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Feb 28, 2022

Accounting for Short-Term Durability in Carbon Offsetting



Feb 28, 2022

Accounting for Short-Term Durability in Carbon Offsetting



Feb 28, 2022

Accounting for Short-Term Durability in Carbon Offsetting

Photo of blue and yellow ballons in the air
Photo of blue and yellow ballons in the air
Photo of blue and yellow ballons in the air

Balloon materials vary in lifespan, or durability, though – let’s say there are two types: one holds the CO₂ for exactly 20 years before popping, another for thousands of years with an innovative new material. How do you measure the climate impact of storing captured CO₂ for 20 years vs. thousands of years? And what carbon offset claims would you make for each?

Although a little simplistic, this analogy highlights one of the most important complexities in carbon offsetting: durability. The field hasn't yet agreed upon frameworks for comparing the climate benefit of a tonne of CO₂ stored in soil for 20 years with a tonne that is permanently mineralized. On the market today, both are sold as “one tonne of carbon credit” and the buyer has to do the hard work of figuring out how they differ in efficacy. The basic questions are:

  • What is the role of carbon storage that only lasts a decade or two relative to storage that lasts for thousands of years?

  • How can we use short-term storage as part of robust offsetting claims?

Defining Durability

Durability can refer to either the planned duration of carbon storage or the risk of reversal before that time is up. This post focuses on the former, which is also often referred to as “permanence.”

At Carbon Direct, we use the term “durability” because it is less absolute than “permanence” and acknowledges the temporal variability inherent to most forms of carbon storage.

The Function of Carbon Offsets

There isn’t clear agreement on what a carbon offset should do. In the purest conceptualization, a carbon removal offset is one tonne of removed CO₂ that cancels out one tonne of emitted CO₂. One tonne is added to the atmosphere and one tonne is removed forever, so the net effect on the climate is zero. Functionally, this is the same as the emission never having occurred in the first place. Frameworks like the Science Based Targets Initiative refer to this as “neutralization” of emitted carbon.

The challenge is this: for CO₂ emissions to be fully neutralized, carbon must be stored permanently [1]. Any release of stored carbon—e.g., when that 20-year balloon pops—causes a net increase of atmospheric CO₂, terminating the interim efficacy of the carbon offset. Engineered carbon removal solutions, like mineralization or direct air carbon capture and storage, can store CO₂ in geologic reservoirs for thousands of years. Unfortunately, current supply of permanent storage is limited to thousands, not millions, of tonnes CO₂ removed. These solutions will scale in the coming decade but often cost over $100 per tonne of CO₂ — more than most buyers are willing to pay today for the attribute of high durability.

As of 2022, the vast majority of carbon removal credits sold in the voluntary carbon market only guarantee carbon storage for decades to a century. This is functionally the same as delaying emissions [2]. Temporary carbon storage does provide value. It can expand the pool of available carbon removal through short-term contracts that make it easier for landowners to enroll in carbon projects. It can also help to delay climate impacts, reduce peak warming, avoid climate tipping points, buy time for technology advances, and generate co-benefits like ecosystem services [3]. Ecosystem services like biodiversity, provision of clean water, nutrient cycling, and other community benefits also deserve recognition in their own right—not just through carbon credits.

But those attributes are not durable carbon removal itself. Moreover, attributing value to these benefits is complex and inherently uncertain in the context of the carbon market. As the number of net-zero commitments made by corporations skyrockets, corporations are being forced to think creatively about how to meet their climate goals in ways that are valid. One of the greatest risks of short-term solutions is that they might be seen as fully offsetting emissions and, because of this, be used as justification to keep emitting. It is critical that pathways to meet climate goals be both transparent and effective.

Carbon Removal and Risk of Reversal

This commentary discusses durability in the context of carbon removal offsets, which is our focus at Carbon Direct. Reduced and avoided emissions offsets have different durability considerations that we do not include in this commentary.

