The Carbon Offset Market Going Up In Flames:

The carbon offset market has been one of the more clever innovations in the campaign to halt climate change and reverse global warming.

Carbon offsets is how heavily polluting companies - or really any company - can offset or compensate for their emissions and make sure they are on track to hit their climate targets and meet their CEO's splashy net zero emission pledges.

This has been a boon for some people - such as those lucky individuals or groups who own large forests.

The idea is pretty simple:

A company like Microsoft or Oracle or BP calculates its emissions and then goes and finds a large and protected amount of carbon that, most critically, will be stable and can offset its emissions over a certain medium to long time horizon. The idea is that then this carbon is permanently removed from the atmosphere.

It then purchases the right to this sequestered carbon and thereby offsets each ton of emissions it either can't or won't eliminate from its regular operations. For obvious reasons, forests are ideal: they are large, full of carbon and have other uses - social and cultural as well as economic.

On the surface this is pretty ideal: The forest gets an added (legal) protection and purpose and the company gets to continue drilling for oil or building data centers or keeping its offices lit.

It is also great because, for the first time really, it creates an incentive (and constituency) to protect and value those same forests far closer to their true worth. We need to stop taking nature for granted - quite literally. So, paying to protect forests and the growing carbon offset market appears to be the elusive "win-win" so often spoken about but rarely actually seen when it comes to climate change or anything else.

The only problem is that forests can burn.

That is exactly what has been happening out in the American West and it is blowing forest size holes in the dream of the carbon offset market.

The large forests that have been set aside to provide offsets for large multinational companies are now tragically burning and, of course, therefore releasing all their carbon into the atmosphere. Microsoft (and others) have glumly watched as two such projects (Colville and East Klamath) have been incinerated before their very eyes this summer.

Now this is awful for many reasons and frankly the carbon offset is arguably least among them.

But forest fires sending these carbon offsets up in smoke underlines how naive some of our assumptions are about how we can or will counteract a changing climate and how its a bit more complex than simply writing a large check and going about business as usual.

Lowering corporate carbon emissions is not likely to be a smooth or easy process.

And furthermore, Nor can companies rely on simply paying for the privilege. The Western fires really underline the futility of a system that is supposed to help us out of the jam but in reality is only becoming more fragile by the year really pulls the rug out from a nascent carbon credit industry and, indeed, the whole offset market.

It also isn't just forest fires either, though those are bad enough. It is also drought and disease, both of which are also becoming more prevalent around the world and also make it hard to neatly "offset" much of anything.

So, beware breezy net zero pledges and especially quick and "easy" projects to offset carbon for the decades to come that rely on the capriciousness of weather and the messy world we actually inhabit.

And stay alert for insurance firms that will try and make a secondary market insuring those same pledges from being immolated in the markets, if not in the actual forests. ESG insurance specialists will be springing up to "help" keep net zero emissions on track.

Microsoft and other "big" climate pledge companies will be writing more big checks to cover those promises.....

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