Forest-Based Carbon Offsets: Airlines Should Taxi With Caution
Brought to you by King & Spalding
Douglass Cassel
Counsel
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King & Spalding
Major airlines use forest-based carbon credits, also known as REDD+ credits, to speed their paths toward net zero carbon emissions. REDD+ credits are granted for programs to prevent deforestation and forest degradation.
The concept is simple and appealing. Airlines or intermediaries pay developing countries or owners to preserve forests, thereby reducing carbon emissions or avoiding added emissions that would result from deforestation. Each ton of emissions thereby saved equals one carbon “credit.” Airlines buy the credits, directly or in voluntary carbon markets, and then use the credits to offset continuing emissions from aircraft.
Forest-based carbon credits are supported by United Nations agencies, most governments, and companies in many industries. They are seen as a win-win-win – companies get carbon offsets, governments in developing countries receive revenue, and the environment benefits.
Putting the concept into practice, however, is problematic. As S&P Global reported this March, “after a few years of strong growth, the voluntary carbon market in 2023 hit a crisis of confidence, driven by media scrutiny, which challenged the quality and veracity of underlying reductions in carbon emissions.”
Largely as a result, in 2024 to date, aviation industry carbon credit prices are down by 32%, while “nature-based” (mainly forest-based) carbon credit prices have plummeted by twice that amount – 64%.
Serious doubts about the quality and veracity of forest-based offsets have been documented. Studies by scholars at Berkeley (2023), Columbia and Princeton (2021), University of Cambridge (2023), and the University of Kyoto (2024), all report serious overstatements of carbon emissions purportedly saved by REDD+ projects.
Among the reasons are multiple methodological challenges. The most basic problem is to hypothesize a credible baseline: what would have happened to a forest if it were not preserved in order to generate carbon credits? Would it be preserved anyway because no developer wants to buy it? Or would it be preserved by owner preference or by national law? How can one know the answers with a high degree of confidence?
Then there is the problem of “leakage”. Suppose forest “A” is saved by a carbon credits deal from being leveled for a shopping center. There may be nothing to prevent the would-be developer from simply moving across the street and flattening forest “B” instead. Net carbon emissions will not have been reduced, only moved. Yet an airline that buys the forest credits may still count them to offset its own carbon emissions.
Another concern is selectivity. Studies suggest that sellers of forest-related carbon credits are disproportionately conservation-minded. They would probably preserve their forests regardless. Carbon credits make their proclivities more profitable, but do not save carbon emissions.
Or consider duration. Once a carbon credits deal is signed, how long will carbon emissions be avoided? What if there is a forest fire? Carbon emissions reductions agreed to last for decades will be cut short.
Even in the best of circumstances, how does one calculate the emissions actually avoided by preserving a forest? Many forests include a variety of species of trees with differing carbon absorption capacities. Different species, of differing ages, in differing climates and weather patterns, absorb differing amounts of carbon. Even with good intentions and the best science, calculating the emissions saved by preserving a forest is no easy task. Yet many REDD+ projects rely on rules of thumb – or worse.
Finally, there is the issue of fraud. Unscrupulous sellers or brokers may falsify data to make their projects appear to save more carbon than they actually do. U.S. federal prosecutors in New York recently announced the indictment of the former CEO of a company that ran carbon credit projects (although involving more efficient cookstoves, not forest-based credits). The CEO allegedly calculated carbon credits – and then sold them in the market – on the basis of false and misleading data. Moreover, he had reportedly been a board member of a major carbon credit certifying body.
The overstatements are generally more pronounced in the case of “project” carbon credits, i.e., credits granted for an individual forest or other small-scale project. Best practice is now tending to move away from project credits to “jurisdictional” credits, which are based on emissions savings for an entire jurisdiction or other large area. On a large enough scale, selectivity is avoided, developers cannot simply move across the street, and falsified data by individuals has less impact on the overall results.
Still, jurisdictional credits are not a magic bullet. There remains the baseline problem of “what if”? Without a carbon offsets agreement, how much forest in a given jurisdiction would be preserved anyway? Political, social, economic, and climatic variables are at play. A significant degree of speculation remains.
Supportive of carbon credits, the U.S. government in May 2024 issued a statement of policy and principles for carbon credits. The statement observed that voluntary credit markets have “the potential to grow in the coming years and channel a significant amount of private capital to support the energy transition and combat climate change, with the right incentives and guardrails in place.”
However, recognizing the widely reported overstatements of carbon savings actually realized, the statement also noted concerns that some companies “use credits to offset their emissions in place of feasible direct abatement actions.”
The statement therefore urged the U.S. private sector and other stakeholders in the carbon credit value chain to ensure that carbon credits represent “real decarbonization.” Public claims by credit users “should only rely on credits that meet high integrity standards.”
As major users and beneficiaries of carbon credits, companies in the aviation industry would do well to review their practices to ensure they meet the highest integrity standards for carbon offsets. All feasible options for reducing air industry emissions should be explored first. Only then, after careful examination of the quality of carbon credits offered or potentially offered for sale, should credits be considered for purchase to offset air industry emissions.
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