Our current carbon trading system has limped along for 30 years, but is now more a problem than a solution – how can those invested in it jump ship to something more seaworthy?
What’s Wrong with Carbon Trading 1.0?
The article ‘The Problem: why current carbon auditing fails’ and its accompanying video on the See Through Carbon website details the many failings of our current carbon pricing, trading, offsetting and auditing system, but in summary it’s:
- Inaccurate: most carbon footprint calculations don’t count everything they should
- Expensive: most carbon auditing standards charge to use them, and are unaffordable for small businesses
- Opaque: most standards are proprietary and monetise access to their data.
- Corruptible: having dozens of competing, commercial standards rewards giving the best marks for the lowest costs, i.e. greenwashing
Theoretically elegant, Carbon trading 1.0 has proved itself to be too chaotic, unregulated, inconsistent and loophole-riddled to deal with bad actors gaming the system. More than three decades have passed since the first carbon trading initiative, but its modest achievements are dwarfed by the glaring fact that carbon emissions have continued to soar ever since.
Three decades of voluntary arrangements, leaving big business to self-regulate, and feeble enforcement has demonstrably failed to address the biggest problem human civilisation has ever faced. Arguably, by facilitating greenwash, carbon trading has done more harm than good, providing a fig leaf of respectability for corporations who still prioritise profit over carbon reduction.
What does Carbon Trading 1.0 have to show for itself after 30 years of fiddling while the world burns, shrivels and drowns?:
- greenhouse gases in our atmosphere are still increasing
- fossil fuel companies are not only still solvent, but making record profits
- Governments spend US$7 Trillion a year on subsidising fossil fuels v. US$1.7 Trillion on renewable energy
Repairing Sinking Ships v. Building Seaworthy Ships
Supporters insist the current carbon trading system isn’t inherently flawed, but just needs a bit more tweaking. Carbon Trading 1.0, they say, may be imperfect but it’s better than nothing.
Critics say if this is the best solution human ingenuity can come up with, we’re screwed. Instead of rearranging deckchairs on a sinking ship, we need to abandon it altogether, and seek a more robust, seaworthy vessel.
See Through Carbon (STC) takes the latter view. It was designed to directly address these failings, by being:
- Accurate: STC uses the best available practice to count all emissions
- Affordable: STC is free to use, especially important for the small and medium companies that generate 70% of carbon emissions
- Transparent: STC is open source, allowing scrutiny and facilitating constant improvement
- Honest: STC is a zero-budget project created by an international team of volunteers. No money means it can’t be bought.
It’s not an easy market to enter, especially with zero budget. Carbon Trading 1.0, the ‘voluntary’ version, is already worth more than US$50Billion. Most of the competing carbon standards are backed by big investors, and a new wave will soon join them as venture capitalists see the growing potential of a booming sector.
After all, the worse our climate gets, the more money can be made from anything that appears to fix it.
Even at $50 Billion, the carbon trading industry is less than 1% of the the US$5.3 Trillion oil and gas industry, but it represents a lot of vested interest.
Rocking the boat, even a sinking one, is unlikely to be popular.
Evolution v Revolution
So which is it to be?
- Evolution: running repairs on a sinking ship
- Revolution: transfer to a new vessel
Stating such a binary, polarising choice, especially when dealing with something as complex as climate change, should not be done lightly.
Complexity means plenty of opportunity for sincere, as well as mischievous, cherry picking of data and disingenuous whataboutery.
No one knows this better than the PR companies behind Big Oil’s strategy of denial, deflection, distraction and despair. Civil war among the green brigades is an ideal outcome for Big Oil. The more competing standards there are, the greater the bickering among them, the more disagreements on evolution v. revolution, the easier it is for the fossil fuel giants to quietly keep pumping out emissions and continuing business as usual.
So how can those fighting for carbon reduction avoid a civil war?
We hope evidence, logic and reason will prompt radical change, but if the ‘climate debate’ has taught us anything, it’s that facts alone are not enough.
Sometimes change requires ditching nuance and asking blunt questions. This feels like the time for blunt questions about how we measure carbon. If not now, when?
