Corporate Carbon Offsets Get Reexamined As U.S. Wildfires Rage

With wildfires across the western U.S. reaching record highs this year, and burning up forests, companies are being compelled to reexamine nature-based carbon offsets.

As reported by USA Today, “the number of fires that have burned nationally by this time of year is the largest in a decade, with over 33,000 fires scorching upwards of 1.9 million acres by July 12, according to the National Interagency Fire Center.”

In addition to the significant losses and evacuations, a key challenge for corporations is that many have purchased carbon offsets tied to forests, which are now burning up. 

Forest offsets tend to be the most popular carbon offset in the market today. At the end of 2020, forest offsets led the way in issuances - 24.9 million - according to the latest report from Ecosystems Marketplace.

How do forest carbon offsets work? GHG emitters purchase forest carbon offsets to avoid, or offset, their emissions occurring elsewhere. According to the Climate Trust, there are generally three types of forest carbon offsets:

• Afforestation/Reforestation (A/R): carbon is sequestered and offsets generated through the creation or re-establishment of forests.
• Avoided Conversion (AC): forests with a demonstrably high likelihood of tree and carbon loss (usually from conversion to agriculture or development) commit to retain forest as forest, and the avoided carbon dioxide emissions through this conservation effort yield offsets. Under the Verified Carbon Standard, Reduced Emissions from Deforestation and Degradation (REDD) is similar to AC.
• Improved Forest Management (IFM): better, sustainable forest management increases carbon in the forest and in durable, harvested wood products. Improved forest management for carbon offset projects may include:

  • Increasing overall age of forest by increasing rotation ages.
  • Increasing forest productivity by thinning diseased or suppressed trees or managing brush and other competing vegetation.
  • Improving harvest practices.
  • Maintaining stocks at a high level.

Carbon offset programs are typically set up to anticipate risks like wildfires and provide an appropriate cushion, or insurance, which means a certain portion of the total offset credits purchased are set aside in anticipation of potential disasters like wildfires and other risks. But the market is learning now that these insurances may need to be calibrated going forward to better reflect the real climate risks being experienced and expected in the future.

Speaking at a recent Carbon180 event focused on exploring carbon removal pathways, Microsoft’s carbon manager Elizabeth Willmott advised participants to get smarter about carbon offsets and what the real climate risks are. “We don’t want this to force us to pull out of investing in nature-based solutions,” she said.