Climate policy

Trade in carbon certificates – more apparent than real?

03.12.2024, Climate justice

Whether in regard to the CO2 Act or the new austerity programme: Swiss policymakers are relying increasingly on carbon certificates from abroad to meet their own climate target by 2030. Yet the plan could fail – the first programmes are already showing serious shortcomings. An analysis by Delia Berner

Delia Berner
Delia Berner

Expert on international climate policy

Trade in carbon certificates – more apparent than real?

Old buses and ubiquitous face masks: Bangkok suffers from exhaust fumes, but do e-buses financed by Switzerland really help in Thailand? © Benson Truong / Shutterstock

In January 2024, Switzerland captured the world's attention – at least in the specialised world of the carbon markets. This was because, for the very first time, carbon emission reductions had been transferred in the form of certificates from one country to another under the new market mechanism in the Paris Climate Agreement. More specifically, Thailand had introduced electric buses in Bangkok and had reduced carbon emissions by around 2000 tonnes in the first year. Switzerland bought this reduction in order to count it towards its own climate target.

Let us take a step back: Switzerland plans, by 2030, to save more than 30 million tonnes of CO2 abroad rather than in Switzerland. The first bilateral agreements in that regard were concluded in the autumn of 2020, and their number has now surpassed a dozen. Several other projects are being developed, ranging from biogas facilities and efficient cooking stoves in the poorest countries, to climate-friendly cooling systems, and also to energy efficiency in buildings and industry. So far, only two programmes have been approved for attribution towards Switzerland's climate target. And the 2000 tonnes of CO2 savings from Thailand were in fact the first certificates to be traded. This means that much remains to be done by 2030 if there is to be a sufficient number of certificates available for purchase by Switzerland.

The first project could fail...

After inspecting case documents under the Freedom of Information Act, the "Beobachter" newspaper has now revealed that the very first programme in Bangkok is at risk of failing to generate any further certificates. Already a year ago, allegations began reaching the Federal Office for the Environment (FOEN) to the effect that the e-bus manufacturing company was violating national labour law and the right to the freedom of association enshrined in human rights law. Although a provisional agreement was reached a year ago, new allegations apparently surfaced this year, which the FOEN must now investigate. This is so because Switzerland cannot approve certificates if human rights violations were entailed in generating them. The FOEN was quoted in the "Beobachter" to the effect that it "can and will" suspend further issuance of certificates if the allegations are substantiated. Extensive investigation by the "Republik" magazine has brought yet more allegations to light. Supposedly, Switzerland was even implicated in an economic crime in Thailand by fuelling a 10-billion-franc stock market bubble and ignoring warnings.

The second approved project, too, will generate fewer certificates than promised. A new research by Alliance Sud into the cooking stove project in Ghana reveals that its planning entailed over-estimating emission reductions by as much as 1.4 million tonnes.
It is now already clear that, in general, foreign offsets are no cheaper and certainly no easier to implement than climate protection measures in Switzerland. The latter will have to be introduced sooner or later anyway in order to achieve the net zero target in Switzerland.

More than growing pains

The first projects illustrate the difficulties being encountered in ensuring that a project effectively reduces carbon emissions by a particular amount and is also cost-effective. Doubts surrounding reductions have been the reason why many offset projects have made the headlines in recent years. Cost effectiveness is crucial, as the majority of the certificates are paid for by the Swiss public through a tax on fuel. To verify these two things, the FOEN would need to examine the projects' financial plans. It would have to be persuaded, for example, that project costs include no disproportionate margins or profits, but that as much money as possible is being invested in climate protection or sustainable development, with the involvement of the concerned population groups in the partner country.

Yet the flaws of the Swiss system of foreign offsets are becoming apparent here. Because the certificates are not bought by the Confederation but by the Foundation for Climate Protection and Carbon Offset, Klik, which converts the proceeds from the fuel tax into certificates, the "commercial details" are not revealed to the public. What this means is that no one knows the cost of saving a tonne of carbon emissions by using e-buses in Bangkok, or the overall amount of money being invested in the cooking stove project in Ghana – let alone what the yields accruing to private market participants look like. Moreover, in the case of the aforementioned project in Ghana, extensive passages were redacted in the project documentation that was published. The transparency is even worse than in the case of serious standards in the voluntary carbon market.

