The fight against climate change has moved from the margins to the political center, where it has found a new, if unlikely champion in the business elite. While raking in soaring profits from ecological plunder, a growing number of the largest, most noxious companies have pledged to lead the transition to a sustainable future. The problem, however, is the timeline. There’s not enough time to reduce temperature-raising emissions without also reducing profits. But the captains of industry have devised an elaborate solution, a new kind of carbon-based economic market which can be used to buy and sell the very thing we do not have: time. Carbon markets take many forms, but they are all unified by a single principle: the transformation of “green” activities, like planting trees or protecting forests, into commodities—carbon credits—which polluting companies can purchase to offset their own destructive emissions. The market enables polluters to “buy time,” regulatory flexibility, and PR while purportedly leading the energy transition.
Shell, for instance, has voluntarily set a target of becoming a “net-zero emissions energy business by 2050.” Instead of reducing all of its emissions, Shell plans to rely on carbon markets to compensate for its “unavoidable” dirty operations by purchasing carbon credits resulting from greener activities, like a one hundred twenty thousand-acre reforestation project in the Mississippi Delta. Carbon credits—and the carbon-storing trees they represent—are supposed to offset a percentage of emissions, allowing Shell to claim a smaller carbon footprint on paper. Their net-zero ambitions underscore carbon markets’ fundamental inability to actually decrease the excess carbon dioxide in the atmosphere. By trading dirty emissions for more trees, carbon markets can only aspire to not increase—but not reduce—overall emissions levels. In effect, they are the perfect political tool for major polluters to defang environmental demands and maintain the economic status quo.
From their formulation in California in the 1970s to their launch into global markets in 2005, carbon credits were designed to harness the invisible hand of the market to mitigate the catastrophic effects of the fossil-fuel economy while still encouraging economic growth; the theory was that a new market could provide antidotal financial incentives to solve the ecological destruction wrought by markets overall. However, the promise of carbon markets—hailed as a bridge between environmentalism and economics—crumbles under the fundamental market mandate of insatiable growth. If a carbon market creates a way for polluters to buy time while transitioning to net-zero, then its intrinsic goal would be to shrink as emissions are cut and make itself obsolete, as its disappearance would mark the successful stabilization of greenhouse gases in our atmosphere and an end to anthropogenic global warming. But a market that spells its own demise is bad for business. And business must stay booming.
A market that spells its own demise runs entirely contrary to a viable business plan.
In most registries, each carbon credit represents one metric ton of carbon dioxide or CO2 equivalent (tCO2e). This simple equation masks a layered puzzle of quantification that transforms physical carbon into an abstract commodity. A forest, for example, would be measured by the carbon dioxide emissions dormant in its trees and each metric ton of carbon dioxide would represent a tradeable credit. This is where private registries, such as the American Carbon Registry in Virginia and the Climate Action Reserve in California, come in. They function as authorities who convert carbon to credit; who transform the atmospheric and ecological complexity of the carbon cycle into new economic products by way of specific, trademarked methodologies.
Shell is not alone in flocking to the carbon marketplace to don sustainability costumes by day while polluting nakedly by night. In 2021, as carbon credit prices soared, carbon markets across the world grew by 164 percent with a record turnover of $851 billion, according to market analysts at Refinitiv. Rather than providing a private-sector panacea for global warming, carbon markets serve more as laboratories, where environmental economists conduct experiments to discover more ways to convert untapped—and unprofitable—sustainable materials, processes, and activities into commodities. In the age of climate catastrophe, the ancient alchemist’s dream has been realized: base material has transmogrified into gold.
The Midas Touch
Carbon voyages through the Earth, cycling between a sequestered state in forests, oceans, and oil deposits and a gaseous state that is released into the atmosphere through respiration, decomposition, and combustion. This cycle results in a revolving layer of gases that collect in the atmosphere and regulate a galactically unique temperature that can support life, resulting in what’s commonly known as the “greenhouse effect”—the gas analogous to glass, and the Earth, a botanical greenhouse. Over the last two centuries, this glass has thickened—and is still thickening—abetted by an ever-expanding, carbon-burning global economy, setting the Earth on a course for a feverish future.
