Can Carbon Credits Slow Global Warming?

By: Anya KamenetzMon Jun 23, 2008 at 4:35 PM

Legal limits on greenhouse-gas emissions are coming fast, with a $1 trillion carbon market emerging. At the core: A cadre of young, idealistic Yale forestry grads. But will carbon offsets do anything to slow global warming?

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Camile Rebelo | Photograph by Amy Eckert

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John Forgach | Photograph by Amy Eckert

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A whole generation of Yale's leading young environmentalists are becoming investors and analysts, with a faith in the power of capitalism that seems as idealistic as their passion for nature. "I love trees; they're so tangible!" says Kuppalli, who is now the U.S. director of New Forests, an Australian investment-management firm with $350 million in assets and capital commitments that develops carbon credits and other revenue from forests. "You can go somewhere and say [clapping her hands], 'There's my forest! There's my carbon!' "

For some, though, doubts have begun to seep in about what exactly their impact is. "Everyone can agree that maintaining forests is good for biodiversity, good for climate change; it's like apple pie," says Lex Hovani ('06), who is helping to create a national forest-carbon-credit program in Indonesia for the Nature Conservancy. "But then when you get into the details, people are starting to realize they're not always talking about the same thing."

The uncertainty looms especially large with forest-preservation projects. Under existing UN standards, you can create carbon credits by raising plantations of trees, as Forgach's firm is doing. But the destruction of the world's existing forests, particularly tropical forests, accounts for some 20% of greenhouse-gas emissions. So this past December, at the UN climate negotiations in Bali, a consensus coalesced around a proposed certification standard called Reduced Emissions from Deforestation and Degradation, or REDD. A REDD project involves buying forest land in a developing country, or making a deal with its owners, and creating a nature preserve. You attempt to prevent logging or slash-and-burn agriculture by hiring guards or offering the locals a better living doing something else. Then you sell carbon credits based on the deforestation thus avoided. The UN estimates that the market for REDD credits alone could reach $100 billion. According to a 2006 U.K. study, just 1.5 acres of tropical forest land could be worth as much as $25,000 in carbon credits at a CO2 price of $35 to $50 a ton. (The E.U. market price in May was $39.)

Forgach would prefer to see his trees turned into "fungible" carbon credits without a lot of regulatory hoo-ha. "I think forestry is a utility," he says. "Forest investments are tainted by NGOs that show the butterflies and the naked Indians." For others, though, the butterflies and natives are as much the point as global warming. Tropical forests are the world's richest centers of biodiversity, and more than a billion of the world's poorest people rely on them for fuel and food. Should REDD certification include requirements for biodiversity and sustainable development alongside carbon limits?

Rebelo believes so. A project she's working on in Mozambique includes training locals in forestry and providing seedlings for villagers to cultivate for firewood. "I'm doing what I've always wanted to do," she says. Yet she acknowledges that since the REDD discussions in Bali, new projects have been popping up so fast -- with locals and investors impatient to make money from carbon -- that well-rounded development programs are harder to execute. "It was all ass backward," she says. "It all just moved really fast." Today, she's helping to manage and develop more than 750,000 acres of forest in Indonesia and Africa for various European companies and nonprofits. "We're seeing a big series of field expansions -- massive projects all over the world. Between January and the end of March, I don't think I spent more than seven nights in one place."

The United States is responsible for about a fifth of the world's greenhouse-gas emissions. A serious carbon cap here at home -- 80% below 1990 levels by 2050 is widely considered the minimum to avoid the worst consequences of global warming -- is therefore crucial. Yet the rising clamor that we do something, anything, about greenhouse gases has swamped debate about what that something should be. The success of the American cap-and-trade system for acid rain is held up as proof that market dynamics can take care of our global carbon problem. But there are differences between acid rain and carbon.

The system for acid rain worked in part because the trading of credits was limited to a set of industrial polluters in one country. They exchanged permits to emit the gases among themselves -- and under the auspices of a then-powerful Environmental Protection Agency and effective courts. In other words, it was more or less a closed, monitored system.

But global warming is, of course, a transnational problem. And the attempt to create a global carbon market by using offsets in developing countries makes the whole system infinitely more porous. Even assuming that new emission standards are laid down here in the United States, allowing companies to outsource their compliance to the planet's hinterlands means that we are making rules vastly more difficult -- if not impossible -- to enforce. As Rebelo says, "These are all developing countries with poor governance structures and a lot of corruption."