Clean Carbon? Why Carbon credits are not the solution to climate change

Carbon offsetting programmes might seem like a good short term solution and while they have their benefits ultimately they are designed to secure a future for the fossil fuel industry in a world where investors, activists and regulators are demanding action to stop climate change.

Carbon neutral crude oil might sound counterintuitive, yet it is exactly what Occidental Petroleum claims to have achieved.

Earlier this year, the company claims it exported a two-million-barrel cargo of crude oil to India that was 100 per cent carbon-neutral.

If you’re wondering how an entire shipload of planet polluting crude oil can suddenly become carbon neutral, then the answer lies in carbon credits. Occidental states that by purchasing carbon credits, the company was able to make the two-million-barrel cargo carbon-neutral. These credits represent an equivalent amount of greenhouse gas removed from the atmosphere by the projects generating the credits.

And though details of the Occidental transaction have not been reported two sources involved in the deal told Reuters that the driller paid about $1.3 million for the credits – or about 65 cents per barrel. Oil currently sells for more than $60 a barrel.

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What are carbon credits?

Carbon credits is a system that allows companies to compensate for their greenhouse gas emissions. Companies can compensate for their environmental footprint or in cases like Occidental’s use carbon credits claim a carbon-neutral status by paying someone else to either reduce their emissions or capture their carbon.

This someone else can be companies or even countries, typically developing economies, that sell or offer carbon credits to offset the emissions produced by other companies or countries, who in turn then use these credits to make claims of reducing their carbon footprint. Carbon offsets are normally measured in tons of CO2-equivalents, commonly abbreviated as CO2e. A single carbon offset resembles a decrease of one metric ton of carbon dioxide.

It is worth noting that carbon credits do nothing to reduce the pollution from a given barrel of oil, though proponents of offset programs argue that credit purchases help finance clean-energy efforts that otherwise would not be profitable.

Though Occidental has defended the deal, saying it could kick off a new market for oil offset with credits that directs money to green-energy projects. "We can be a big part of the global solution," said Richard Jackson, Occidental's president of operations for onshore resources and carbon management.

A worrying trend

In many cases carbon offsetting programmes are designed to secure a future for the fossil fuel industry in a world where investors, activists and regulators are increasingly demanding action to stop climate change. In some cases, companies even charge a premium price for what they call ‘cleaner petroleum products.’

The Occidental deal only a recent example. Oil-and-gas companies around the world are trying to create a market where climate credentials could allow them to recoup the full cost - or more - of credits or other measures that allow for the low-carbon labeling.

Lundin Energy, an independent driller with operations in Norway, plans to spend $35 million to plant 8 million trees in northern Spain and Ghana - something it says will allow it to generate its own credits to offset greenhouse gas emissions from its fossil fuels.

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Reuters also reports Suncor Energy has pledged to cut the amount of carbon it emits per barrel produced 30 per cent from 2014 levels by 2030 to contribute to Canada’s climate goals and address shareholder pressure to reduce its emissions. And how buyers in Spain, Japan, Taiwan and China have also bought LNG certified as carbon-neutral, a trend that has led the International Group of LNG Importers, an association of big global LNG companies, to start working on standardised methodology.

Qatar, the world's biggest LNG producer, announced in February that it is building a carbon-capture project at its North Field expansion project in the Persian Gulf.

Occidental is also developing the largest-ever direct-air-capture facility, to pull 500,000 tonnes per year of carbon dioxide out of the open air near some of its Texas oil fields, using fans and chemical reactions. That's equal to the annual emissions from nearly 110,000 U.S. cars.

The fact that here are no uniform standards for how to calculate the full climate impact of fossil fuels, or how to properly offset it with environmental projects, industry experts say. Additionally, companies buying credits are also not obliged to disclose their cost or origin - a problem because they can vary widely in price and quality.

Not really a creditable move

Environmental and climate experts criticise such programs as smoke-and-mirrors that allow polluters to scrub their image while they continue to profit from climate damage, while also prolonging the life of the fossil fuel industry.

Oil company claims of clean fuels through offseting are like "a tobacco company saying they sell nicotine-free cigarettes because they paid someone else to sell some chewing gum," said David Turnbull, a spokesman for Washington-based Oil Change International, an advocacy group opposing fossil fuels.

If Occidental’s project works, for example, the company plans to pump the carbon back into the Texas oil fields, raising reservoir pressure to extract more crude.

Occidental says it hopes to market crude oil produced in this way as the feedstock for refining jet and marine fuel - providing a way for those industries to claim they have offset their emissions.

While carbon credits and other offset programmes bring accountability to oil and gas giants who have been profiteering off polluting the planet for decades it is not a sustainable solution. The biggest issue with carbon credits is that they do not take into account the carbon that has already been pumped into the environment over the years and the fact that that cannot be offset. The adverse effects of climate change that w are currently facing are a direct result of those emissions. And to counter those serious, long lasting and sustainable steps need to be taken.

Marion Verles, Chief Executive Officer at SustainCERT, the credit verifier, said such offset schemes can help reduce overall greenhouse-gas emissions - but could also backfire.

“Telling consumers they can consume carbon-neutral fossil fuels sends the message, she said, that "behavioural change is no longer needed.”