Is CO₂ compensation just as good as real restraint?

A weekend trip to Majorca, New Year's Eve in New York or a cruise through the Aegean: Just a few months ago, before COVID-19 turned our social, cultural and business lives upside down, this was actual reality for many people. The voluntary compensation for CO2 emissions through compensatory payments helps to alleviate the bad (climate) conscience. However, can CO2 compensation as alleged panacea be as good as restraint? Moreover, from when can the voluntary CO2 compensation be a solution for companies? Stella Schaller, Expert for compensation through climate protection projects and international climate diplomacy spoke about the pros and cons - and associated positive side effects in Brass Tacks with Smart Heads.

As project manager and climate expert Stella Schaller is active worldwide for climate protection, sustainable development and peacekeeping. In the independent think tank adelphi, she has taken part in numerous analyses and research projects on the topic of CO2 compensation. Among others, she is the co-author of the guidebook "Voluntary CO2 Compensation through Climate Protection Projects“ of the German Federal Environmental Agency.

How do you view climate protection: with an apocalyptic mood or as a global challenge?

I see climate protection as one of the greatest challenges of the twenty first century. The effects pose a threat to the environment as well as to worldwide prosperity, economic development, social justice and the physical and psychological health of people. Climate change and destruction of the environment will also increase the likelihood of viral diseases and pandemics like Corona. That is why fundamental changes are needed in all private and public areas of life - above all with regard to mobility, housing, agriculture and energy. However, for me, climate change is above all a matter of justice.

Why?

Because the countries and ethnic groups that are the least responsible for the climate change are bearing the greatest burden of the damage. I am deeply upset when I read about the many island residents who lose their homes through the effects of climate change or droughts, which give rise to new famines and conflicts.

Mobility causes emissions – How do you personally deal with your ecological footprint?

I try to avoid air travel completely. If this isn't possible, I compensate for the emissions with voluntary CO₂ certificates. Biking instead of driving, a green electrical power provider, fewer animal products and a sustainable bank account are also important to me.

Ms. Schaller, let's assume that you and I are both traveling from Stuttgart to Berlin. You are driving with your own non-electric passenger car and "compensate" at twice the rate for your CO₂ footprint caused by travel. I take an ICE train of the German Railway Authority Deutsche Bahn. Which one of us has done more for climate protection? To what extent is compensation just as good as exercising restraint?

In this case you would have done more because a train ride is generally less damaging to the environment than a car drive and a saving is always preferable to compensation. Travel by car and flying are relevant not only with regard to the CO₂ emissions. Air pollutants and noise are generated; in addition, the transport infrastructure takes up space and eats up resources.
When flying, in addition to CO₂ emissions, there is also a negative impact on the climate through vapor trails, nitrogen oxides and aerosols which are produced during the combustion of kerosene.

CO₂ compensation is considered as one solution approach to the global climate problem.What is your view on the debate about the pros and cons of compensation?

CO₂ compensation must never be seen as a license to pollute. Because compensation alone is not sufficient to alleviate climate change. First and foremost, we have to reduce emissions radically and rethink the ways in which we do business and consume. Besides that, it is also an ethical issue whether we want to continue to pollute the atmosphere carelessly and pay people in countries of the global south so they can save our emissions again through projects. CO₂ compensation offers a good balance only when it's no longer possible to prevent the CO₂ emissions.

Do you trust CO₂ compensation projects even more than compensation alone?

CO₂ compensation projects frequently also promote the sustainable social and ecological development of the project country and thus also the realization of the 17 Sustainable Development Goals. A good example is the introduction of efficient wood gasification furnaces in India. The cooking equipment requires 50 percent less wood and thus counteracts the decline of the world's largest mangrove forests. The unique salt plants protect the Ganges delta project region as a kind of natural barrier against storms and the rising sea level in the region. However, that's not all. Mangroves store up to five times more greenhouse gases than other trees. The wood gasification stoves not only consume less wood, but also produce less harmful smoke and thus prevent respiratory diseases. The reduced need for wood also means that the families have more available financial resources for education and other expenses.

Just how does the market for voluntary compensation of emissions work?

Project developers plan a climate protection project and implement it in a third country, for example. In this regard, it must be guaranteed, among other things, that there are additional CO₂ savings, that is to say, they would not have been generated without the compensation payments. That is why every CO₂ compensation certificate must get a seal of approval before it can be traded. One example is the gold standard. Customers who want to minimize their ecological footprint from travel, housing or everyday activities can purchase the certificates and provide financial support for projects in this way.

