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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Plus, the more offsets a company like AES creates in faraway lands, the less it invests in upgrading or replacing its coal-fired power plants here at home, as it might if it had to pay a carbon tax or reduce its emissions directly. That's why rich corporations are so interested in offsets in the first place -- they're less of a threat to business as usual.

The clock is ticking. The Intergovernmental Panel on Climate Change (IPCC), the scientists who along with Al Gore took home the Nobel Prize last year, are saying we have until 2009 at the latest to put a serious curb on emissions. That's next year. In Europe, where they're still tweaking the cap-and-trade model after three years, the scheme has not significantly cut carbon emissions; the price of carbon even crashed in April 2006, partly because too many credits were handed out.

It should be cause for concern that not a single person interviewed for this article, on either the investment or the carbon-project side, would assert with confidence that the rules currently being written for a U.S. cap-and-trade market will actually reduce overall carbon emissions. When it comes to carbon forestry especially, the simple economics just may not work out. "People are suddenly starting to see that carbon forestry is not the silver bullet," Rebelo says. "There's this big idea that it's going to save the world's forests, and I don't think it is. Carbon credits are one revenue stream among many. It's never going to counteract logging or oil-palm conversion." China, for example, is leveling Southeast Asian rainforests and planting oil-palm plantations to feed its ravenous appetite for biofuel. "I was looking at a potential project in Papua New Guinea," Rebelo explains. "Carbon credits could produce maybe $100 to $150 per hectare per year versus logging at $500 to $600, or conversion to oil palms, which is even higher."

"I haven't seen meta-analysis that says, 'Yes, this is working,' " says Bo White, who is founding a new company with Rebelo and another FES grad to sell carbon offsets to U.S. consumers. "I think it's really important to find ways of determining if these markets are actually helping the problem or just transferring money from here to there."

When Schwarzenegger was asked to speak at the Yale Conference of Governors on Climate Change in April, the occasion was billed as a "celebration of state environmental leadership." In the end, though, it became as much an indictment of the federal government's failure to act on global warming. For all of Schwarzenegger's free-market nods, California's environmental success has hinged on tough, activist regulations that forced businesses to adapt -- and not the messy, self-interested dynamics of a market. Markets may be the most powerful forces in our society, but they are hard to control. The long-term impact of a market in carbon is impossible to predict.

Yet that seems to be the only course offered by our national leaders. Today, the smart money is anticipating a legal carbon cap and thus a formal U.S. offset market not long after 2010. That transformation can only be compared with what started when Anthony Lucas struck oil at Spindletop a century ago. That black gusher eventually gave birth to the world's biggest multinational corporations; this green version is set to transform not only the energy sector but the way business is done, period. Here's hoping the kids at the core of this new green market, from Yale and elsewhere, figure out how to make it work.