Planet Money - Emission Impossible

Episode Date: May 7, 2021

Carbon offsets have become a popular tool to combat climate change. But how effective are they? | Subscribe to our weekly newsletter here.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. Early last year, the CEO of Microsoft got on stage at Microsoft headquarters. Please welcome Satya Nadella. He walks on and stands facing the crowd. Behind him, there's this wall covered with these healthy-looking green leaves. Thank you so very much. It's fantastic to be here today.

It kind of looks like a TED Talk crossed with a product announcement. As corporations, our purpose and actions must be aligned to helping solve the world's problems, not create new ones. And then he gets to Microsoft's new pledge to fight climate change. Today we are making the commitment that by 2030, Microsoft will be carbon negative. Carbon negative. What does that even mean? Microsoft has offices around the world that use lots of electricity. They have fleets of cars and trucks, data centers that use diesel. All of those things mean carbon emissions. But somehow the CEO of Microsoft is saying his company's going to eliminate all those carbon emissions. Even better, reverse them. Their

plan? The answer, in part, has to do with what's displayed on the screen above him. Images of giant pristine forests. Boris, trees. These are not just nice nature images. Trees are going to solve some serious climate accounting problems for Microsoft. This is the decade to take bold steps forward to address our most pressing challenges. Thank you. bold steps forward to address our most pressing challenges. Thank you. One-fifth of the world's largest companies have made pledges like this one to reduce their carbon footprint to zero or beyond. They've done the math and decided that they can do this in part

by paying someone across the world to save trees. Which, really? Is that really how we're going to do this? Hello and welcome to Planet Money. I'm Julia Simon. And I'm Amanda Aronchik. Behind every carbon neutral or carbon negative pledge, there's some math that companies can continue polluting as long as they're offsetting it somewhere else. Today on the show, does the tree math add up? And if it doesn't, what's that mean for just the biggest problem humanity's ever faced? The logic of how a major carbon-emitting company can fight climate change by saving trees halfway around the world is kind of a journey. So today, we're going to take you through the steps, introduce you to the key players, the forest boss, the stamp of approval guy, and the broker.

First up, the forest boss. My name is Darsono Hartono. Darsono controls one of the biggest forests in Indonesia. Just to give an idea of how big the area is, it's actually twice the size of New York. So New York, the island, or Manhattan? New York, including the five boroughs. Oh, whoa, all the boroughs. Darsono's journey to becoming a forest boss starts in 2007. He was in his early 30s, and he was at this conference in Bali.

He goes to a lot of conferences. He has a lot of those cool silk batik shirts. And he had just moved back to Indonesia after working on Wall Street, and he's looking for his next big business thing, which is why he's at this conference. It's a palm oil conference. Palm oil is one of Indonesia's this conference. It's a palm oil conference. Palm oil is one of Indonesia's largest exports. It's in everything. It's in your Nutella, in your Cheez-Its, it's in your soap. People cook with it. It's also pretty bad for the environment. Leads to a lot of deforestation. So you were thinking that you would do what exactly in palm oil?

I was basically to own a plantation at that time, right? While he's in Bali, he runs into an old college bud. And his buddy's like, dude, palm oil is so 2000 and late. You got to look at the future. You got to get into the triple P. He was like saying, Darsono, you have to do this triple P. What did he mean? I was like, what do you mean by triple P? What did he mean? Darsono's buddy's like, the profit is in the trees. You and I, we should start a business together. We're going to protect our forests, our Indonesian forests.