The compulsory and voluntary compensation of emissions
In the European area, a distinction is made between two different forms of emissions compensation - compulsory and voluntary compensation of emissions:

The compulsory compensation of emissions
With the Paris Climate Convention 2015, the nation states of the world community have committed themselves to change the global economy in a climate-friendly way for the first time. As demonstrable proof that this can be achieved, the countries are required to present and meet ambitious targets, for example for the reduction of greenhouse gases. At the EU level, emission producers - e.g. companies, as well as the agricultural or construction sector - have since been obligated to provide financial compensation for a part of their emissions. Within the framework of the so-called emissions trading system, the financial resources spent are then used for climate protection projects in order to reduce the overall greenhouse gas balance of a country. This obligatory emissions trading is the first step towards climate protection. You can find more information on the pages of the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety.

The voluntary compensation of emissions
Beyond the compulsory compensation of emissions, companies, organizations and consumers can also offset emissions that cannot be avoided or reduced by means of voluntary CO2 compensation projects. In the case of an airplane flight, for example, the amount of climate-effective emissions is initially calculated. In this context, climate-effective means that the emissions released are classified as being harmful to the climate. Airline passengers can compensate for these in the same emissions volume in climate protection projects by purchasing so-called emission reduction credits - which are often referred to as certificates. In this regard, it must be ensured that the climate protection project wouldn't exist without the purchase mechanism. Therefore, voluntary compensation always refers to an additional climate protection measure. For example, Reduction measures, which are internationally negotiated at the national state level may not be concomitantly sold as voluntary compensation certificates. This is because the CO2 savings would then no longer be additional and would no longer be classified as compensation.

How do you assess the market potential of the voluntary CO₂ compensation?

Thus far, the voluntary share of the total market for CO₂ certificates is still very small. The demand has grown steadily in recent years because consumers and in particular companies like Daimler, for instance, have increasingly been concerned about climate-neutral activities. How the market will develop after the global Corona crisis is unclear.

What compensation projects do you recommend as being particularly suitable?

I am a fan of the German project "MoorFutures“. As the name already indicates the initiators are concerned with the retention and renaturation of peatland areas. Healthy moors protect the climate because they store more carbon than any other ecosystem. Although moors account for only three percent of the global land area, they store twice as much CO₂ as all forests of the world taken together. When moors are destroyed or dry up, large quantities of climate-damaging gases escape. The rewatering of the moors leads to a reduction of greenhouse gas emissions of between 5 and 35 tons per hectare per year. The reductions achieved can be sold on the voluntary carbon market. You can find more information on the project here.

A moorland field in the Lüneberg Heath. Moors store more CO2 than any ecosystem in the world.

What time horizons have been taken into account in the compensation measures? After all, the emissions arise today or have already been released into the air in the past - and when will they be neutralized again? Is it possible to generalize?

Most of the emission savings, which we find on the market today, have already been realized in the past. However, there are also compensation projects that will only take effect in the future - such as forest or land use projects. Here there is a risk that they cannot achieve the planned CO₂ compensation. For example, the forest could possibly burn down in ten years or be cleared due to pest infestation. That is why for future projects it is necessary to take special buffering measures and to perform risk analyses so that emission savings can nevertheless be guaranteed and sold.

Why does it make a difference for the climate whether

  • a. the CO₂ doesn't reach the atmosphere (e.g. as a result of not taking a flight)
    or
  • b. the CO₂ does not get into the atmosphere elsewhere and at a later time (e.g. because the flight has been compensated through investments in CO₂-reducing power plants, which would not have been possible without the flight)?

Emitting no CO₂ is always better than compensating for it later. This is because climate-damaging emissions not only have a negative impact on the environment but also on air quality and health. Besides that, even the organization and implementation of compensation activities in turn uses up energy and resources, albeit not to the same extent.

Compensation measures are often implemented at the other end of the world – that is to say, not in the places where the emissions are created. How meaningful is this in your view?

The market for voluntary compensation of emissions is based on the idea that it does not matter where in the world emissions are emitted and then saved again. The advantage of compensation projects in the southern hemisphere is that they can be implemented much more quickly, more easily and cost-effectively than in Germany, for example. Nations, which are already carrying out compulsory CO₂ reductions since the Paris Agreement, are therefore implementing their voluntary compensation projects primarily in the southern part of the world. This will probably change again because all countries in the world are meanwhile required to reduce emissions. In the coming years, the UN Framework Convention on Climate Change is to define exactly whether and what projects can be carried out in the voluntary market.