In 1997, world leaders gathered in Japan for the Third Conference of the Parties (COP 3). Their purpose was to sign the Kyoto Protocol, an international treaty extending the 1992 United Nations Framework Convention on Climate Change that committed states to reduce emissions and stabilize “greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” With delegates from 160 countries present, the treaty negotiations began from the premise that global warming was largely an unintended consequence of the relentless pollution emitted by the world’s industrialized countries—mainly those in the Global North. Climate change was seen as a “negative externality,” an unforeseen environmental price of capital production that needed to be accounted for in global markets.
The British economist Arthur Pigou originally theorized about negative environmental externalities in 1920. He argued that they could be corrected—in effect, internalized—through taxation, which would make polluting more expensive and thereby incentivize reductions. But by the neoliberal 1990s, President Clinton’s American delegation in Kyoto pushed a new idea that was borne out of the anti-tax craze of economic deregulation: an international carbon market scheme. In the lead up to the Kyoto meeting, delegates from Brazil had proposed a Clean Development Fund, which would have required that the industrialized countries responsible for the lion’s share of global emissions would contribute extensive funds for climate adaptation and renewable technologies in industrializing countries. Many of these countries supported Brazil’s idea of a North-to-South wealth transfer, but the business interests of the Global North argued that it was an assault on the free market system and sought to break the solidarity between industrializing countries. The United States courted Brazil in a handful of exclusive meetings, which led to a change in Brazil’s proposal from the Clean Development Fund, to the carbon-credit-based Clean Development Mechanism (CDM), which was eventually ratified and implemented as part of the finalized Kyoto Protocol. At a press conference concluding the meeting in Kyoto, U.S. Under Secretary of State for Economic, Business, and Agricultural Affairs Stuart Eizenstat said, “We have achieved nearly all the elements of the President’s policy framework, emphasizing market-based mechanisms rather than central government direction or heavy taxes.” In other words, mission accomplished. The market-based achievements in Kyoto have stymied climate action ever since.
After introducing and pushing carbon markets, the United States eventually pulled out of the Kyoto Protocol in 2001, leaving a vacuum for individual states to develop their own programs, and California took the lead. In 2006, a year after the Kyoto Protocol took effect, California passed the Global Warming Solutions Act (AB 32), which launched a mandatory carbon market as a means of reducing greenhouse gas emissions. The market, known as the Cap-and-Trade Program, is regulated by the California Air Resources Board (CARB) and was formally adopted in 2013. It imposes progressively shrinking emission limits, or “caps,” on individual polluters. In contrast to the rigidity of a carbon tax, Cap-and-Trade provides flexibility for major polluters by giving each company a tradable “allowance” of emissions, paving the way for some to efficiently reduce their emissions well below the cap. Those who could not cost-effectively reduce their emissions could meet the cap by trading money for another company’s unused right to pollute. The increased flexibility of trading pollution allowances purports to enable market forces to buy time in order to find the most profitable way to reduce overall emissions as caps tighten. According to a 2021 report by the California legislature, the state reduced its 2016 emissions to levels last seen in the 1990s, meeting its 2020 goals four years early. But the state is not on track to meet its current goal of further reducing these levels by an additional 40 percent by the year 2030. Meanwhile, in addition to trading pollution allowances, companies could offset their emissions further—up to 8 percent until 2020, 4 percent until 2025, and 6 percent until 2030—by purchasing state-certified carbon credits often issued by private registries.
In 2017, California Assembly Bill 398, which extended the Cap-and-Trade Program until 2030, mandated the creation of a Compliance Offsets Protocol Task Force to make recommendations for expanding the state’s carbon market. In 2021, the two “environmental justice” members of the thirteen-member Task Force resigned in protest, charging that the recommendations only served the financial interests of the carbon offset market through deregulation and expansion at the expense of emission reduction goals. In his letter of resignation, Neil Tangri, a founding member of the environmental justice group Global Alliance for Incinerator Alternatives (GAIA), attacked the assumed connection between carbon market growth and market health. “The offset program,” he wrote, “can be expanded and weakened, or it can be strengthened and shrunk; it is not possible to expand and strengthen it.”
