Carbon dioxide lasts for centuries – so do carbon offsets
Carbon dioxide, once released into the atmosphere, stays there for hundreds of years. When a person uses an offset to offset emissions, they must ensure that the offset they buy also lasts for centuries. In order for a company to claim that it is achieving net zero – by balancing its emissions with an equivalent amount of removal of carbon dioxide from the atmosphere – it is essential that any offsets it uses be long-lasting rather than temporary.
The saying “Dogs are for life, not just for Christmas” is a slogan used to try to prevent animals from being bought on a whim and then abandoned. It encourages people to consider their responsibility in the care of a living being. If you’re not ready to commit to the life of a dog, you shouldn’t buy it in the first place. We have to think about offsets in the same way.
When considering the welfare of pets, the question is easier. Our lifespans are many times longer than that of dogs, so if we make a “dog for life” commitment, it is the dog’s life that we consider, rather than our own.
With offsets, the lifespan we have to take into account is that of carbon dioxide in the atmosphere, which persists for hundreds of years. This far exceeds the lifespan of people and businesses, so structures must be put in place to cover responsibilities beyond our own existence. Even when we are gone, our carbon footprint will continue.
For example, while tree planting is a popular approach to offsetting emissions, carbon is trapped away from the atmosphere for as long as the forest persists. If the forest literally burns the offset goes up in smoke.
Compensation that lasts for a few decades is insufficient, while the thing it is compensated for will cause damage for centuries. If you claim compensation, you must support it in perpetuity. So how can a company, which has no expectation of immortality, take an eternal oath?
Last beyond the life of a business
This brings us to the regulation of banks. At the time of the global financial crisis, some institutions were considered “too big to fail”. If they had been allowed to go bankrupt, they risked bringing down the entire financial system and governments were forced to bail them out – to huge cost to the public treasury.
To avoid such a situation in the future, regulators are demanding banks establish “living willsForcing them to create contingency plans in case the bank becomes insolvent. If the bank runs into trouble, the government can allow it to go bankrupt without harming the company. It is prudent to create a structure that lasts beyond the lifespan of the companies concerned, especially when the failure of such companies would have serious consequences.
Something similar could be implemented for offsets. When a company purchases compensation, it must also take out insurance to cover the costs of subsequent compensation, should the initial compensation fail.
How “clearing obligations” might work
A similar process could be implemented for offsets. When purchasing compensation, you must also purchase a bond to cover the costs of subsequent compensation, if the initial compensation fails. Companies must voluntarily enter the details of the compensation methods and quantify the costs associated with the risk of erosion of these compensations (forests felled, for example, or consumed by a forest fire). These costs should be presented in the company’s accounts as a contingent liability – a way of showing the costs that may accrue to a business at some point in the future.
Businesses will oppose such transparency as an unnecessary reporting requirement and a potential stalk to their own back, as it would crystallize in an audited report a liability that they would prefer not to put on paper. A voluntary route is unlikely to be effective.
It may be necessary to prosecute companies that ignore the potential costs of maintaining temporary offsets. Here’s the thing – if a business is involved in a court case, the potential impact of the lawsuit needs to be recorded in the business’s accounts as, yes, you guessed it, a contingent liability. Essentially, litigation would seek to require a business to keep a record of ongoing activities that could give rise to future liabilities.
At this point, you might be wondering why I am so mean to companies that are at least going in the right direction, and why I am not so aggressive towards companies that are not trying to offset their emissions. Let me reassure you that I am an equal opportunity aggressor – I think all companies should take into account their emissions so that at some point we can have an accurate tally of how much damage they should be responsible for cleaning up.
With those claiming to offset their emissions or be net zero companies, however, there is an additional angle to consider. Companies seek to gain a business advantage over their competitors by polishing their green credentials. But if these green credentials are wrong, then the advantage that has been gained over rivals is a form of fraud.