The Trouble with Offsets

To date, there have been multiple attempts by trade groups to develop and verify a carbon offset methodology for biochar. Briefly, a carbon offset credit is a payment made by an emitter of carbon (a power plant, mine, oil refinery) to the developer or owner of a carbon sequestration project (owner of a forest reserve, biogas plant owner, biochar project developer etc). In theory, this sequestration project will ‘offset’ the carbon emissions of the emitter in a perfect, one-to-one ratio. The idea is that once a cap & trade system is in place, where emitters are required by law to offset a certain % of their emissions, these offset payments will help to fund the capital cost of sequestration projects. In principle, a carbon market should flourish around these offset payments, enabling emitters, project developers and financiers to bid up the prices of these offsets like stocks and bonds. Since ┬ámany large biochar projects are currently undercapitalized, and have the potential to sequester carbon, offsets sound like a great way to finance them…. right?

Perhaps…. The reality is that carbon markets have been incredibly slow to develop. The United States has failed to pass any cap & trade legislation which would force the biggest emitters to purchase offsets. The task of verifying that an offset project actually produces a one-to-one emissions offset has proven incredibly challenging and costly. Scientists like Prof. James Hansen have even rallied against cap & trade, stating that it will do little to actually reduce emissions.Currently, the only option for an aspiring project developer is to sell offset credits through ‘voluntary’ markets. The price of a voluntary offset credit is highly volatile, and typically not worth the cost of verification.

Should we bank our hopes on future carbon offset credits as the eventual lifeblood of the biochar industry? Absolutely not. We believe that a carbon offset methodology for biochar will do little to sustainably grow the biochar industry. Here’s why:

  • Offsets favor large projects: Given the high cost of verifying a carbon offset project, only very large projects can generate a sufficient return on investment (ROI). The UK Climate Trust recently stated that any biochar system that produces less than 2,500 tonnes of biochar annually is unlikely to be a candidate for carbon market investment (if/when carbon markets develop). Furthermore, Climate Trust recommends that all biomass feedstocks be certified as “waste that would otherwise decompose.” The most productive biomass operations in the world (US-based corn plantations) produce between 4 and 6 tonnes of waste per acre per year. Under the offset scenario, a biochar production system would have to source biomass from over 1,500 acres of farmland each year. If we assume the biochar plant is at the center of this 1,500 acre plot, trucks will have to travel up to 56 miles round trip to source and deliver a single load of biomass for conversion to biochar. Heavy equipment would then have to return this biochar to the field. Until project developers have a better idea of the ancillary emissions and costs associated with large biochar projects, it is not clear they will serve the overall goal of reducing emissions.
  • Offsets do little to actually reduce emissions: The goal of a cap & trade system is to make it economically unfavorable for emitters to emit. Unfortunately, an offset scheme is unlikely in practice to facilitate this. The biggest emitters have no incentive to reduce emissions as they can simply pass the financial and environmental costs along to consumers. While an offset market would be a boon for sequestration project developers, it would do little to actually curb global emissions. Didn’t we all get into the biochar business to reduce emissions?
  • The science just isn’t there yet: As a leading biochar company, we are confident in saying that more work has to be done to determine definitively how much CO2 is offset longterm through on-farm burial of biochar. Verification and payment requires very precise measurement of CO2 offset. Millions of dollars and years of research are necessary before we sufficiently understand soil carbon dynamics and the role played by biochar. In addition, it’s very difficult in practice to ensure that 100% of biochar produced gets sequestered in the soil.

Thankfully, we have found it is completely possible to develop a financially viable biochar industry based around the soil amendment benefits of biochar. Provided the capital costs are kept low, small-scale distributed projects can be developed and scaled. Over the next few months, we will be demonstrating how and where these projects are viable and profitable. Until carbon markets can demonstrate a path towards true emissions reductions, we will retire all carbon offsets produced from our projects rather than attempt to sell them to emitters. We encourage other biochar developers and enthusiasts to follow suit and sustainably grow our industry without subsidies.

One Response to The Trouble with Offsets

  1. @olegarciawilke March 2, 2011 at 7:49 pm #

    I agree with your analysis. Jason. I think biochar systems can only be sustainable if they stay small and decentralized.

    Are you aware that the fertility of terra preta is not the result of biochar alone? Do you know about the important role the process of lactofermentation plays to bring in the good soil microbes to create terra preta? And that the fertile terra preta soil is the result of a very clever and sustainable sanitation system?

    I think it is important to really recreate terra preta, which is fundamentally about the right soil biology / soil microbes as far as I understand it. (In my view it is not about just adding biochar to the soil and doing bussiness as usual industrial agriculture with lots of chemical fertilizers and so on). And I think we should start to use Terra Preta Sanitation (TPS) as the amazon indians did. I think especially for the people on our world who suffer at the moment from having no sanitation system at all there should be efforts to make TPS available to them.

    Please check out the following link to learn more about Terra Preta Sanitation:

    What do you think about it? Do you see possibilities to implement Terra Preta Sanitation in the work you do with re:char (in haiti or kenya)?

    Wish you all the best for what you do at re:char!