This article addresses this dilemma head-on, examining the challenge of shifting to a See Through Carbon-type standard from the perspective of the main players invested in the current system:
- Governments
- Big Business
- The Carbon Trading Industry
Governments and Carbon Counting
From competing tribes to nation states, homo sapiens has always been better at fighting ‘red in tooth and claw’ than striving together for common purpose.
Whether the binary division of the Cold War, or the more complex competing power blocs that followed it, we humans are just not used to presenting a united front to a common threat.
The universal nature of the climate crisis makes our instinct for division particularly disastrous. We have global bodies like the UN, or IPCC, but they’re toothless, and without claws, in the face of the realpolitik world of the three-headed beasts of Government, Business and Media.
Still, nominally at least the Government head of the beast can tell the other two heads what to do. Governments hold all the levers of power and regulation to reach the admirable UN Sustainable Development Goals they’ve all signed up to.
For thirty years, however, governments have largely left the most important task facing human civilization up to self-regulation and voluntary goals. Unsurprisingly, a system fine-tuned to deliver shareholder value has prioritised profit over carbon drawdown, which is why climate change continues to accelerate, let alone go into reverse, slow down or stand still.
It’s surely finally time for governments to start pulling those levers in coordination with other governments, to regulate and enforce rapid carbon drawdown.
But before anyone can claim progress on carbon reduction, we need to start measuring carbon footprints properly.
Which means adopting standards like See Through Carbon, and rejecting the proliferating commercial and proprietary standards, funded by venture capital, that incentivise giving maximum greenwash for the lowest price.
That ship is sinking, and beyond repair.
Big Business and Carbon Counting
The more globalised our economy has become, the greater the influence multinationals have been able to exert on the rules that govern it.
It’s a vicious cycle – the bigger the disparity between corporations and nations, the easier it is for multinationals to divide and rule, playing countries, even blocs, against another to benefit its shareholders.
These shareholders are also dispersed around the planet: New York hedge funds, Middle Eastern sovereign wealth funds, Russian oligarchs, Chinese banks, social media billionaires and government pension schemes. They have little in common other than their principle shared value of profit and return on investment. Carbon reduction barely comes into it, especially if it’s voluntary.
What’s truly messed up is that we’re all so focused on big businesses in the first place. The OECD reckons Small and Medium Enterprises (i.e. 200 employees or fewer) generate up to 70% of total carbon emissions, so you’d think we might put out the huge fire before the smaller one.
Because we currently value money way more than carbon (even though the former is a recently-invented abstract concept, the latter the building block of life of Earth), the reason for focusing on big business becomes obvious. They can afford to pay for voluntary schemes that make them look good – so long as they set the rules and they’re not too expensive. Small businesses are too busy surviving to afford paying to measure their carbon footprint, let alone reduce it.
Still, there are recent signs some big businesses are changing their tune, even without government regulation.
Partly, they’re being pushed into it by a relentless drip of exposés about the ‘largely worthless’ carbon offsetting projects they relied on to pay someone else to reduce the carbon they continue to emit.
When media organisations blew the whistle on the world’s biggest carbon offsetter, Washington DC-based Verra, this caused major reputational damage to the global giants who’d bought their products to claim they were ‘carbon neutral’. Brands like Gucci, Chevron, British Airways, Shell, Ben & Jerry’s and Netflix were all left tainted.
Their PR departments were left with three bad choices:
- Vigorously defend a voluntary offsetting industry that has been comprehensively demolished by multiple researchers over decades as ‘unscalable, unjust and unfixable‘
- Plead ignorance, despite the huge volume of academic research debunking the offsetters’ claims
- Appear complicit in cynical greenwashing
Some big businesses are trying to regain the initiative by honking their voluntary carbon reduction goals, but they must know that the grander and more detailed their claims, the more they’re holding themselves hostage to future scrutiny.
The world’s biggest company, Apple, recently tried this approach with their ‘Mother Nature’ commercial, a high-production value fantasy of an annual review with Mother Nature holding them to account.
