Instead of Carbon Offsets, We Need ‘Contributions’ to Forests

(Photo by iStock/valio84sl)

Over a billion dollars have been spent on forest and land use carbon credits to “offset” emissions. These offsets have been heralded as a means of protecting and growing the world’s remaining forests, and of addressing climate change. But offsets aren’t delivering. Recent high-profile studies estimated that only six percent of tropical forest carbon credits represent real emission reductions, adding to the drumbeat of scientific articles, reports, and investigations in the last year showing that the climate benefits of forest carbon credits have been greatly overestimated (and that at least some offset projects have actually caused social and environmental harm). In the wake of such studies—and of a growing number of lawsuits against Delta Airlines and other companies that have used forest carbon credits to make “net zero” and similar claims—some companies and universities have announced their decision to stop buying them altogether. Prices on the carbon market have plummeted.

It’s good that low-quality offsets are being exposed, but private-sector funding for forests is at risk of drying up. Given the important benefits forests provide—not merely holding and absorbing heat-trapping CO₂ but improved air and water quality, biodiversity conservation, poverty alleviation, and more—we urgently need a new approach for funding the climate, biodiversity, and social benefits of forest preservation, expansion, and management.

One way to channel forest finance away from bad offsets toward more productive outcomes is, simply, to stop claiming that forests offset fossil fuel emissions. Companies could, instead, make “contributions” to global climate mitigation through investments in forests. This change in terminology may seem small, but it represents a fundamentally different approach. For one thing, not allowing companies to subtract carbon credits from their direct emissions into a single net number, as offsetting does, refocuses priorities on direct emissions reductions. Companies would no longer be able to hide inaction behind offset purchases.

For example, compare two hypothetical companies that could call themselves carbon neutral. One dramatically reduces its own emissions, except for a small amount of remaining emissions that it offsets with carefully vetted carbon credits; the other takes no action to reduce its emissions and, instead, buys a large amount of low-quality carbon credits as offsets. The first company will have a much larger effect on tackling climate change, given that most offsets are currently not delivering climate benefits. If the same two companies were bound by a contribution approach, it would be much clearer to the public that they made drastically different choices in reducing their own emissions.

A shift from offsets to contributions is also more accurate. Forests only temporarily store carbon from the atmosphere, and thus cannot “cancel out” the fossil fuel carbon that will be released into the atmosphere, where it will persist for centuries to millennia. Direct reductions and offset purchases are also not equivalent because of uncertainty. It is much easier to measure direct emissions than to estimate emissions reductions, which must be measured against an assumed, and often highly uncertain, scenario of what would likely have happened without the carbon finance.

This shift in framing is crucial for improving forest project outcomes. In the current offsetting model, all actors involved in producing carbon credits have an incentive to inflate a forest project’s climate benefits. Carbon project developers profit when they have more credits to offer, and third-party auditors that are hired by the developers themselves have incentives to be lenient so they will be hired again. Meanwhile, offset credit buyers benefit when credits are cheap and plentiful. This race-to-the-bottom dynamic helps explain why low-quality projects dominate.

Freeing companies from the pressure of “offsetting” by switching to a “contributions” frame lessens the incentive to minimize costs at the expense of quality, allowing them to focus on contributing to higher-quality projects.

Some still believe that the current offsetting model can be fixed. However, there are a number of reasons for skepticism. First, at their roots, offsets involve a basic asymmetry of information between offset sellers and buyers that, especially when combined with enormous complexities and uncertainties, will make them vulnerable to being gamed. Second, everyone involved in the offset market benefits from gaming, as we describe above. Third, even the best efforts to accurately quantify forest carbon benefits cannot reconcile the fundamentally temporary nature of forest carbon storage with the effectively permanent consequences of fossil fuel pollution. Particularly as forests around the globe are increasingly vulnerable to climate change-fueled disasters like wildfire, drought, and pests, forest stability over centuries is highly uncertain.

We are optimistic, however, that a contributions-oriented approach can be designed to fix the fundamental flaws of the offsetting model. In a contributions model, corporations and other carbon credit buyers are freed from seeking to maximize the quantity of credits they purchase, because their goal can no longer be to cancel out their direct emissions. Thus, a buyer can instead shift their focus to contributing to high quality forest conservation projects that prioritize specific forest locations and interventions that are most likely to result in real forest climate mitigation impacts and avoid harm.

The stakes could not be higher. Over $1.3 billion in funding was channeled to forest and land use carbon offsets in 2021 alone. Now, as the offsetting model faces a credibility crisis, a contribution approach has the potential to productively steer billions of dollars into effective forest efforts that don't undermine urgent climate action.

Read more stories by Libby Blanchard, William R.L. Anderegg & Barbara K. Haya.