We also assume here that carbon offsets last exactly as long as they are claimed to. In reality, the risk of premature reversal (e.g., via a wildfire or leaky reservoirs) and possibilities of carbon storage beyond the official term of an offset (e.g., in long-lived wood products) are important factors in durability.

Accounting for Durability: Vertical and Horizontal Stacking

If carbon removal offsets are claiming to essentially cancel out emissions, are there ways that temporary carbon storage can help us to do this? There are two broad solutions that have been investigated in the scientific literature, which we have synthesized into the following strategies:

  1. Horizontal stacking: Sequentially buying offsets as they expire to permanently offset a tonne of CO₂. Firms seeking to neutralize their emissions in this way horizontally stack credits to create a continuous sequence of one tonne stored over time.

  2. Vertical stacking: Buying multiple short-term tonnes up front to offset one tonne of CO₂ emitted today. Firms can fully or partially compensate for the lifetime climate impacts of emissions today by overbuying short-term tonnes up front, i.e., by vertically stacking credits.

Horizontal & Vertical Stacking

Horizontal Stacking

Horizontally stacking credits over time has a certain simplicity to it: if I buy a 20-year credit in 2021, I need to replace that credit in 2041. The replacement credit could represent truly permanent storage, or could be another 20-year credit, in which case the cycle continues [4]. In this example, the 20-year purchases are like an offset lease or rental – the credit provides a service that eventually must be renewed or replaced. If not, emissions are effectively delayed, but not neutralized. The challenge here is that if a firm goes bankrupt, for example, its emissions will persist long after there is someone to keep a record of those emissions and re-buy offset credits. Horizontal stacking requires consistent responsibility over long periods of time, which isn’t easy to manage.

One strategy, which we are pursuing now with Carbon Direct’s own offset procurement, is to buy future geologic storage credits (ex-ante) alongside short-term forestry credits (ex-post) to bridge a gap in availability [5]. The geologic storage will be fully available by 2025 and has a duration of thousands of years; the short-term forestation storage is available now. We structured our offsets in such a way that by the time the short-term credits expire, the longer term storage will have been executed, offsetting our emissions continuously. Using this bridge approach, we have offset our emissions from today into perpetuity [6]. It wasn’t cheap, but we know that we have fully neutralized our emissions while supporting both a beneficial forestry project and scaling engineered carbon removal.

Vertical Stacking

Vertically stacking credits is a bit harder to get right. With this approach, a firm would have to buy multiple 20-year credits this year to offset a single tonne of emitted CO₂ forever. The result is disproportionate climate benefits for the next 20 years, followed by a spike in emissions as that carbon is released in year 20. In general, vertical stacking provides oversized near-term benefits, but those benefits come at the cost of potential climate impacts in the future.

Vertical Stacking

A key challenge with vertical stacking is knowing how tall the stack needs to be. Several approaches have been suggested to approximate that equivalence value by comparing short-term climate benefits with long-term climate impacts [7]. They all have some fundamental similarities:

  • They all require models and assumptions about the climate system that introduce uncertainty. These approaches are built on an understanding of how emitted CO₂ behaves in the atmosphere and can produce very different equivalence values depending on which assumptions are made. In some cases, they incorporate economic considerations as well, through time preference (discounting) or by translating CO₂ emissions to climate-related economic impacts [8]. Ultimately, these assumptions force us to figure out what sort of impacts we care about most: e.g., warming, economic damages, tipping points, intergenerational equity, etc. The wrong assumptions could lead us toward actions that do more harm than good in the long run.

  • Each approach to estimating equivalence serves to calculate the fractional value of short-term carbon storage relative to a longer time horizon (e.g., 1000 years). For example, one model result might find that 50 years of storage achieves 25% of the climate benefit that 1000 years does. This implicitly leads to vertical stacking: if that 50-year credit equates to 0.25 of a permanent credit, buying four today could make up for the difference. Buying four credits today, however, might also end up being more expensive than one permanent credit.

