This past winter, the global climate breached multiple tipping points, while at the same time the U.S. formally announced plans to withdraw from the Paris Climate Agreement. Early 2020 brought forest fires and climate protest marches. Despite the disasters and the responses, people around the world continued to board airplanes, drive petroleum-powered vehicles, and purchase electricity produced from burning coal and natural gas sources.
A way to counterbalance the amount of net greenhouse gas emissions human activities release into the atmosphere has been to purchase a carbon offset, generated by a project that sequesters carbon, such as the planting of a new forest. From design to implementation, the business and science of carbon offsets is a multifaceted industry that varies in approach, intent, and effect. Carbon offsets attempt to bring a measurable and standardized system to the business world, lending an economic lens through which to address and remedy carbon emissions for individuals, municipalities, and institutions. With the current pandemic making abrupt spikes and dips in data points, the relationship between the economy and the climate grows more complicated.
“I’ve spent my career telling people to fly less. If you told me in the fall how few planes would be in the sky right now, I would have been shocked,” says Megan Ryerson, associate professor of transportation engineering and planning in the Weitzman School of Design. Since the global pandemic has kept people home, air travel has dropped precipitously. The airline industry is one of the biggest buyers of carbon offsets, and is responsible for 12% of carbon dioxide (CO2) emissions from all transport sources. Logically, it follows that this unprecedented period of reduced jet fuel emissions means less money diverted to a third-party carbon offset provider.
This isn’t the takeaway to consider from the pandemic, argues Ryerson. It’s whether frequent flyers and the airline industry will return to the same travel patterns, rather than harnessing the global pause and reevaluating a new normal for jet fuel emissions and travel in general. “Whether offsets are purchased or built into travel or energy plans should not be a sign or metric of conservation. We’ll see success when we need fewer offsets, and when they are cheaper to buy.”
One in, one out
“A great way to visualize carbon offsets is by looking at a bathtub. The tub is filling, and we are trying to keep it from overflowing,” says Mark Alan Hughes, a professor of practice at the Weitzman School. In this analogy, the bathtub threshold is the global mean temperature, and we are trying to keep the climate from breaching that threshold. What contributes to the global mean temperature, the faucet in this analogy, are greenhouse gas emissions. Carbon offsets are designed to act as a drain, a system to release some of the water in the bathtub. For every flight that takes off, the emissions from jet fuel “fills the tub,” while every offset tries to lower the tub through a carbon reduction practice. On average, a plane produces slightly more than 53 pounds of carbon dioxide per mile. For scale, rail travel accounts for .03 pounds of CO2 emissions per passenger mile, and .35 pounds per passenger miles from journeys in cars.
Both Hughes and Ryerson point out that there is no clean alternative for jet fuel, no “green” flights are available to reduce the carbon impact of flight travel. Pre-pandemic, flights accounted for around 2.5% of global carbon dioxide production. Individuals who fly can make up for their share of greenhouse gas emitted by their flight by purchasing a carbon offset directly from the airline, if that airline partners with a third-party carbon offset provider. That third party then invests in a clean energy system, or plants trees. Other industries recognize their carbon footprint and purchase offsets. Lyft, the ridesharing company, says it offsets all emissions from their rides. “A problem with offsets is they aren’t all designed well, they may not have the impact they claim to have. A company may miscalculate the amount of carbon it releases into the atmosphere, or how accurately they are compensating for it,” says Hughes.
Who buys, who sells
Where do individuals, or companies, or municipalities, buy a carbon offset, and how does the math work? “It depends on what your goals are,” explains Hughes. “If your goal is to compensate for the largest fraction of your carbon footprint, and for the same dollar you can plant 10 trees in Indonesia versus one tree in the U.S., you fund where the most trees can be planted. But in reality, goals are more nuanced.”
A tree doesn’t just absorb CO2, it provides benefits locally, it lowers temperatures, and tree planting creates jobs. If you want to have an impact measured in ways more locally focused, more socioeconomic ways, planting a tree at home creates local benefits for local environments.
The carbon offset market is comprised of two types of offsets: a voluntary market and a mandatory cap-and-trade market, explains Tom Daniels, a professor of city and regional planning at the Weitzman School. “A voluntary market is one where companies buy carbon offsets because they think it is good for their social responsibility and business image,” he says. “The second is a mandatory cap-and-trade market, in which companies that emit greenhouse gases must reduce their emissions below a specific cap; a company may be able to purchase a small amount of carbon offsets to help stay under its cap and avoid a fine.”
Third party carbon offset businesses are a small but growing market. Of the 37 gigatons of new greenhouse gas emissions created last year, only 1% were offset, totaling $500 million. It is an unusual business model in that success will be measured in a reduced need to purchase offsets in the future. But greenhouse gas emissions will not be completely eradicated. By 2042, Penn’s goal for reaching carbon neutrality, the University will still be responsible for releasing C02 into the atmosphere, through energy consumption and travel.
