Decarbonizing With Offsets

Aviation is—in climate change parlance—“hard to abate,” meaning no actionable and scalable path to decarbonize. While there are hundreds of electric-powered aircraft startups, those are mostly short-takeoff rotorcraft designed for urban-mobility applications – flying cars in function if not form. Without major breakthroughs in battery technology, electrifying jet airliners isn’t in the cards. Instead, current thinking has SAF (Sustainable Aviation Fuel), a variation of biodiesel, augmenting kerosene until it’s replaced by 100% SAF, new “electrofuels” which dispense with plant-derived feedstock, and/or hydrogen.

Aviation generates about 2.5% of global emissions (80% from passenger travel) — with all due respect to Greta Thunberg, close to a rounding error. But because aircraft emissions are thought to be particularly damaging and could triple from growth in developing countries, the ICAO (created in 1944 by the Chicago Convention to oversee international air travel) implemented a mitigation program: the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

Being hard-to-abate, for now CORSIA only caps them at 2020 levels while trusting that new technology will ultimately enable reduction. Till then, airlines will continue to rely on carbon-offset purchases. Offsets ultimately fund projects that capture carbon (removal), like forest conservation or restoration, or that eliminate or lower emissions (abatement) as with renewable generation replacing coal. Measured in metric tons of carbon dioxide, not dollars, offset purchases become credits in carbon accounting, with emissions as debits.

As they do with dollars, accounting rules for carbon get complicated and, at times, subjective—particularly the foundational offsetting concept of additionality. To be ‘additional,’ the carbon benefit of a project needs to be above and beyond what would have otherwise happened. Therefore, a project’s offset-eligibility first requires calculating a baseline scenario of future emissions without the project. In turn, that requires supportable assumptions about both “business as usual” and the (presumably) lower-carbon reality promised by the offset project — gazing a decade plus into the future.

It’s hard to predict a time-bounded long-term future, and tea leaf and crystal ball readings aren’t supportable assumptions. Instead, offsets rely on the intersection of economics and human nature: rational actors will alway minimize costs and maximize profits. A project can be additional — table stakes for offsets — if it leads to higher costs or relatively lower profitability than would have otherwise occurred.

Put differently: no (economic) pain, no (carbon offset) gain.