Capturing carbon: how should we do it?

We asked Dan Ward, our resident systems thinking enthusiast, to explore how carbon markets might work, and how we might prevent the unintended consequences that mar the current iterations.

Climate change, and the carbon driving it is the defining challenge of our age: we must increase our carbon absorption and storage (sequestration). The question is, how should we direct money into carbon sequestration? Activities are already in motion. But do the actions add up?

 Where I live in Wales the story of carbon sequestration can sometimes look like this: 

a) A Welsh farm, often in financial straits, sells up  

b) The land is purchased by a wealthy fund or business that is interested in acquiring carbon credits to offset their emissions  

c)  The land that was previously farmed is converted to forestry to lock in carbon, likely close planted coniferous species for the maximum carbon gain at the expense of benefits to biodiversity and water quality

d) Purchase of land by wealthy funds and businesses prices local people out of buying the land, and locks people out of farming. The loss of working farms reduces the work opportunities and social cohesion of the area. And it might be that the carbon could be lost from those trees anyway if the owner decides to harvest or sell on.  

This story is fictional, but narratives just like this are already playing out across the UK and globally. In the UK this means we must develop an effective understanding and considered strategy for how to deliver carbon sequestration: delivering the benefits we want to see, and avoiding the unintended consequences such as land value increases and the speculative capitalism of carbon. 

First, we must start with some fundamental outcomes that any system to sequester carbon must deliver, bearing in mind the other social and environmental considerations that must be part of our thinking:

We must have a baseline reference point of the condition of our natural systems to measure delivery against:

• We must know how much carbon we have in our land and sea already. 

• We need a verification process for carbon payments. Has the right amount of carbon been sequestered and will it be stored for a sufficiently long period of time?

• Public good payments (I think of these as a commodity or service that is provided without profit to all members of society, either by the government or by a private individual or organization) for carbon and other benefits must be based on outcomes. Payments must be as much or greater for keeping already good areas in good condition, not just for getting areas to that condition. Otherwise, there are incentives to destroy areas and then be paid to restore them.  

Carbon markets to date, while a positive step in some ways, are problematic. Governments have hesitated to regulate them. However, the high private demand for such markets has given them a Wild West feel. It is currently unclear how much of the carbon offsets paid for has resulted in more carbon being sequestered than would have been sequestered anyway: witness the Guardian story on airlines offsetting carbon.

 Carbon markets are also currently linked with the concept of ‘net zero’. Companies and countries can reach net zero by reducing their emissions and investing in carbon sequestration and storage to balance out their remaining emissions. The problem with net zero is we already have too much CO2e in the atmosphere. Net zero is not good enough. We actually need to reach zero carbon – no emissions, and then remove further CO2e from the atmosphere. Net zero at the moment does not have such a strict definition. It just means the atmosphere contains the same amount of CO2e at the point of net zero, which we know is too much and still leads to runaway climate change.  

 So how can we ensure carbon markets are a force for positive outcomes rather than unintended consequences?  

Carbon markets cannot be left to the private sector to deliver, without government regulation. This is leading to the speculative capitalisation of carbon, which is driving poor delivery and negative unintended consequences.  

Payments for carbon sequestration need to feature certain characteristics:

o   A national assessment of carbon stocks and potential (perhaps a digital grid of the UK land and sea area, with transparent carbon information for each grid square) 

o   A public ledger (possibly a blockchain) of what carbon has been paid for when and by whom, with no double counting of carbon, or other accounting tricks possible.  

Suppose government was to be the broker of carbon payments. This is not necessarily the best direction but let’s explore it anyway. Payments by companies for carbon sequestration, either voluntarily or through carbon taxes would be paid to a government-backed fund at a set value per tonne of carbon. It would then be up to government, through the public sector or other delivery bodies, via mechanisms such as agricultural subsidies to distribute this payment for the appropriate carbon sequestration.

Such a model could allow the state to use money raised from sales of carbon credits to subsidise its payments for carbon sequestration delivered through agricultural subsidies, and to finance direct intervention to increase carbon sequestration and storage. This would also unlock government spending using private and public money on ocean restoration for carbon sequestration and storage as well as land based carbon. 

Incorporating these elements into the design of carbon payment mechanisms could help to ensure that we achieve what we really want: reducing CO2e in the atmosphere while delivering a host of benefits.