And Darsono's like, I get that. Let the forest grow. The land becomes more valuable. A few years later, we can flip the forest, sell it for a profit. I was thinking of maybe this is just like a real estate, right? You own something, you hold it for a long time, and you're going to make money. That's just the naive thinking of Darsono in 2007 in 2007. Yeah. D'Arsono's buddy is like, no, no, no, no. This is not about real estate. This is about climate change. Hear me out. In order to slow climate change, we, you know, everybody, whatever the world, need to reduce our carbon emissions to nearly zero. And that includes big companies. But you know what's really hard when you're a big company? Reducing your emissions to zero. This right here is the key reason why there's a business opportunity in Indonesia's massive forests. See, trees,

they're kind of incredible. They suck carbon out of the air and store it, which is why companies will pay Indonesians to keep forests standing rather than let them get clear cut. These payments are called offsets, as in, sure, we companies are emitting carbon into the atmosphere at home. But that's cool because those emissions are offset by that forest we're protecting in Indonesia. This area would have been deforested. Without our intervention, the area will be converted into pulp and paper. Pulp and paper. They would just cut down all the trees, deforesting the area. So Darsono's buddy says, instead, let's preserve the forest.

Darsono's like, yeah, he's convinced there's a business opportunity here. And he can help save the people and the planet through forests. He's not going to go into palm oil. D'Arsono and his buddies start doing research. They have to figure out where the most desirable carbon-rich forests are. There are a few that they look at. None are perfect. But then?

Then I remember, oh yeah, there's this area that I know of, which is a peatland area in Santa Kalimantan. Should we go there? So it's like, okay, let's do it, right? D'Arsono and his buddy get to the area, and it's beautiful. A swampy forest, home to orangutans and clouded leopards, absolutely full of carbon. Totally worth preserving. This was the spot. Eventually, this project went on to become what might be the largest of its kind in the world. But that took a number of years. They had to get the rights to the land, which was really complicated.

In 2013, they finally got them. And then they formally start working with local communities to protect the forest. This all costs a lot. And D'Arsono, he wants to make a profit. He needs customers. But before companies will give him money to save the trees, he's got to prove that he's really saving them. To do that, he needs to go to the stamp of approval guy.

Do you know D'Arsono Hartono? Yes, I do. He needs to go to David Antonioli. I'm the chief executive officer of VERA. David's nonprofit, VERA, validates forest projects like D'Arsono's to make sure that they're taking as much carbon out of the atmosphere as they say they are. We're a standard setter, so we spend all of our time developing the rules and the procedures, the standard, that project developers like D'Arsono and others need to follow. So somebody like D'Arsono comes to Vera and he's like, hey, I have this forest. It's gorgeous, carbon rich. I'm saving it from being destroyed and I want to get paid for it.

And Vera is like, sure, but you need to prove all that. Get some auditors on your land so that they can check it out. You can't just hire any old auditor. It has to be an auditor that's accredited properly, which means they have the right training, they've got the right procedures in place to deal with conflicts of interest, and they can do the job. Aside from overseeing the auditors, basically Vera has to find out, are these projects working? Are they living up to their promises? The whole process of getting verified can take years. But the Vera stamp of approval is worth it. Because after a forest boss gets a Vera stamp of approval, they now have something they can sell. Vera has certified this project takes this many tons of CO2 out of the atmosphere. And for each ton of CO2 reduction, Vera issues one credit. This is a currency of this world, what they call a verified carbon unit.

These are the offsets that companies will pay someone like D'Arsono good money for. But D'Arsono doesn't have the connections to sell these verified carbon units to big companies. Which brings us to the third and final link of the offset chain, the broker. My name is Diego Saez-Gil, and I am co-founder and CEO at Pachama. Diego's startup, Pachama, it's who companies go to when they want to buy verified carbon units. Now, his startup is relatively new, but it's attracted a lot of big name investors. Bill Gates Climate Fund, Amazon. Serena Williams, the tennis player who we are big fans of. Who isn't? Part of why Silicon Valley investors love Diego is that he talks to

them in a language that they understand. In a way, we are a marketplace like Airbnb, connecting supply and demand. It's like Airbnb, but for offsets. So I click it. Yes. If I'm a company and I go on Diego's website, I can look for a forest. The company monitors these forests with satellite images and AI. I want it to zoom. Oh, there it goes, zooming into Brazil. Oh, in the center of Brazil. Woo, woo, big, big zoom. Next to the map, there's a description of a forest project.

