MIT Technology Review just published an article on one of my perennial favorite topics, carbon offsets. According to senior editor James Temple, the University of California system has found that there are “systemic problems” with offset markets, and has recommended that people concerned about the climate essentially abandon it entirely. Apparently when administrators at UC tasked some of their experts with identifying carbon offset programs that were rigorous and serious enough for the university to invest in, the researchers couldn’t come up with anything legit enough to recommend.
For example, Barbara Haya, director of the Carbon Trading Project at UC Berkeley, told Temple that “We took a look across the whole market and did deeper dives into project types we thought were more promising. And we came up almost empty.” Temple explains that the findings of their in-house experts prompted the entire UC system to change its sustainability strategy. Earlier this year, UC announced it would stop using third-party offsets, and would charge each of its universities a “carbon fee” for each ton of carbon dioxide used. Instead of offsetting, they will now focus on cutting their own emissions on campus.
These results are similar to what my colleague Max Laraia and I wrote up for National Review this summer, in a piece titled “The Carbon-Offset Market Is about to Crash and Burn.” As we pointed out, the real driver of carbon offset markets is not the value of the offsets themselves, or the fact that they have concrete climate benefits, but the expectation that future law and regulation will force market actors to mitigate their greenhouse gas production, meaning that anyone who gets in on the ground floor will stand to score a handsome profit once such things become mandatory:
The United Nations–sponsored organization Principles for Responsible Investment (PRI), a leading promoter of environmental, social, and governance (ESG) business practices, has for years claimed that there will be an “Inevitable Policy Response” to climate change, meaning that stricter greenhouse-gas regulations are just around the corner. PRI claims that those regulations will be “increasingly forceful, abrupt, and disorderly.” In other words, if your company or industry doesn’t get in line with climate-policy goals while they’re still voluntary, you’ll get torn apart when the regulatory rubber hits the road.
Unfortunately for climate finance promoters and offset investors, that future is far from inevitable. In a scenario where the balance of power in Washington, D.C. shifts to Republicans, for example, it’s all but guaranteed not to happen.
In any case, it’s encouraging to see honest researchers like the people at the University of California not give the offset market a pass just because it pushes all of the fashionable buttons in the minds of center-left technocrats and activists.