Another challenge, beyond the size of the stack, is knowing how and when vertical stacking is an appropriate approach to carbon offsetting. Namely, when is it necessary to fully neutralize emissions? And when are alternative approaches—like vertical stacking—acceptable? There aren’t easy answers to these questions[9]. Vertical stacking forces us to weigh climate benefits today against potential climate impacts tomorrow while considering all sorts of factors, like the extent to which vertical stacking may help us avoid climate tipping points or buy us time to decarbonize emissions.

Finally, and critically: high-quality carbon removals, even temporary ones, are in short supply in today’s market. Vertical stacking requires overbuying up front. If there isn’t enough supply to even meet baseline demand without overbuying, it may be very difficult to find the extra credits needed for vertical stacking.

Looking Ahead: Scaling Durability and Quality

Directly reducing emissions should be the first step of any organization’s carbon management plan. But beyond this we must also remove carbon from the atmosphere, and do so in ways that give carbon neutrality claims integrity — which must take into account durability. Temporary carbon storage solutions have an important role to play alongside permanent solutions, but that role is poorly articulated in the offsets market.

Ideally, carbon offsetting will completely neutralize a tonne of emitted carbon through removal into perpetuity. This is the least ambiguous interpretation of “net zero.” But in today’s market, there isn’t sufficient supply of permanent storage solutions to meet even a fraction of the demand for carbon offsets. Similarly, there is a limited supply of high-quality short-term carbon removal credits to overbuy in a way that might approximate permanent storage (e.g., vertical stacking). This means an important strategy is to grow the supply more permanent CO₂ removal systems (e.g., direct air capture with CCS or carbon mineralization) as part of a portfolio that also includes high-quality short-term carbon removal — a strategy that Microsoft [10] and others have adopted.

That is why we at Carbon Direct are increasingly focused on helping bring quality supply online in the coming years. Meanwhile, we’re continuing to explore both horizontal and vertical stacking approaches to develop guidance for when and how to use each approach. Our aim is to help carbon offset buyers construct offset portfolios that are scientifically sound, practical, and flexible enough to adapt to advances in our collective understanding of these complex issues.

From life cycle assessments to emissions abatement strategies, learn more about our CO₂ Management services here.

  1. Irrespective of the lifetime of CO₂ in the atmosphere, any reversal of a carbon offset constitutes a net emission of CO₂. Even adding a tonne of CO₂ to the atmosphere in 1000 years still increases the atmospheric pool by one tonne.

  2. A. Levasseur, et al., Valuing temporary carbon storage. Nat. Clim. Chang. 2, 6–8 (2012).

  3. E. Marshall, A. Kelly, The Time Value of Carbon and Carbon Storage: Clarifying the Terms and the Policy Implications of the Debate. SSRN Electron. J., 1–23 (2012).

  4. This idea was articulated in a slightly different formulation by: Herzog, H, K Caldeira, J Reilly. (2003) “An issue of permanence: assessing the effectiveness of temporary carbon storage. Climatic Change. It was recently made accessible through CarbonPlan’s handy Permanence Calculator.

  5. Ex-ante credits are expected to be delivered in the future. Ex-post credits are credits that exist today, representing a climate benefit that has already been delivered.

  6. Provided the engineered storage lasts as long as it is supposed to.

  7. Groom, B, F Venmans. (2021) “The social value of offsets.”; Parisa, Z, et al. (2021) “The Time Value of Carbon Storage.”; Cullenward, D, F Chay, G Badgley (2022) “A critique of NCX’s carbon accounting methods.”; Chay, F, et al. (2022) “Unpacking ton-year accounting.

  8. Discounting future costs and benefits is standard practice in economics, but it is not always straightforward. For example, high discount rates can make even catastrophic damages in the distant future seem insignificant in net present value-terms.

  9. Some academics have suggested that offsetting fossil fuel emissions with nature-based solutions represents a mismatch that fundamentally increases the active carbon pool. For example, see: Cartonne, W, JF Lund, K Dooley. (2021). “Undoing equivalence: rethinking carbon accounting for just carbon removal.” Frontiers in Climate.

  10. One year later: The path to carbon negative – a progress report on our climate 'moonshot'


Carbon Removal