I can see how many verified carbon units it's generated. There's a verification report by Vera, some photos. Oh, I see a river. I am seeing trees. You can see the trees. This is a very, it's a very dense area of the Amazon rainforest. You can see the shape of a triangle. It's a triangle. Yes. That is the borders of the area that is being conserved. If I'm a company, I can choose to protect this forest.

I can buy some verified carbon units and get closer to my carbon negative pledge. And that is the carbon offset chain. Usually the company pays the forest boss, who has paid the stamp of approval guy, and then the broker also gets paid for hooking the whole thing up. And in the process, the planet is saved from climate change. Or is it? That's after the break. There's a woman who spends her nights thinking about the thorny questions around carbon offsets.

Her name? Freya Che. Her home base? Santa Cruz. Are you like in the watery part or the foresty part? Critical question. I can usually see a little slice of ocean, but today it's really foggy. Freya works with a climate change research group called Carbon Plan, and they focus on transparency and integrity of climate change solutions. Her job involves analyzing offsets that are being sold on the market. Last year, Freya's group heard about Microsoft's new pledge to go carbon negative, the one we talked about at the beginning of the show.

And after Microsoft made the announcement, they were also like, we need your help. Send us proposals. So a bunch of companies, including Pachama, the broker, they all pitched Microsoft with their best ideas. Microsoft knew Freya's team and knew they had expertise in evaluating these types of proposals. So Microsoft is like, we'll give you early access to this info. And Freya's team says, cool, we'll vet it. Microsoft provides some funding to CarbonPlan.

Also to NPR. Anyway, Freya starts digging into the proposals one by one, all 189 of them. The day-to-day process is take a project, go look for literally any piece of information you can find on it, and then try to synthesize the important bits. She goes on the web to see what's out there. She looks for reports from the stamp of approval guys, the brokers, information on the project's history. She's trying to figure out... Whether the claims make sense from a scientific standpoint. Okay. Essentially, if the claims are legit or not. Are the claims reasonable and defensible?

Freya's team came up with a rating system for the proposals, which involved check marks. Five check marks means the proposal is solid. Microsoft can be confident that this project should reduce its carbon footprint. Presumably one check isn't great. Yeah, one check mark means we have a lot of questions about what is going on. Now, ultimately, as they went through these proposals, they started to run into these really heady issues. Heady and really kind of similar to that old mental puzzle. You know the one. If a tree falls in the woods and no one's around, does it make a sound?

Ferris' forest projects are based on similar hypotheticals. They raise all kinds of questions. Does that forest really need saving? Was it really in danger? And what happens to the offsets if the trees burn in a wildfire or if loggers just go and cut down another forest somewhere else. If somebody is using offsets to justify their emissions, you want to be pretty confident that the purchase of that offset is creating new climate benefits now. Freya's team found that when it came to the pitches that Microsoft received, more than two-thirds got just one check out of five. Pachama submitted five projects to Microsoft, and four of them got the lowest rating. Pachama says that despite these ratings, they're confident in the effectiveness of their projects. Microsoft didn't accept any of Pachama's proposals in this go-around. I think we have to be really careful to care about

quality. If we are buying and selling offsets that are not quality, we are not contributing to a climate solution, even though it looks good on paper. So as much as we can encourage quality through transparency, the closer we get to making offsets a climate benefit rather than a net climate problem. This is something that concerns Freya's team, that the whole offset chain is flawed in large part because there is no one truly independent entity or governing body ensuring offset quality. The stamp of approval guys are basically the only regulators. I brought these concerns to David, the CEO of Vera. Vera has given its stamp of approval to nearly 70% of all carbon offsets used by companies.

