A decade of increasingly devastating wildfires in California have wiped out nearly all of the state’s 100-year guaranteed forest offset reserves, according to a new independent study by San Francisco-based non-profit CarbonPlan.
Wildfires have depleted forest carbon offsets reserves in California over the past decade.
The “undercapitalised” buffer pool puts into question the effectiveness of the carbon offset market to actually reduce emissions.
As the carbon offset market continues to grow, major overhauls are needed to better mitigate climate risk.
California has a significant forest carbon offset programme, which ties carbon offset credits to the carbon stored in forests across the US. The credits are designed to have a 100-year guarantee on the forest carbon claims via a mechanism called the “buffer pool”, where forest projects contribute 10-20% of all the credits they generate.
The buffer pool is meant to mitigate risks from climate events such as wildfires and floods, by creating a reserve of carbon credits that can cover any carbon losses by natural disasters.
California’s carbon market cannot cover climate risks
However, the program has significantly underestimated the impact of extreme climate events on its forest carbon offsets. The new study finds that between 5.7 million to 6.8 million tonnes of carbon have been released back into the atmosphere as a result of wildfires in six forest projects included in California’s carbon trading system.
This release of carbon emissions means that wildfires have depleted nearly one-fifth of the total reserves in the buffer pool in less than a decade as credits are used to cover these carbon losses – equivalent to at least 95% of the program’s reserves to manage all fire risks for 100 years.
The study also finds that other risks to the forest offset credits, such as the disease sudden oak death, could put at risk all the carbon credit reserves set aside to manage disease and insect risk.
Altogether, these findings cast doubt on the solvency of the buffer pool to cover climate risks as part of the state’s carbon offset program and the integrity of the program to guarantee forest offsets for 100 years.
“In just 10 years, wildfires have exhausted protections designed to last for a century”, commented one of the authors of the study Oriana Chegwidden. “It is incredibly unlikely that the program will be able to withstand the wildfires of the next 90 years”, she warned.
Carbon sinks are going up in flames
The new study puts into question the effectiveness and durability of carbon offset programs as climate impacts put these assets at risk.
The buffer pool insurance mechanism to protect against risks is “severely undercapitalised” according to the research, and does not take into account the continually increasing risk of climate disasters, which jeopardises the ability of carbon offsets to actually do what they claim to do – offset carbon emissions.
Forest carbon offset credits have often been criticised as they only offer a temporary carbon sink. CarbonPlan’s policy director Dr. Danny Cullenward explained that “fossil [carbon] emissions have permanent consequences, but carbon stored in trees won’t last forever” due to a wide range of risks such as drought, disease, and wildfires.
If wildfires and other natural disasters continue to destroy forests – and they will -this will completely deplete the buffer pool and mean that the carbon offsets sold under forest projects may not actually be carbon offsets at all. If a forest dies, so to does its ability to absorb carbon from the atmosphere, essentially rendering the linked offsets valueless on a carbon market.
This exposes a detrimental flaw in the forestry carbon offset market. If companies buy carbon offsets related to forest projects as means to mitigate their own carbon emissions, but a forest burns down due to a wildfire and there are no reserve credits to offset the newly released carbon into the atmosphere, then the company has simply continued to emit carbon business-as-usual and there is actually more carbon in the atmosphere, instead of less.
It is simple maths: more carbon + a forest carbon offset – a forest = more carbon.
“More and more companies and governments are using ‘nature-based’ offsets to market consumer-facing claims” said Cullenward. “ While there are many good reasons to invest in forest health and conservation, forest carbon offsets do not deliver climate benefits that justify ongoing fossil [carbon] emissions”, he added.
Forest carbon offset programs won’t get us to net zero
“The problems we observe here are [not] unique to the California program and raise broader concerns about the integrity of offsets’ permanence claims”, said another of the study;s authors Freya Chay.
Forests are crucial in reducing carbon emissions worldwide, with an independent study finding they absorb around 2.6 billion tonnes of carbon each year, or about a third of humanity’s annual fossil fuel emissions. However, with extreme weather events on the rise, instead of being carbon sinks, some forests are now becoming net carbon emitters.
A United Nations Educational, Scientific and Cultural Organization (UNESCO) report World Heritage forests: carbon sinks under pressure finds that between 2001 and 2020, 10 out of the 257 World Heritage forests are showing a carbon surplus due to human activity and climate change impacts.
Yet, the carbon offset market has failed to consider this swing of the pendulum and continues to operate on the basis that forest are inherently carbon sinks. This is worrying in regards to the effectiveness of these credits, especially considering the profile of the companies demanding more of these credits.
New analysis from BloombergNEF shows that the top buyers of carbon offsets globally are a diverse group of heavy-emitters like airlines and oil majors. Of the top 10 largest carbon offsets buyers in 2021, nearly half of their portfolio came from deforestation projects. This feeds into the concern that carbon offsets simply give companies a pass to emit business-as-usual, without having a real world decarbonisation impact.
BloombergNEF also predicts that the demand for carbon offsets is only going to skyrocket over the next decade – going from $1 billion today to $190 billion in annual value by 2030 – as companies look to quickly reduce their emissions to meet decarbonisation goals.
However, a spike in carbon offset purchases does not necessarily mean that carbon is being reduced in the real world, as spotlighted in the CarbonPlan research. While forest carbon offsets can do a lot of good, there needs to be more transparency and consideration of climate risks in the mechanisms to render them meaningful.
As the carbon offset market is set to explode, it is urgent that these issues are addressed now so that they can be used to actually preserve the world’s forests and achieve net zero, instead of simply allowing top emitters to continue to pollute.