What Happens to Carbon Credits When Forests Burn Up?

What Happens to Carbon Credits When Forests Burn Up?

Many corporations are investing billions in carbon offsets as a way to reach their net-zero goals. But as drought and climate change put forests in danger, the forests that allow for carbon offsets may disappear, leading state governments and companies alike to investigate what to do next. Additionally, how beneficial are these programs anyway? Reporting from National Geographic shows that many programs claiming to offer carbon offsets are not as effective as they seem. A ProPublica investigation found that many forest offset projects in South America did not offset as much CO2 as promised, and others couldn’t substantiate their claims at all. Meanwhile, Bloomberg showed that many offsets offer credit for "protecting” forests that are not at risk.

DW: Why carbon offsets are worse than you think, January 21, 2022.

Bloomberg: These Trees Are Not What They Seem, April 20, 2021.

Why This Matters

The loss of forests around the world contributes to climate change and deforestation is the second-largest cause of emissions after burning fossil fuels. Carbon offsets provide incentives for protecting these crucial carbon stores and ecosystems and have great potential, but so far have largely failed to deliver climate benefits. Reforming and adapting the offset industry to consider climate change impacts could make a huge difference in holding corporations to their climate commitments.

Since Brazil’s President Jair Bolsonaro took office in 2019, environmental protections of the Amazon -- one of the world’s largest carbon sinks -- have weakened. Brazil has seen record logging for the third month this year. By the end of April, nearly 2,000 square kilometers had been cleared this year. “Climate scientists fear that deforestation of the Amazon rainforest will not only release huge amounts of carbon into the atmosphere but also lead to the eventual degradation of the forest into tropical savannah,” DW reports.

The Economist: How do carbon markets work?, October 1, 2021.

TED: Carbon Offsets - The Big Lie | David Detzler, June 16, 2021.

Forests In Peril

Usually, when landowners sell credits on an area of forest, they set aside a certain percentage to cover potential threats. Two to Four percent are reserved to cover fire risk, 3% for insects or disease, 3% for droughts and windstorms, and 9% for human risks like bankruptcy or logging.

In fire-prone places like California and Oregon, these reserves may not be enough. "Scientists say that you can’t simply take the risk of a wildfire and turn it into a prediction of exactly how much carbon could be lost,” Grist reports. For example, California gave out about 190 million forest credits (equal to 190 million metric tons of carbon) with 15% (30 million credits) in reserves in case of fire, disease, weather, etc. over the next century. However, over the next decade, wildfires consumed over 5.7 to 6.8 million metric tons of carbon -- almost a quarter of the total reserves and complete excess fire risk reserves.

"That means we messed up our calculations so badly that in less than 10 years we’ve blown through 100 years of credits,” says Danny Cullenward, policy director for CarbonPlan.

Source: Global Forest Watch / World Resources Institute, April 2022.

Forest 500: A climate wake-up | But business failing to hear the alarm on deforestation, January 12, 2022.