In order to be certified, all carbon credits must pass a test: they need to be “unusual” in that emission reductions represented by carbon credits need to be considered additional to what would have happened in a business-as-“usual” scenario. In effect, each protocol for generating carbon credits must demonstrate that, without carbon markets, particular emission reduction projects would not have happened. If a protocol results in a forecast that would reduce emissions more than it would without, then the project would be considered “additional.” For California’s Cap-and-Trade Program, additionality is determined by the state’s Air Resources Board (ARB) using criteria that are also easily abused.
According to a report last year by Lisa Song and James Temple for ProPublica and MIT Technology Review, the uncertainty between usual and unusual futures is exploited to generate carbon credits that do not reflect actual emission reductions. They report that the Massachusetts Audubon Society, a wildlife and habitat conservation nonprofit, applied for and was issued six hundred thousand offset credits through the ARB’s Offset program. Why? Because the nonprofit presented a possible future in which it could heavily log nine thousand seven hundred acres of its preserved forests. And legally, it could. This logging future became the business-as-usual scenario. Protecting those acres, therefore, was an unusual future which deserved carbon credits under the ARB’s criteria. The question, however, is would a conservation nonprofit whose stated mission is to “protect wildlife” and “conserve and restore resilient land” really have logged nearly ten thousand acres? Of course not. The vast difference between could and would, between capacity and intent, pinpoints an exploitable weakness of standardizing additionality in terms of legality.
In the end, by agreeing to not log its forests for one hundred years, the Massachusetts Audubon Society was issued about $6 million of offset credits, which it sold through intermediaries to oil and gas companies who could then use the offsets to continue polluting while technically complying with California’s requirements under Cap-and-Trade. Perhaps the Audubon Society convinced themselves that they were gaming the system to save a few thousand birds, but the uncertainty built into the methodology paves the way for systemic abuse. A 2021 investigation by the nonprofit CarbonPlan found that forest-based carbon credits in the California Cap-and-Trade Program were over-credited by an estimated 29 percent to the tune of $410 million. The landowners get paid and the polluters meet their caps, but greenhouse gases are not reduced. It’s a gut punch, sure, but it’s not surprising that a system built for profit finds any available means of maximizing returns.
California’s carbon markets extend far beyond the state-regulated Cap-and-Trade Program. A loose patchwork of private registries and environmental consulting firms have furnished a growing “Voluntary Carbon Market” to meet the PR demands of polluting companies that have pledged to reduce emissions but want to buy more time to do so. Unlike Cap-and-Trade, the voluntary market is unregulated and the integrity of its carbon credits rests in the authority of whichever private registry issues them. As such, the unregulated voluntary market serves as the testing ground for experimenting with new methods of transforming carbon into commodities that the state could later adopt. Valued at $1 billion in 2021, the voluntary market sows the seeds for future growth in the $850 billion carbon markets worldwide.
The private registry Climate Action Reserve (CAR), founded in 2008, was integral in creating and enlarging California’s carbon markets. Of the six protocols for generating state-certified offset credits under the Cap-and-Trade Program, five were first developed by CAR for the voluntary market. While it originally focused on California, CAR now issues credits for projects across the United States and Mexico. In 2018, it launched Climate Forward, a program bent on widening the definition of carbon credits and taking the operations of the Reserve global.
In a series of virtual workgroup meetings that began last year, Climate Forward discussed a new proposal for generating carbon credits called Avoided Wildfire Emissions (AWE) Forecast Methodology. The discussions, which are available online and open to the public, display the standard form of economic opportunity dressed in climate-crisis urgency. In his introductory remarks at the first meeting, CAR president Craig Ebert said, “It’s obvious that we are frying this planet. Frankly, the time for talk is over. The time for action is upon us.” Still untested and in its theoretical stage, Version 1.0 of the Methodology proposes that carbon credits be used to give companies financial incentives to conduct forest-management practices—termed “fuel treatments”—that might mitigate emissions released by future wildfires by reducing flammable biomass in forests. (“Fuel,” in this case, refers to the total amount of combustible material in a defined space.) The current draft of the proposal, which is still subject to change, standardizes a system of mathematical models for fire behavior and occurrence, weather, terrain, vegetation, and more, to estimate how many metric tons of emissions would be prevented by different fuel treatment projects if a given area burned in a wildfire—and the difference between estimated emissions with and without a particular fuel treatment determines how many credits the project would generate. These calculations are especially tricky because they need to not only simplify but predict the complex conditions that shape wildfire behavior. The current list of fuel treatment activities under consideration include: prescribed fire (purposefully burning landscapes to reduce fuel loads), mechanical thinning (cutting down trees to thin the forest and reduce fuel), fuel breaks (carving vegetation-free borders to mitigate the spread of fire), pruning, and the removal of surface fuels.
