Tuesday, March 14, 2017

Woolly thinking about "greenhouse gas neutrality"

In a well-functioning emissions trading scheme, polluters would have to submit credits in order to be allowed to pollute, and they would purchase credits from those who cleaned up their pollution.  So if the cost of cleaning was higher than the cost of reducing pollution in the first place then they'd choose to reduce emissions. Either way the atmosphere would not receive any more greenhouse gasses and purchasers of carbon credits could rightly call themselves "greenhouse gas neutral".

However, that's not what's happening.  Many people assert  (e.g: click here to see an example) that if a polluter reduces their pollution then they should receive credits for the extent of their pollution reduction. They also assert that purchasers of their credits can claim to be "greenhouse gas neutral". They are wrong.

There are many ways to explain why they are wrong.  You could use stories, mathematics, graphs or even children's blocks. Let's use the latter.

Blocks below represent levels of greenhouse gas in the atmosphere and levels planned to be emitted by two polluters.

Then polluter 2 opts to no longer pollute and is awarded carbon credits. Polluter 1 purchases those credits and is allowed to pollute. The result is more greenhouse gas in the atmosphere, as shown below.  Polluter 1 clearly cannot claim to be "greenhouse gas neutral".

So, what kinds of credits can confer greenhouse gas neutrality on a purchaser? Let's reach for the blocks again.  In this case, we have the atmosphere, a potential polluter and someone who will take greenhouse gas from the atmosphere (maybe using new trees, a scrubber, or perhaps by seeding the ocean with iron to promote plankton); a sequesterer.

The sequesterer receives carbon credits for removing greenhouse gasses from the atmosphere. They are purchased by the polluter, who then goes ahead and pollutes, but the amount of pollution is exactly equal to the amount of sequestration and so the result is shown below:

Clearly, the atmosphere gains no new greenhouse gas and the polluter can now claim to be greenhouse gas neutral.

But wait, there's more! Suppose there is no polluter, and a rich benefactor who cares about the environment or a government decides to purchase credits from the sequesterer and immediately destroy them. Before the transaction the blocks look like this:


and after the transaction they look like this:

That's right, an ETS that awards credits for sale only to those who clean greenhouse gasses from the atmosphere encourages activity that can reduce atmospheric levels of greenhouse gas if credit purchasers choose not to pollute.

This may seem obvious to you, and it is, but I have had so many arguments with people who can't see it that I thought illustrating the logic with blocks might help.

Here's the killer: It is generally much cheaper to do nothing than to extract greenhouse gasses from the atmosphere. If we award people carbon credits for simply reducing outputs of greenhouse gas, we effectively pay them for nothing, and it takes much longer for emissions trading schemes to work because few will engage in activities that extract greenhouse gasses from the atmosphere.

So next time someone says that they are "greenhouse gas neutral" because they purchased credits from a power company that got credits for installing a wind farm, or from someone who opted not to clear a patch of rain forest, let them know that they are kidding themselves.  We'll all benefit if you do because our emissions trading systems will be much more effective if they properly reward greenhouse gas neutrality.