Like any business, third-party carbon offset providers have to be adequately regulated and transparent, so the companies are not just turning a profit. While a global metric for measuring and quantifying a carbon-to-cash ratio doesn’t exist, there have long been international protocols to measure emissions associated with burning natural gas or oil, and there is published and verified research on how much carbon different trees capture. The World Resources Institute sets standards that entities use, including Penn, that acts like a Blue Book for environmental emissions. About 80% of carbon offsets are purchased through two big third-party suppliers—Verra and Gold Standard.
The Paris Agreement, which came out of the Conference of the Parties (COP) UN Framework Convention on Climate Change in 2015, laid out nationally determined contributions that everyone was going to make a commitment to stay under limits, and had a series of annual goals. The finer details of financing a carbon market and trading mechanisms was proposed as an agenda item at COP25 in Madrid, but postponed. In the absence of an international framework for these financing issues and carbon offsets, the market is continental, and often regional. The largest carbon market in the world is the EU trading scheme, which has a big offset component. In the U.S., western states cooperate with some Canadian provinces with a trading scheme, and a trading scheme in the Northeast, the Regional Greenhouse Gas Initiative focuses on reducing greenhouse gas emissions from electric power plants.
Making an offset
Daniels studies California forest offset credits, and his paper from 2019 standardized how to measure the efficacy of a program. Once a privately-owned forest—usually of 5,000 acres or more—goes through the lengthy and expensive application and certification process, that private forest land can generate offset credits.
Both Daniels and Ryerson have referred to the business of having a third-party business profiting off of climate change as “unusual.”
“It’s an unusual business model in that we should need fewer offsets if we are really reducing carbon emissions,” says Daniels. “And there is some controversy in that environmentalists think this is a way for emitters to buy their way out of reducing their own carbon footprint.” But the benefits of having a well-preserved, and well-managed, forest cannot be overlooked.
“Because of careful forest management,” says Daniels, “these forests are doing beneficial things for the environment.”
However, because of the pandemic, the price of offsets may go down because emissions aren’t as high. “The pandemic will affect the number of offsets, obviously,” Daniels says. “Emitters will not be emitting so much so the demand for offset credits will be lower.”
But, as Hughes points out, the practical reality is the impact of the pandemic hasn’t been fully felt because companies are still spending money from last year’s purchases. And according to Scripps Institution of Oceanography, emissions are still increasing, despite the global shutdown: The month of May had a 1% increase in greenhouse gas emissions from May 2019, the highest in human history. To have any impact on slowing the increase of carbon in the atmosphere, emissions would have to drop 20-30% for at least six months. At most, the projected decrease in emissions from human activity due to the global pandemic could be 8%. By June, emissions had rebounded from its dip.
Additionally, the economic downturn could have a negative impact on long-term investment in clean energy. With economies impacted by the pandemic, the U.S. is in a recession, investments in clean energy will be deferred due to austerity measures. And at the end of June, airlines were granted an emissions reprieve after the International Civil Aviation Organisation (ICAO) proposed not taking 2020 into account when calculating how much airlines have to pay to neutralize their carbon dioxide output.
Local, verifiable, and additional
While a company or individual that buys an offset may expect to reduce the amount of CO2 it plans on emitting, in actuality, an offset allows a company to avoid reducing emissions up to a certain amount, such as 8% in the case of California. They can also apply to accumulated greenhouse gas emissions over time, by a company, municipality, or institution that has measured its historical carbon footprint and calculated its total greenhouse gas emissions. Microsoft achieved carbon neutrality and is working towards carbon negativity. But Microsoft is a comparatively young company. Some industries would have to go back to the Industrial Revolution.
“We focus on China being the largest greenhouse gas emitter, but only if you look at recent years,” says Hughes. “If you look historically, since the Industrial Revolution, the U.S. is by far the worst. It has been putting greenhouse gases into the atmosphere for hundreds of years. The idea of a historical carbon footprint is very important.”
Penn’s first climate action plan (CAP) in 2009 introduced wind power purchases to offset the traditional energy it purchased. “Everyone felt good about that for about five years because it felt real and tangible,” says Bill Braham, an architect professor at the Weitzman School. But once national energy credits became much cheaper, the CAP committee wanted to find offsets that were more meaningful. The Penn Climate and Sustainability Action Plan 3.0 (CSAP), introduced in 2019, made a commitment to be a carbon-neutral campus by 2042. One of the subcommittees, the Faculty Senate Committee on the Institutional Response to the Climate Emergence (CIRCE), was established in late 2019 to look at operations, education, and research, and bring recommendations to CSAP. On the table for consideration is a plan for Penn to purchase offsets. But, the report states that “offsets should be as local as possible, visible, verifiable, and additional (meaning that they add new carbon reducing activities).” Also in consideration are tree planting, wetland restoration, and local carbon offsets.
In April, Penn signed a power purchase agreement to purchase solar energy from two new solar energy facilities in Pennsylvania. Purchasing solar-powered energy will be key to meeting the campus’ carbon reduction goals of reaching carbon-neutrality by 2042. The shift to solar power will begin in 2023, and is projected to reduce the University’s entire academic campus carbon emissions by 45% from its 2009 levels, and meet the goal of the Paris Climate Accord seven years early.