How do you view current and future solutions for recapturing CO₂ from the air?

Technical carbon capture solutions can recapture already emitted climate-damaging CO₂. Capture and storage technologies can reabsorb CO₂ from industrial plants or power stations and store it in underground layers, for example. Of course, this is good for the climate balance - however, the possible long-term consequences are difficult to estimate at this time. There are efforts to reabsorb CO₂ from the air through artificial trees. It is clear that we have to consider such technologies in order to meet the Paris climate targets. The potential risks for the environment and health, however, must not be underestimated depending on the respective sources, processes and contexts, and the projects are still not economically feasible enough with the present systems of incentives.

If compensation does not outweigh restraint, why is it that for companies compensation is nevertheless a suitable means of reducing their ecological footprint?

CO₂ compensation is essential, especially for manufacturing companies, because they are not able to prevent all emissions along their entire value chain.

In your view, should CO₂ compensation become obligatory in the free economy in the same way as the CO₂ price?

The CO₂ price, which will apply to other sectors from 2021, is already a form of compensation to the extent that the proceeds are invested in climate protection programs (and in part are fairly redistributed to the population). For products or industries outside the sectors that are already covered, compulsory compensation of emissions could also be introduced, as decided for example by the International Civil Aviation Organization for the growth of air travel after 2020. However, many more measures are needed in order to rebuild our infrastructure and economy to be climate-neutral.

Should compensation efforts be disassociated from any allegorical comparisons with the "indulgence trade" since the bottom line is that more people will then be motivated to reduce CO₂? Or, conversely, would it be meaningful to even intensify the negative associations of green-washing since many people would otherwise have no reason to engage in any CO₂ prevention?

Neither of the two. If consumers are to exercise restraint in the first step, they must initially know more about climate change and the most effective measures for its prevention and mitigation. CO₂ savings are the first step - if this step is not taken, the compensation is indeed inappropriate. Knowledge of the strengths as well as the pitfalls of the CO₂ compensation should be promoted. The projects frequently have positive side effects and in a country of the global south can contribute to sustainable development and the creation of many jobs, while also protecting the biodiversity. Therefore, if we raise the awareness of compensation options in society, we will not only heighten the awareness for climate-conscious action, but will also promote the development of the partner countries.

Critics are interpreting compensation as a purging of bad conscience. When can a company justifiably say that the options for reduction and prevention have really been exhausted?

Of course, compensation cannot do without clean accounting. There are standardized methods, based on which the total emissions of a company along the value chain are initially measured and can then be systematically reduced. In this context, a company differentiates between three areas, the so-called scopes, which are considered at different degrees in the calculation. In this way, all emission sources are rendered transparent.

For the compensation of unavoidable emissions it is important in the next step that companies purchase compensation certificates that are internationally recognized - and fit in with the company's philosophy. In the interest of maintaining credibility, activities that are fundamentally unsustainable should not be compensated, but rather discontinued.

Scope 1 includes the emissions which are caused, among other things, on the company's premises by the combustion of energy sources, for example, for electricity generation in our own power plants.

Scope 2 includes all emissions which are emitted outside the plant grounds as a result of the generation of externally purchased energy, such as electricity from the electricity provider.

Scope 3 includes emissions which arise before (upstream) or after (downstream) our business activities. This includes, for example, the CO2 emissions which are generated in the supply chain (purchased goods and services), in driving operation (service life including fuel and electricity production) of our vehicles at customers or during the recycling of the vehicles.You can read more about the three scopes of the Greenhouse Gas Protocol in our Sustainability Report.

More information on the calculation of CO2 emissions at Daimler is provided for you here.

How can a company like Daimler use CO₂ compensation in an as efficient and climate-friendly manner as possible?

In addition to the compensation with "Gold Standard" certificates, it would be useful if Daimler would become involved in a project development for CO₂ compensation. In such a cooperation project, Daimler would then own a part of the project. This would facilitate the communications and representation of the company to the public and promote the project in a special way.

In closing, what would you advise us as Daimler on the way to CO₂-neutral mobility?

Prevent as many emissions as possible already in the production chain and compensate with highly qualified projects. In addition, I would like to encourage you to continue to expand emission-free mobility offers.

Which project would you particularly recommend to us?

I recommend a dual strategy for Daimler, in which climate protection projects in Germany and abroad are supported. This combination will enable effective compensation without double counts, on the one hand, as well as simultaneous local involvement, on the other.

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