Complete due diligence before buying carbon credits
31 May 2023
According to media reports, Delta Airlines has been named in a lawsuit stating that its carbon neutrality claims are ‘false and misleading’. The $1 billion suit puts forward that the carbon offsets the company is using to achieve carbon neutrality do little to offset global heating.
In February 2020, the airline announced plans to go carbon neutral. The $1 billion program would mitigate all greenhouse gas (GHG) emissions from its worldwide business operations for the next decade. The CO2 neutrality would be achieved through the purchase of carbon credits generated from conserving rainforest, wetlands and grasslands, together with increased aircraft efficiency reducing the total amount of fuel used.
The class action lawsuit says that Delta’s carbon neutrality claim is ‘demonstrably false’ as it relies heavily on junk offsets that do nothing to counteract the effect of aircraft emissions on the climate.
For its part, since buying the offsets Delta has advertised itself as ‘the world’s first carbon-neutral airline’ across a series of media outlets, including television commercials and various online platforms. Inflight paper products are also said to carry the claim.
The Guardian quoted Krikor Kouyoumdjian, a partner with the legal firm Haderlein and Kouyoumdjian which is bringing the suit, as saying: “The language carbon neutral is so provocative. When companies say: ‘Don’t worry about our emissions, they’re sorted’ they are communicating complacency. They are letting consumers pay to feel better and not have to worry about the impact of their consumption. But that is counterfactual to reality. It is not something that you can pay away.”
The suit being brought against Delta highlights the need for companies to be fully aware of how effective the carbon credits being purchased actually are in offsetting the amount of CO2 produced by company operations. Further, the lawsuit brings into question the value of carbon credits and whether the system is fit for purpose.
According to the Carbon Offset Guide, an independent non-profit which is operated by the Carbon Offset Research and Education (CORE) initiative of the Stockholm Institute and the Greenhouse Gas Management Institute, in a perfect scenario a carbon offset can be used as a substitute for GHG emissions reductions that an organisation would have made on its own.
As the group’s website states: ‘For this to be true, the world must be at least be as well off when you use a carbon offset credit as it would have been if you had reduced your own carbon footprint’.
This highlights the need for ‘quality’ credits – or those products which deliver full confidence that the purchase will actually result in an equal CO2 reduction. Where some defining criteria are vague, in large part to their dating back to the US Clean Air Act of the 1970s, CORE has published five key criteria which relate to quality carbon offset products.
These should be:
- Not overestimated
- Not claimed by another entity
- Not associated with significant social or environmental harms
To ensure the quality of carbon offsets, it is necessary to undertake some related due diligence. Although time consuming, this can be done internally. Otherwise, consultants can be retained to examine individual carbon offset projects and create a portfolio of credit providers which meet the buyer’s goals (with respect to location, project type, etc.).
Then it is worth considering the risk of the carbon credits. Risk ranges across from low to medium and high, where the performance of a high-risk carbon credit is difficult to quantify, or possibly not effective. Examples of a low-risk carbon credit include destruction of ozone-depleting substances or direct-air carbon capture and storage. Somewhat surprisingly, CORE states that high-risk examples include biomass and renewable energy production and low-carbon transportation.
Get what you pay for
In the end, it pays to qualify the projects selected to deliver any purchased carbon credits as to the effectiveness of their reducing any impact on the climate. It was reported that in the case of Delta that one the company’s carbon credit projects was involved in burning off methane gas. According to the United States Environmental Protection Agency, methane is about 25 times worse for the atmosphere than CO2, which makes destruction of the gas valid, but releasing additional CO2 as part of the process effectively undermined the end goal.
The case against Delta argues that there is a market premium for green products and that the airline has benefitted from misleading environmental claims – in that while the company expected to have the carbon credits to achieve its carbon neutrality, but those credits from the ‘voluntary’ market were insufficient to offset the emissions.
In another instance, an investigation carried out by the Guardian, German newspaper Die Zeit and investigative group SourceMaterial found that Verra rainforest credits used by companies such as Disney, Shell, Gucci and other corporations were largely worthless as they were based on preventing the destruction of forest areas which were not under threat. Verra disputed the findings.
Construction companies and machine or vehicle manufacturers, together with their Tier suppliers, could be considering the purchase of carbon offset products to help achieve their respective environmental neutrality goals. Win or lose, the case against Delta highlights the need for due diligence when it comes to selection of carbon offset products. While bought in good faith, should the overall performance of these projects fall below expectations, the purchase could end up reflecting badly on the respective buyers.
(This article was amended on 12 June, 2023, to include the US EPA figure for how much worse methane is for the atmosphere over CO2.)
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