“An idea that comes up every 10 years is for Penn to invest money to weatherize buildings in West Philly,” says Braham, who chairs CIRCE. By weatherizing the aging buildings throughout the area, Penn can claim the carbon credits that fewer emissions create. The proposal benefits the hyperlocal community that Penn serves. “If Penn is going to spend money on offsets, why not produce enduring value for its neighbors?” asks Braham. “It will make people’s lives better because it will drive utility costs down. Most of these older houses also have moisture and mold problems. Remediation will make healthier residents, creating a co-benefit of this plan.”
This proposal, however, is an expensive way to offset carbon. Dollar for dollar, an offset purchased outside the local community will have a greater, measurable impact in the amount of carbon in the environment. A going market price for an offset is $25-50 per metric ton. An estimate for this plan would be $150-300 per metric ton.
“It’s hard for people to trust that the accounting is real. So, we are looking at plans that are rooted in the local community not just for the offsets, but because these plans benefit the community,” says Braham.
He cites three tenets of how we should consider buying offsets: local, verifiable, and additional. Local, because money spent locally has added benefits for the economy and health of the community. Verifiable, utilizing a standardized metric. And additional, which Braham breaks down. “If I’m going to invest in solar panels on someone’s house, but they were going to add the panels whether I invested or not, it’s not an additional offset. Our goal is to add something new that will reduce carbon emissions, not just participate in an ongoing system.”
Individuals have been conscious of their carbon footprint for a long time. The Swedish word, flygskam means “flight shame,” and captures the ethos that engaging in an emissions-heavy practice like air travel should weigh heavily on the conscience of the environmentally minded. To that end, one can purchase an offset from JetBlue airlines, for $10 or $50, or use a calculator to factor a one-in, one-out dollar amount. Or, Ryerson argues, individuals and universities and the business sector can look at its air travel habits as a whole, and consider a new system.
“There’s a lot of debate over how much we as individuals are responsible for aviation emissions. There are many complexities that layer in to how responsible one is for a cross-country flight,” says Ryerson. “If there are 200 people on a plane, would that flight have taken off whether or not you purchased a ticket? What percentage of that flight are you personally responsible for? The emissions from starting my car are much more directly calculable and attributable to me compared with my emissions from taking a flight.”
On a university level, if one person opts to travel less, will that make a dent in carbon emissions? If a number of people opt to travel less, will an airline company refrain from adding more flights? Purchasing an offset won’t reduce flight schedules, but a collective declaration to fly less, either professionally or personally, might.
Ryerson and members of Penn Travel have taken into consideration the effect air travel has on the climate, and where offsets fall short. “Universities including UCLA operate a program that levies a small fee on everyone’s travel,” says Ryerson. “Those fees then fund undergraduate research in sustainability. At Penn, we could conceivably fund a sustainability fellows program.”
A proposal for this kind of program, however, is not in the works, primarily for its lack of quantifiable, verifiable reduction of carbon emissions, therefore not an offset.
Ryerson is hopeful, despite the massive toll the pandemic has taken on communities, that this period where global industry has temporarily ground to a halt, will be beneficial. “Because we have put everything on pause, now is a moment to address long-term policy solutions. Everyone is tuned in right now to things like air travel policy, and adjusting to changes.” Now is the time, she argues, to put the pieces back together in a sustainable way. “We don’t want to go back to where we were pre-pandemic. Travel and the associated emissions will return. Now is the time to look critically at policies and say ‘if we grow back, we need to grow back sustainably.’ Because we will get to a point where we are out of the thick of the pandemic and move into a rebuilding phase.”
Ryerson predicts a long-tail period of recovery. Right now, the most pressing details of fighting a pandemic and restarting an economy in recession takes precedence. But in the long-term, this is the moment to harness the energy of recovery in a responsible way. “The pandemic won’t change air travel fundamentally, but it is a starting point. If this movement doesn’t get people’s attention that air travel habits need to change, what will?”
In the end, a carbon offset takes the proceeds that are generated from carbon-producing activities and uses them to build a system that doesn’t rely on carbon emissions. In the way that cigarette taxes pay for public health advertising campaigns, carbon offset companies invest in systems that reduce the very source of their funding. The offsets themselves are not a measure of success.
Megan Ryerson is the UPS Chair of Transportation and Associate Professor of Transportation Engineering and Planning in the Weitzman School of Design.
Mark Alan Hughes is a professor of practice at the Weitzman School and founding faculty director of the Kleinman Center for Energy Policy.
Tom Daniels is a professor of city and regional planning at the Weitzman School who teaches courses on environmental planning and land use planning. His paper on California forest offsets is titled “California’s success in the socioecological practice of a forest carbon offset credit option to mitigate greenhouse gas emissions.”
Bill Braham is an architect professor at the Weitzman School, and director of the Master of Environmental Building Design and of the Center for Environmental Building + Design.
Homepage photo: To reduce greenhouse gas emissions as part of Penn’s Climate and Sustainability Action Plan 3.0, the University signed a power purchase agreement with Keystone Solar. Purchasing solar-powered energy will be key to meeting the campus’ carbon reduction goals of reaching carbon-neutrality by 2042. (Image: Community Energy, Inc.)