And with well-functioning markets, the invisible hand of competition can accelerate innovation and deployment of improved offsetting technologies, leading to atmospheric decarbonization. With sound accounting principles in place, robust market practices and institutions for carbon-offset trading can develop, as they have for other products. Our principles extend that system by specifying how accurately measured and verified carbon offsets can be recognized as E-assets on organizations’ environmental balance sheets when such E-assets can be used to extinguish E-liabilities and when they must be modified to reflect offset impairments (that is, reductions in the quantity of carbon sequestered previously recorded on an E-balance sheet). The principles presented here extend the E- (or environmental) liability method of carbon accounting, described in the 2021 HBR article “ Accounting for Climate Change,” which enables organizations to measure and manage the cradle-to-gate GHG emissions incurred in their outputs.
In this article, we sketch out an accurate and auditable accounting framework for atmospheric carbon removal. Unless offset contracts are properly accounted for and audited, market-based approaches to reducing GHG will be vulnerable to misrepresentation and fraud. Meanwhile, buyers of carbon offsets are tempted to relax the direct management of their own GHG emissions, believing that their purchased offsets have relieved them of their responsibilities. Without robust protocols for monitoring the status of offsets, sellers of carbon offsets pay less attention than they should to ensuring that the carbon stays sequestered over the lifetime of their implied obligations. How, for instance, can you accurately measure the quantity of carbon captured over the productive lifetime of a forest? Is a kilogram of carbon captured in trees equivalent to a kilogram of carbon stored in rocks or soil? And will the carbon being captured in trees or underground be sequestered for the same duration as current CO 2 emissions will linger in the atmosphere?īeyond measurement issues, weaknesses in the accountability infrastructure of offset markets contribute to moral hazard problems. Part of the problem is that the measurement of GHG extraction is challenging.
Indeed, recent media investigations have suggested that the great majority of products transacted on offset markets remove very little GHG from the atmosphere. Unfortunately, carbon-offset markets are, to date, nowhere near as effective as traditional commodity and financial markets. In theory, competitive markets for the purchase and sale of carbon offsets should help to finance entities that have a comparative advantage in capturing the most GHG at the least cost. Such products are known as “carbon offsets.”
Corporations, nonprofits, and government entities with net-zero emissions targets, and with limited options for removing GHG themselves, need to contract with organizations that have more-efficient carbon-sequestration processes and technologies to purchase quantities of extracted GHG from them. Natural processes, such as photosynthesis, and technologies, such as mineralization, can capture existing atmospheric GHG. Any plausible strategy for addressing climate change must, therefore, include removing GHG emissions from the atmosphere. Even with advances in “clean” energy technologies, the world remains heavily dependent on fossil fuels, and we do not have a realistic path to sustaining society without using current agricultural or industrial chemical processes, which together account for over 25% of GHG emissions today. Three sources account for the great majority of human-created greenhouse gas (GHG) emissions: burning fossil fuels for energy, industrial chemical processes unrelated to energy production, and agriculture.
0 kommentar(er)
