Evaluating the Use of Carbon Offsets in IPCC 1.5C Warming Scenarios

Abstract

The world faces the daunting task of limiting global warming to 1.5 degrees Celsius. Integrated Assessment Models help us understand pathways to achieve this goal in the most efficient way. In most scenarios where the international community can limit warming to 1.5℃ carbon dioxide removal is deployed to help reach net-zero emissions targets by sequestering carbon through land-based sinks like afforestation and reforestation or technology like bioenergy or carbon capture & storage. Therefore, it is theoretically important that the international community uses available forms of carbon sequestration, specifically readily available ones like terrestrial carbon offsets, carefully to offset emissions from difficult to decarbonize industries like aviation, steel production, and ferrous metals. As a key part of emissions reductions strategies, using carbon offsets for anything but offsetting emissions that cannot readily be decarbonized theoretically risks our ability to meet reduction targets. This MP seeks to examine data from Integrated Assessment Models and how they use carbon offset credits to limit warming to 1.5℃ and study the carbon offset credit market in the real world to identify purchasers and find out whether offsets are being used in the most efficient way. Objectives: The objectives of this study are fourfold. Analyze emissions and carbon sequestration data from IPCC scenarios in the IAMC 1.5℃ Scenario Explorer; analyze the compliance and voluntary carbon offset markets for evidence and patterns in the use of offset credits; compare the deployment of Agriculture/Forestry/Other Land Use (AFOLU) CDR in Integrated Assessment Models to current offset market trends to establish a gap in efficient use; and establish policy recommendations for using offset credits. Methods: Of the 177 scenarios in the IAMC Scenario Explorer, 75 of them limit global temperature increase to 1.5℃. 74 of those scenarios employ carbon dioxide removal in some way. The method in this study was to focus primarily on scenarios with a “land-use change” variable in their underlying data, as the study focuses on carbon offsets through AFOLU carbon dioxide removal rather than BECCS or other methods. From the underlying data for these scenarios we pulled out, cleaned, and calculated CO2 emissions, residual positive CO2 emissions, N2O emissions, carbon capture and storage, and carbon sequestration from land-based sinks. These variables gave us the information needed to establish the average Gt/year of CO2 the scenarios were sequestering through land-based sinks, and if that amount was enough to offset emission from difficult to decarbonize industries. Thes study also used data from the European Emissions Trading System. Variables in the underlying data included the carbon offsets traded in a two-year period, what economic sector the offset was being employed by, and the total CO2 emissions from each sector. This allowed us to determine that carbon offsets, at least in Europe, are largely being used by the power sector for electricity generation and other processes, rather than airline fuel, steel production, or other industries. For the voluntary market, a literature review on relevant information was conducted and we were able to establish the largest institutional purchasers of offsets and what they were offsetting when making those purchases. Findings and Results: The study found that the average yearly residual positive emissions that need to be offset is about 10.3 Gt/CO2 per year in the data subset where both the land-use change variable and N2O emissions were accounted for. According to the 2020 Production Gap Report sponsored by the UN environment program, the feasible amount of CDR available each year around 2050 is only 8.6 Gt/CO2 per year. This confirmed our theory that all available offsets for carbon dioxide removal must go directly to offsetting the dirtiest industries or we risk being unable to meet warming targets. The study also found that in practical use, this is not what is occurring. In Europe, more than 60% of carbon offsets are being used to offset emissions from power generation at stationary installations, and none of the top five corporate purchasers of carbon offsets are from the difficult to decarbonize sectors of the global economy. This suggests that there is a sizable gap between what Integrated Assessment Models assume carbon offset credits are being used for and how they are being employed in reality. Broader Ramifications: The data from this study suggests a ban on offsets for anything other than offsetting the dirtiest industries must be considered. This could be on an international (Conference of Parties or binding international agreement) or national (federal/state laws). Integrated Assessment Models also should consider accounting for misuse of offsets when calculating emissions targets. Finally, institutional purchasers of offsets should take a hard look at the effects of their purchases. Although it may balance their emissions sheet and provide public relations fodder, in the long run it is a detriment to our collective goal of limiting warming to 1.5℃ .