Estimated Carbon

Companies that advertise their commitment to become carbon-neutral typically plan on meeting those targets by buying carbon offsets. Purchasing these credits is much easier than actually curtailing operations or transitioning entirely to renewable energy sources. The only problem is that the companies, and organizations that sell carbon offsets, have a vested interest in overestimating how much carbon they are removing from the atmosphere. The organizations putting these credits on market are the same ones responsible for calculating their size and impact. How long is the project going to run for, how certain are we that it will reach its goals, will there be any confounding effects (e.g. release of methane), what will truly happen under the status quo, how likely is the baseline scenario? These are the types of questions that need to be answered before a project can be packaged off and sold – yet all these variables are based on assumptions.

In effect, the sellers of carbon credits get to charge for something they make out of thin air, through theoretical modeling. It's a bit like financial derivatives, where profits are booked upon their creation, not on the ultimate outcome. Organizations pitching these projects get to will their "product" into existence, through the sheer power of assumptions. If this was any other good or service, the credits couldn't be sold until their true effectiveness could be determined, by collecting and analyzing evidence. However with carbon credits, they get to be purchased in advance of their measurement, regardless of the projects' ultimate ability to combat climate change. Organizations that fail to be realistic in their projections reap greater rewards. In turn, most market participants are overstating the amount of good they are actually doing in the world (and turning a blind eye to any contradictory evidence)!