The AWE Methodology is at the cutting edge of the carbon market because it monetizes avoided emissions rather than measurable reductions. In contrast, traditional carbon credit methodologies require verification ex-post. A forest, for instance, must be measured to determine its carbon credit value. Rather than measuring to create a carbon credit, as the Methodology does with wildfire, Climate Forward developed one based on forecasting—the Forecast Mitigation Unit ® (FMU)—which they promptly trademarked. In the laboratory of the voluntary carbon market, FMUs greatly expand the kinds of environmental activity that can generate carbon credits. No longer are projects confined to that which can be measured; with FMUs, carbon credits provide the means to profit from divination.
The creativity behind FMUs was quickly noticed by the market. “What’s happened, interestingly, is the carbon markets have actually seen a bigger opportunity with Climate Forward and FMUs than was originally envisioned for the program,” Jon Remucal, the associate director of nature-based solutions at the Climate Action Reserve, told me. He suggested that the problem with many traditional carbon credit projects is the upfront cost; for example, reforestation requires labor and materials to prepare a site and plant saplings in the ground, and for those saplings to grow into trees of a certain size before their sequestered carbon can be measured and profitable credits issued. In contrast, FMUs involve an ex-ante projection rather than an ex-post verification of the environmental benefits a project is expected to generate in the future. In effect, FMUs are designed to defray that upfront cost and make previously unfundable projects possible.
The landowners get paid and the polluters meet their caps, but greenhouse gases are not reduced.
FMUs have also enabled carbon markets to expand into the arena of fire management. They view wildfires as a negative economic externality capable of being corrected by the market, but their data- and model-driven conversion of fuel treatments into carbon credits hides the political stakes involved in reckoning with the ever-increasing risk of wildfires. In fact, the history of fire and forest management in the United States is one of colonial violence against Indigenous peoples and the suppression of their knowledge about fire’s various ecological roles—a history of ecological destruction wrought by the extractive economies of timber, minerals, agriculture, and development. Rather than addressing these ongoing histories, the AWE Methodology erases them by employing the market logic that led to forests’ rising flammability in the first place; it excises the complexity of wildfire and illustrates precisely how carbon markets pull the political teeth from any sustainable activity they enclose.
Smokey the Bear Sutra
Many ecosystems in the western United States evolved to propagate lightning-ignited fire. The giant sequoias in California, for instance, require moderately burned soil for their tiny seeds to successfully germinate. “Fire itself is sacred. It renews life,” Bill Tripp, a member of the Karuk Tribe in Northern California and director of natural resources and environmental policy for their Department of Natural Resources wrote in the Guardian. Tripp argues that the revival of “cultural fire”—purposeful burning, which has been practiced by Indigenous peoples for millennia—is a much-needed solution to mitigate the adverse effects of megafires. Yet, cultural fire has long been maligned, criminalized, and as recently as the 1930s, violently suppressed. Even now, after the federal government has slowly reversed its position during the past fifty years to support the careful reintroduction of prescribed fire into fire-adapted landscapes, the Karuk Tribe and others still face regulatory and funding challenges in protecting their own lands through this practice.
