“Avoid emissions first:” Offsets needed for net zero, but they must be real

There is a reason why the word “net” appears in “net zero.” Not all emissions can be eliminated, which means that to get to “net zero” some will need to be offset. But those offsets need to be real, and they will need clear rules and improved standards, according to a new report from the Grattan Institute.

In its latest report, Towards net zero: Practical policies to offset carbon emissions, Grattan describes carbon offsets as “a difficult part of the net-zero conversation”.

Carbon offsets are essentially credits for reducing emissions or removing greenhouse gases from the atmosphere, and they are used to compensate for emissions elsewhere.

Offsetting methods include nature-based solutions like tree planting, soil carbon and fire management, and industrial means like direct air capture and storage and mineralisation. 

It’s a controversial topic. Oil and gas companies have relied on activities like tree planting to help justify expansion plans, while environmental groups have raised questions about credits being issued with no basis in emissions reductions. Bush fires, heatwaves and drought pose a risk to the long term viability of tree planting, and potential conflicts arise as agricultural land is turned over to carbon farming. 

Given such issues, cynicism regarding offsets is understandable, Grattan’s report states. 

While offsetting is not a substitute for avoiding emissions, Grattan says  some will be needed to reach net zero in order to account for leftover emissions where solutions aren’t available or are too expensive.

“Even when you shut a coal mine, the fugitive emissions might continue for quite some time” is one example, Grattan’s energy program director Tony Wood told RenewEconomy.

Once emissions have been eliminated wherever possible, achieving net zero means “every tonne of CO2 or greenhouse gas that we put into the atmosphere has to be offset or balanced by another tonne of CO2 that we take out of the atmosphere,” Wood said.

More than 100 million units in offsets, or carbon credits, could be needed annually to make up for residual emissions from activities like agriculture, aviation, chemical production and fugitive emissions, Grattan’s report estimates. 

Many net zero emissions scenarios involve substantial reliance on offsets.

One scenario for net zero emissions by 2035 modelled by ClimateWorks Australia had residual emissions ranging from 190 million tonnes per year in 2035 to 58 million tonnes per year in 2050. 

Senior project manager Cameron Butler told RenewEconomy that at the peak offsetting this amount equates to around 12 million hectares of forestry or an area roughly 1.7 times the size of Tasmania.

There limitations and risks for different offsetting methods.

Industrial removal, using technologies like direct air capture and storage, can be expensive, consume significant amounts of energy and is limited by geological storage capacity.

Tree planting is limited by the availability of land and water, and can be at risk from extreme weather events like drought, heatwaves and bush fires. Earlier this year a fire in Oregon in the United States burned through forests set aside as carbon offsets for businesses and individuals.

Dr Kate Dooley from Melbourne University told RenewEconomy that land carbon or forest carbon offsets are “risky, they’re prone to reversals – we’ve seen bushfires in Australia – they’re difficult to measure and quantify robustly.”

“There’s a lot of issues of non-additionality where the project was going to happen anyway and got offset credits, so we’re not driving decarbonisation,” she said.

Given these concerns, Greenpeace International has recently called for an end to offsets.

Offsets should be used “as little as possible”, Tim Baxter, senior researcher with the Climate Council told RenewEconomy.

“Ultimately avoiding the worst of climate change means ending the consumption of coal, oil and gas. And this means we have to get as close to zero as possible, as soon as possible,” Baxter said.

Grattan is recommending governments be clear about the role offsetting plays in net zero policies. This includes seeking to avoid emissions first, maintaining high standards of integrity, and being clear about when and why offsetting is necessary.

Rules will also be needed to prevent double-counting of emissions reductions, such as where Australian credits are sold overseas and risk being claimed as reductions in two places.

As demand increases, Grattan says governments should step back from being the major buyers of carbon credits, instead putting in place obligations or incentives for industries to step up.

Eventually the government will have to think about how it withdraws “from being the market participant, and just becomes the market maker, and maybe a buyer of last resort”, Wood said.