The Apple ad has been widely viewed, with very mixed reviews. Some praise it for holding itself to account, being specific, and demonstrating measurable, verifiable progress.
Others point out all its weasel words, get-out small print, and omissions, dismissing it as a more sophisticated upgrade of the same old greenwash.
This neatly reflects the metaphorical choice between repairing the sinking ship v. abandoning it for a more seaworthy vessel.
Either way, Apple’s ad demonstrates the current carbon trading system’s weakness. Without compulsory regulation and enforcement, relying on big businesses to do the right thing on carbon is like relying on billionaire philanthropists to solve the world’s problems. Why should relying on the good faith of rich companies work better than relying on the good faith of rich individuals?
Enforce measurable regulation, and you remove the need to trust super-rich companies or people to do the right thing.
Without proper, consistent standards to measure progress, you’ll always leave miles of wiggle room for non-compliance.
The Carbon Trading Industry and Carbon Counting
The people in the multi-billion dollar carbon trading/consulting/offsetting/auditing industry are the ones in the tightest spot.
On the positive side, they probably wouldn’t be in the carbon-reducing business if they weren’t committed to measurably reducing carbon.
On the negative side, they’re obliged to work within the voluntary 1.0 system as it is, with all its flaws and compromises, and depend on it to feed their families, pay their mortgages, and satisfy their investors.
Take a consultancy that uses the UN’s REDD+ standard to preserve wildernesses, rainforests and national parks around the world to provide ‘nature-based’ solutions to carbon drawdown.
The outputs of their work are absolutely essential. Keeping nature’s best carbon sequestration devices (AKA trees) in the ground is vital. Much better than relying on uncertain, unproven, expensive, future technology like carbon capture.
But no matter how elaborate their methodologies, or how much they tinker with the protocols to ensure consistency, accuracy and compliance, these consultancies depend on dodgy offsetting schemes like Verra’s for their funding. Like Victorian chimney sweeps before child labour laws, they find themselves bound to a system – or onboard a sinking ship – that dooms their current business model. Chimneys need to be swept – the question is how?
Currently, the industry is left with little choice, as Carbon Accounting 1.0 is the only funding game in town. It’s absurd that the critically important task of keeping existing trees in the ground depends on offsetting credits generated by standards as shaky as Verra’s.
The exposure of the offsetting industry has unleashed a destructive civil war among those who depend on it for funding – the kind of bickering that makes Big Oil rub its hands. People invested in the current system have to defend it, being forced into binary choices of ‘offsetting: Good or Bad’ or ‘Support REDD+ at all costs’. This stance is short-term, self-defeating, and head-in-the-sand. The sharks are circling, and the boat is sinking.
But what, they quite reasonably ask, is the alternative?
Here’s a suggestion – if Apple really wants to demonstrate the sincerity of its voluntary environmental commitments, why not directly pay to preserve existing rainforest and wildernesses, bypassing the unfit-for-purpose carbon trading schemes that currently underpin their preservation?
Their next commercial might be rather more convincing – and better received – if they did.
Even then, Apple and all other big businesses need to start measuring carbon footprints properly, which means counting all their emissions (including their entire supply chain) and not counting any fantasy offsetting credits (AKA ‘eliminating emissions’ in their ad).
We’re Gonna Need A Better Ruler
Whichever way you examine the problem – from the perspective of governments, businesses or the carbon-reducing industry itself – the same fundamental flaw presents itself: measuring.
Our current system has more than 70 different standards, which can put a dollar value on the same mass of carbon emissions anywhere between $137 and $1. Imagine the same chaotic, dysfunctional rationale being applied to, say, valuing a euro, tonne of gold, or barrel of oil.
Until we start measuring real-world carbon emissions accurately, consistently and transparently, there’s little point in changing the regulations that govern carbon reduction. Garbage in, Garbage Out.
In Jaws, when Chief Brody first sees the size of the shark that’s threatening his seaside community, he famously says ‘You’re gonna need a bigger boat’. The boat they’re in ends up as matchwood.
Finally abandoning our sinking ship metaphor, if we’re to stand a chance of defeating our own existential threat, we’re gonna need a better ruler.