets observed and documented by Wara and Victor, in 2009, Hannah Wittman of Simon Fraser University and Cynthia Caron of the Polson Institute for Global Development at Cornell University documented on-the-ground problems with some of the first carbon offset projects in the world, in Guatemala.

In 1988, Applied Energy Services (AES) was constructing a 183 MW, coal-fired power plant in Connecticut. AES hired World Resources Institute to find a forestry project to offset the 14.1 million tons of carbon that would be emitted over the power plant’s 40-year life. The following year, AES signed an agreement with the nongovernmental organization CARE International to fund an ongoing agroforestry project in Guatemala.

The report noted that in the first decade, the project failed to offset the emissions from the AES coal-fired power plant. In addition, turning the project into a carbon project diverted project resources from poverty alleviation to carbon measuring. The reasons cited in the report for this failure included “land use conflicts, struggles for control over scarce forest, and legal changes that criminalized subsistence activities such as fuel wood gathering [and] undermined local farmer participation.” Guatemala’s 1996 forest law declared forestland off-limits to farmers. The law effectively took access to forests away from local people.

At the same time, the main goal of the project deliverer, CARE International, is neither forestry nor carbon accounting. As a development organization, CARE prioritizes rural farmers’ needs for poverty alleviation before carbon mitigation. To maintain project funding, however, it needed to achieve mandated targets in establishing carbon sinks. The tension CARE staff experienced in attending to both carbon sequestration and poverty alleviation mirror the difficulties that extension agents face in reaching their targeted population:

when the objective of rural poverty reduction does not overlap with that of increasing carbon sinks, where do they direct their scarce resources?