Carbon offset market to x 50 to meet net-zero goals
Smoke rises from a coal-fired power plant in Obilic, near Pristina, Kosovo, November 18, 2019.
Reuters Companies must meet their 2050 goals for net zero greenhouse gases emissions to grow the carbon offset market by 50 percent.| Reuters
The carbon offset market may grow by as much as 50 times if companies are going to meet their 2050 net zero greenhouse gas emissions goals.
That’s according to a new report from Bank of America, released to clients on Friday and more broadly on Monday, titled “Carbon offsets: volunteer hero for net zero.”
“Net-zero” emissions means that an entity removes as much emissions as it releases and can be thought of as “carbon neutrality,” according to the World Resources Institute, a non-profit global research organization.
To achieve net zero, the first step is to reduce as much emissions as you can. Any remaining emissions that have not been eliminated entirely can be accounted for by removing the equivalent amount of emissions from the atmosphere, the World Resource Institute says. You can remove greenhouse gases from the atmosphere by restoring forests, which in turn reduces carbon dioxide in the air through photosynthesis. Or you may use more technological means like direct carbon capture technology.
According to Bank of America’s report, there is a “still small” market for carbon offsets. Bank of America stated that offsets were issued for 210 million tons of carbon dioxide emissions. This is 0.4% of global total emissions.
There are four primary registries for carbon offsets: Verified Carbon Standard, or Verra; The Gold Standard; the American Carbon Registry; and the Climate Action Reserve. According to the report the market began 25 years ago when the American Carbon Registry was known then as the Environmental Resources Trust.
The Bank of America reported that carbon offsets are priced between $2 to $20 per metric tons. This is a wide range of emissions and it “offers a relatively inexpensive way to decarbonize”, the report stated.
Bank of America stated in a research note that while governments around the globe have established goals for net zero by 2050-2060, they do not appear to be likely to achieve those goals. The report was compiled by the global commodity desk. It stated that current policies were not sufficient to incentivize necessary changes to attain these lofty targets, including carbon pricing.
The report stated that many companies have set their own emission targets, and this will lead to increased demand for carbon offsets.
Bank of America estimates that in order to reach net zero energy, there will be 7.6 billion tons of carbon dioxide removal or offsets. Bank of America estimated that it would lead to a 50 percent increase in demand for offsets. According to the bank, at the low end of growth in carbon offsets demand would have been less than quadrupling.
Projects included industrial and manufacturing, chemical processing, and other projects early in the history of carbon offset markets. The report stated that forestry, land-use, and renewable energy projects account for about 80% in carbon offset projects. According to the report, this may be due to a rising interest in natural-based solutions and declining prices for renewable energy like wind and solar.