Twofold need for action

These challenges go beyond mere teething problems and reveal a twofold need for action by Swiss lawmakers. First, the lack of transparency regarding project-related financial information in the ordinance on the CO2 Act must be remedied. The ordinance is currently being aligned with the latest revision of the Act. Second, the image of foreign offsets as a cheaper and simpler path to climate protection must be corrected. Switzerland must move ahead with climate protection within its borders and again achieve climate goals after 2030 without carbon offsets. Alliance Sud calls on the Federal Council to incorporate this into the CO2 Act after 2030.

 

Investigation

Switzerland in the dense fog of carbon offsetting

20.11.2024, Climate justice

With the purchase of new cookstoves, Ghana is expected to save more than 3 million tonnes of carbon emissions, thanks mainly to women – as a substitute for emission mitigation in Switzerland. Alliance Sud criticises the project's glaring lack of transparency and highlights controversial details that project owners attempted to hide from public view.

Delia Berner
Delia Berner

Expert on international climate policy

Switzerland in the dense fog of carbon offsetting

A girl cooks with her mother in her home in Tinguri, Ghana.
© Keystone / Robert Harding / Ben Langdon Photography

Grace Adongo, a farmer from Ghana's Ashanti region, is happy with her new and more efficient cookstove. Instead of cooking on an open fire, she now places the pot on a small stove. She needs appreciably less charcoal, which both saves money and mitigates carbon emissions. This testimonial comes from the latest Annual Report of the Ghana Carbon Market Office and coincides with many others that are reporting on the numerous cookstove projects throughout the global carbon market. These projects supposedly help provide poorer population groups with cookstoves that are more efficient and less harmful to health than traditional stoves or fireplaces, which generate large amounts of smoke. This reduces wood consumption and carbon dioxide emissions (how much is highly controversial – but more on that later).

The principle involved is always similar. The cookstoves are sold cheaply. This entails customers transferring to project owners their rights to the emission mitigation outcomes. The emissions saved by the new stoves are then calculated over the ensuing years and sold internationally by the project owner as carbon certificates. The proceeds from the certificates are needed to subsidise the cookstoves.

From the personal standpoint of people like Mrs. Adongo, what sounds like a good thing is also precisely that. But the system as a whole is much more multilayered and contradictory. The case mentioned at the start, the Transformative Cookstove Activity in Rural Ghana, which Alliance Sud examines in detail in this paper, revolves around the government carbon offset market in which Switzerland imputes the emission mitigation outcomes achieved in Ghana to its own climate goals. A surprising number of venues also come to light in the process, and also warrant critical assessment from the standpoint of climate justice. Switzerland's cooperation with Ghana is also a good example of why the trade in certificates under the Paris Agreement is not conducive to attaining the ambitious climate goals.

Carbon certificates from this and many other projects are being paid for with a 5-centime tax assessed on each litre of fuel at Swiss petrol pumps. Owned by motor fuel importers, the Foundation for Climate Protection and Carbon Offset KliK provides the money for mitigation projects in Switzerland and abroad. Through carbon offsetting abroad, Swiss lawmakers aim to compensate for climate mitigation actions not taken in Switzerland, so that they are still able to meet the climate goals of the Paris Agreement.

Under the 2015 Paris Agreement, Switzerland undertook to halve, by 2030, its greenhouse gas emissions compared to 1990. With the CO2 Act, however, only about 30% of emissions can be mitigated in Switzerland – barely more than before the law was revised in the spring of 2024. The remaining 20% must be offset abroad. Under the Federal Council's savings package announced in September 2024, climate mitigation activities in Switzerland are also expected to diminish. The inevitable consequence is that Switzerland will need more carbon offset certificates if it is still to achieve the climate goals. That is not the meaning of Article 6 of the Paris Agreement, under which the transfer of emission mitigation outcomes to other countries should lead expressly to "higher ambitions". To achieve this, Switzerland will have to ensure that the climate goals of both countries are consistent with the goals of the Paris Agreement. Switzerland has promised net zero by 2050. Because net zero is to be achieved globally by that same year, Switzerland therefore expects other countries also to set their net zero target at 2050. Measured against this yardstick, there are substantial gaps in Ghana's national contribution, up to 2030, towards the realisation of the Paris Agreement. Ghana has announced only a non-binding net zero target for 2060 and excludes oil production from its climate goals. When contacted in that regard, the Federal Office for the Environment (FOEN) writes: "The requirements of the Paris Agreement apply", and points towards the unilaterally set climate goals based on the principle of common but differentiated responsibilities and respective capacities. "In the process, climate goals must encompass the highest possible ambition and subsequent goals must be even more ambitious." However, there are no other criteria for the climate goals of a partner country.

