"We've bought forest offsets that are now burning," Elizabeth Willmott, Microsoft's carbon program manager said last week, according to the Financial Times.
S&P Global released a podcast on the issue, explaining carbon offsets and credits.
Jonty Rushforth, senior director of Markets and Energy Transition interviewed Platts global head of carbon Paula VanLaningham to give an overview of nature-based carbon, looking at both its values and its limits.
The main limit is relatively straightforward: its value as a carbon sink can disappear if it catches fire.
She points out that parts of the Amazon are now considered carbon emitters rather than sinks, thanks to large-scale fires.
This may have been brought home to many in Australia during the devastating east coast bushfires of 2019-20, as millions of acres of forest caught fire sending both ash and CO2 into the atmosphere. However, even this isn't entirely straightforward.
Estimates over the carbon footprints vary but a government report suggests 830 million tonnes of CO2. However many Australian forests caught in the devastating fires will regenerate and eventually balance out the emissions.
"In some years, especially in years following major bushfires (for example in 2004 and 2005, following the 2003 bushfires), carbon sequestered by post-fire forest regrowth can exceed the emissions from fire in that year," it said.
Australia's National Greenhouse Accounts include carbon emissions and post-fire sequestration associated with bushfires, based on satellite monitoring of fires across Australia and advanced carbon modelling of fire-prone ecosystems.
"Bushfires release significant amounts of carbon dioxide, but generally recover over time, generating a significant carbon sink in the years following the fire," it said. This is one of the reasons some small cap explorers have been looking at investing in burnoffs conducted by Traditional Owners as a form of carbon offset.
The regenerative abilities of Australia's fire-prone Eucalypts as opposed to other forms of tree planting is one of the grey areas of carbon farming, but VanLaningham is clear that on a global scale offset forests catching fire is a key risk.
It is also important to understand different types of carbon pricing.
There are two types, with different pricing structures. The lower are avoidant, so a company may invest in protecting an existing forest or wetland to ensure it isn't logged or destroyed. They may pay local people to protect the resource, so there is less incentive for the disenfranchised to deplete it. This is sometimes referred to as Payment for Ecosystem Services, with pilot schemes and others put in place across the world.
(As a side note this reporter covered one such scheme in Southeast Asia over a decade ago).
The better paid schemes see capture of carbon, by planting new trees or investing in soil carbon schemes.
Another key misunderstanding is that a carbon credit and an offset are not the same thing: a credit is established and tradeable while an offset has yet to capture the required amount of carbon, i.e. a tree may need to grow for several years to offset its share of a project.
But there is "a fairly high risk of potential reversal," she says.
"Nature carbon sinks are really quite vulnerable to the mitigating effects of climate change."
In other words, as inclement weather increases, the threat to forests designed to capture carbon and offset emissions elsewhere grows, rendering the project — if not useless — far less effective.
While there is a safety mechanism in place, and more trees are planted than counted in offsets in case there is what she calls "a reversal," this only counts if the trees aren't subject to a fire.
Ultimately tree planting, and careful stewardship of existing forests, will only be a small part of any low carbon solution given to offset even a day of US emissions from 2019 would take a plantation the size of Seoul, South Korea, every two days This equates to 605sq.km.
Given 1% of global LNG cargoes are now ‘carbon-neutral' at a cost of roughly $2 million per cargo, according to an EnergyQuest estimate made recently, and this number is expected to grow, the number of trees needed to offset and land to host them could be significant even as the LNG sector tries to decarbonise to appease investors.
At this point only the scope 1 and 2 emissions are accounted for, or the making and shipping of the product. Its ultimate combustion, which is the largest share of any carbon footprint, is not counted.
At the end of 2020, Wood Mackenzie Asia Pacific vice chair energy Gavin Thompson wrote:
"Over an average cargo life cycle, approximately 270,000 tonnes of CO2 equivalent is produced, requiring something like 240,000 trees to offset the emissions. This is achievable for a small number of cargoes and currently the cost of these offsetting projects is relatively cheap.
"But is this achievable across the entire LNG industry? 2019 saw around 5,500 LNG cargoes sold, which would require around 1.5 billion trees or carbon credit equivalent."
Of the 2019 deals all applied different carbon account approaches, he said. They did not consider emissions or offset them in the same way.
Woodside Petroleum CEO Meg O'Neill told a press conference at APPEA in June her company had planted 3.6 million trees in 2020 to offset Pluto LNG emissions.
When quizzed on a bushfire mitigation plan she took the question on notice but a Woodside spokesperson later said the company "understands managing the risks associated with bushfires is important in relation to the carbon industry".
