Snags for carbon offset projects
One of the key take home messages from the 2023 World Economic Forum in Davis last week was that our carbon offset market system is not working efficiently. This concept is commonly known as ‘cap and trade’.
The concept is solid. The problem, from our simplified perspective, is that there are too many layers of management and oversight chewing up resources and leaving too little for local ‘shovel ready’ projects. Translating the project goals into a carbon-based accounting system means that we are working in a currency system unfamiliar to all except a few specialists. An emphasis by carbon exchanges on projects in located in remote parts of the world amplifies this problem. There are too many complicating factors for the cap and trade system to work as conceived.
A secondary problem, at least here in the U.S, is that political will is building in opposition to the climate goals adapted by businesses and their customers. Any synergy that could be gained is lost in this environment. Governments historically provide assistance in the form of tax credits; a proven system that is far easier that the carbon credit market.
I fault the AICPA here in the U.S. for not taking a more active role and providing more leadership in this area. Yet I am not surprised. The AICPA seems to focus on the fewer large businesses, not the many more small businesses that dominate this local environmental offset and sustainability market. Despite all the discussion, we haven’t really embraced carbon-based accounting.
The key question remains:
Is there a simple practical way to connect local carbon generators with carbon offset projects here in our own local area without suffering the efficiency losses discussed at WEF? I will continue to look for possibilities.