The outlawing of cultural fire and landscape burning in the United States emerged through industrial forestry practices that originated in seventeenth-century Western Europe—particularly in France—where foresters viewed fire as having no ecological role and considered it a wild, unnatural threat to future timber yields. In the late nineteenth century, settler-colonizers brought this approach to the western United States where, unlike Western Europe, forests had evolved to burn. Through violent means, the U.S. Forest Service imposed the idea that forest fires are the unnatural result of moral and ecological degradation. After the Great Fire of 1910, which burned three million acres in the Inland Northwest region of the United States, fire suppression became the law of the land. The U.S. Forest Service mandated their “10 a.m. policy,” in which any fire must be controlled by 10 a.m. the next morning. After a century of staunch fire suppression policies, many argue that the West is running a wildfire deficit—a concept which uses an economic metaphor to describe the effects of decreased fire activity over the last century that’s resulted in a build-up of flammable material as drought and insects desiccate vegetation, and a warming climate extends the length of the fire season and heightens the probability of severe weather events. These volatile conditions lead wildfires to produce their own weather, tearing through and destroying even fire-adapted ecosystems where fuel treatments have taken place. Wildfires fueled by raging winds are exceedingly difficult for firefighters to suppress.
Dr. Timothy Ingalsbee, the executive director of Firefighters United for Safety, Ethics, and Ecology (FUSEE), told me that we need to end the “war on fire [and] focus on helping communities coexist with fire.” While the AWE Methodology mentions the environmental and social benefits of prescribed burning in fire-adapted ecologies, its focus is on removing fuel itself, and it remains to be seen whether its standardized models and systems for analyzing data will accurately estimate how many metric tons of emissions could be avoided as a warming climate exacerbates conditions. Also in question is the efficacy of FMUs: “There’s no expectation that FMUs sales will fully cover the cost of fuel treatments, but if it makes it more likely that fuel treatments will take place, then you know we’ve done some good,” said Remucal. However, the “good” of carbon markets is not designed to address wildfires or environmental justice as a whole.
According to the AWE Methodology, a project must not “materially undermine progress on environmental and social issues such as air and water quality, endangered species and natural resource protection, and environmental justice.” This rhetoric echoes the leitmotif of carbon markets; they can only prevent a net increase of emissions, not achieve net reductions. They do not aim to aid environmental and social projects; they are only designed not to harm them. In market logic, everything must be comparable, exchangeable, and commensurate with everything else, and the AWE Methodology, accordingly, quantifies forests so that they can be compared under a common carbon metric. Jon Remucal explained: “One general perspective that we often take at the Reserve is that ‘a ton is a ton is a ton,’ so if you’re quantifying the tons that are offset, reduced, avoided, or sequestered by a project, you can use that as a claim for an offset for a ton that’s emitted by a polluter.” For this circular logic to work, all metric tons must be devoid of physical, political, and ecological distinction; they must erase the uneven impact of climate catastrophes. While pollution enters the collective atmosphere of the Earth, marginalized communities bear the brunt of contaminated air and water, and life-threatening floods and fires.
The logic that all carbon is the same ignores the layered scientific reality of the carbon cycle.
Ultimately, the logic that all carbon is the same ignores the layered scientific reality of the carbon cycle, according to carbon-accounting expert Kate Dooley. While forests and fossil fuels both sequester carbon, a forest’s lifespan is measured in centuries. When a tree dies, it releases its carbon into the atmosphere as a part of the “fast” carbon cycle. Fossil fuel reserves, on the other hand, operate on “slow” geological timescales—they take millennia to form and they keep carbon underground for millennia to come. Carbon markets allow the engines of capitalism to manipulate reality and erroneously equate the fast carbon cycle with a slow one, but “saving” metric tons of carbon in a forest is wholly incommensurate to the ecological cost of extracting and burning carbon from deep underground, despite the financial industry’s profits gained therefrom. By trading carbon in a forest for the right to burn fossil fuels, carbon markets stiff their own supposed environmental goals.
The greatest aspiration of carbon markets is a world where everything can be measured and commodified as tCO2e. The continual development of new protocols and methodologies presage that dream, one in which the market would reign as the supreme regulator of greenhouse gases. If carbon markets were to succeed in assisting the economy’s transition away from fossil fuels, they themselves would disappear; their value would shrink smaller and smaller with each step in a truly sustainable direction. But it’s unlikely that a system enchanted by financial incentives and fantasies of progress would willingly achieve a victory requiring its own extinction. Instead, carbon markets—and other market-based techno-fixes to environmental catastrophe—are more likely to ride the waves of climate emergency to expand their tentacular reach while dissuading laborious scrutiny.