The three concerns are, one, the hypotheticals. This is all pretty hard to verify. Two, the regulatory worries. And three, are these offsets actually helping fix climate change? I started with the first, the hypotheticals. There are so many what-ifs in offsets, but especially in these forest projects, you know, like the type that D'Arsono runs and the type that Diego sells. There are just so many hypotheticals. And I guess the fundamental question is, can corporations sleep easy at night knowing that they're actually offsetting their emissions from forest projects that you verified? I think the answer is yes, for sure. And you say there's so many hypotheticals. I don't think there are that many, quite frankly. I mean, we know how many trees are on the ground, right?

We know how many get cut down. David says they address these hypotheticals in part by baking the eventualities into their models, into their calculations, and setting aside credits as insurance for events like wildfires. Concern number two, regulation. That there's no real independent regulatory body overseeing this offset market, only private regulators like Vera. David says an independent body could be useful, just so long as it doesn't overlap with his work. Which brings us to concern number three. Is this

even working? David says, of course. He has devoted his life to this, and he wouldn't be doing this work if he didn't think it was helping stop climate change. There was one more thing I wanted to ask David about. It had to do with a study that had made waves in the carbon offset world, published in one of the most prestigious science journals. The study looked at a bunch of these enormous forest projects in one of the world's deforestation hotspots, the Brazilian Amazon, projects Vera had given its stamp of approval to, including a few sold by Pachama, the broker. And the study found these projects were overestimating the deforestation that would

have happened had they not been there by almost 60 times. 10 out of 12 Brazilian forestry projects that you gave your stamp of approval to didn't stop the deforestation they claimed. That's what that study found. So for the corporations that have purchased offsets from these projects, did they offset their emissions? Yes, I think so. I mean, there are many great studies out there looking at the impacts of projects, and we welcome them.

But we shouldn't be throwing the baby out with the bathwater just because there was one study that identified some projects that, according to one methodology, you know, didn't, you know, the results were different than what we say. We also heard from some of the forest bosses who run these projects in Brazil. And they agree with David. David says he welcomes critiques from studies like this, that they use them to build more nuance into Vera's rules for certification and their assessment process. But there are lots of companies that have already bought offsets from these huge projects that have already said we can keep polluting because we are saving this forest in Brazil. Don't these investors need some sort of heads up? What do you mean? I guess we're talking about these corporations buying offsets that were given the stamp of approval by you.

Did those projects actually offset the emissions they said they were going to do? set the emissions they said they were going to do. Look, corporations have any number of tools to do their due diligence and figure out which credits they want to buy, which projects they want to buy credits from. And in the end, corporates have to decide what they do. But you can't be telling corporates all of a sudden, oh, you know, your credits are bad because that's going to chill investment. Right. I'm not arguing that it is

delivering investments. It's just the question is, is it delivering climate change emission reductions? Yes, absolutely. It's absolutely. There's no doubt in my mind that they are. Right when I talked to David, they were publishing new standards. He says they're always updating and improving the rules so companies can have confidence in the offsets that they're buying. As for companies doing due diligence, Microsoft told us they've made a strategic decision that at the moment they will no longer buy offsets from this type of forest preservation project. They say it's too difficult to calculate whether the emissions are actually avoided.

Now, it's important to remember where this all started, these pledges that companies are making. When companies say they're going net zero or carbon negative, what they're signaling is that they are doing all they can to stop climate change, that they can keep polluting as long as they're offsetting it somewhere else. Which is fine if the math works. And right now, that's a big if. Companies are putting hundreds of millions of dollars into these offset markets. So if the math doesn't work, these offset programs are just adding more planet heating gases into the atmosphere,

effectively doing more harm than good. Want more from Planet Money? We're on TikTok. This week, we look at the Birkin bag and why you have to work so hard to buy one. That's at Planet Money. You can also send us an email, planetmoneyatnpr.org. We're also on Instagram, Twitter, and Facebook. Today's show was produced by Nick Fountain and Dan Gurma and mastered by Gilly Moon. Planet Money's supervising producer is Alex Goldmark. Our show editor is Brian Erstadt. And this episode was edited by Maureen McMurray. Many people to thank Jessica Green, Gilles Dufresne, Robbie Watt, Adani Ashinyabi,

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