A year ago, Ghana announced the expansion of oil production, adducing the lack of financial support for climate protection as the reason. This illustrates the fundamental problem: the countries in the Global South lack the international climate finance that should be forthcoming from the Global North by way of support. The upshot is that they opt for what they see as their second-best solution for raising funds, that of selling the outcomes of their climate mitigation activities as carbon certificates. The difference with climate finance is that Switzerland obtains the "right" to postpone its climate mitigation measures. On balance, ambitions for effective climate mitigation are being lowered, not raised.

Dense fog in February

Ghana and Switzerland approved this cookstove project in February 2024 under the bilateral market mechanism of the Paris Agreement (Art. 6.2). It is being implemented by the Amsterdam-based company ACT Commodities (project owner, see Box 2) and is projected to record a 3-million tonne reduction in carbon emissions by 2030. It is therefore incumbent on both governments to ensure that the project fulfils and maintains high quality requirements, which it promises to do. The Federal Office for the Environment (FOEN) verifies the relevant project documentation and publishes them upon authorization.

The project owner is ACT Commodities, an international conglomerate headquartered in Amsterdam. On its website, the company describes itself as the leading global provider of market-based sustainability solutions that is driving the transition to a sustainable world. ACT is a major player in emissions trading. But the company prefers to avoid too much transparency – its own website fails to mention that the conglomerate also has oil and fuel trading in its portfolio (through its sister company ACT Fuels, which has no website). This comes to light thanks only to a perusal of the Dutch commercial register. Since July 2023, ACT Commodities has also owned a company that supplies marine fuels, the dirtiest of all fuels. The conglomerate is therefore one of a growing group of commodity traders doing business with fossil fuels and simultaneously "greenwashing" themselves as players on the carbon market.

But the very first look at the documents reveals a lack of transparency: the project is as opaque as dense fog. Extensive passages in the project description are redacted, including virtually the entire analysis that is meant to prove that the project will lead to additional emission mitigation (see chart). But many other relevant facts and figures were also concealed. And the document containing the calculations showing why the CO2 reduction should amount to 3.2 million tonnes was not even published in the first place. That is not what transparency looks like.

Alliance Sud requested publication of the unredacted documents and calculations pursuant to the Freedom of Information Act (FoIA) – and had to wait four months owing to the project owner's initial refusal. Much, though not all of the project documentation was released thereafter. The passages that were still redacted were supposedly business secrets. It is now also becoming clear that in the original document, many places had simply been arbitrarily concealed.

 

Excerpt from the analysis of the project's additionality, originally redacted altogether.

 

Emission mitigation is being overestimated by up to 79%

The calculation methodology whereby the project in Ghana is expected to save 400,000 tons of carbon emissions annually over eight years is a key piece of information regarding carbon offset projects. Reputable certifiers in the voluntary carbon market require project owners to disclose these calculations. These data must be made available for scientific analysis – especially since a growing number of studies are identifying cases of over-crediting of emission mitigation through carbon certificates, including for cookstove projects.

In this case, however, the project owner is reluctant to do so – an unacceptable lack of transparency. Alliance Sud submitted an FoIA request and obtained a PDF copy of the calculation tables. Without being able to view the integrated Excel formulas, verifiability remains limited.

But the figures now available offer surprising revelations. The PDF document containing the calculations shows that for the years 2025-30, emission reductions for the same stoves are being calculated at almost twice as much as for the years 2023-24. The underlying reason is obviously a planned increase of the most key metric, namely, the fraction of non-renewable biomass (fNRB). This is an estimate of the amount of wood biomass by which the harvesting of fuelwood exceeds its natural rate of regeneration. Only reduced use of non-renewable fuelwood can be regarded as a reduction in carbon emissions. The metric is multiplied directly by the other factors and is therefore crucial to calculating emission mitigation. The overstating of the fraction of non-renewable biomass (fNRB) is the main reason for the sometimes-scathing criticism elicited by cookstove projects launched to date for emission mitigation purposes.

For anyone keen on the details, the project documentation showed an fNRB set at 0.3, which is more conservative than for many previous cookstove projects. According to the official UNFCCC reference study dated June 2024, this is an appropriate standard value, as it avoids massively overstating emission mitigation and is also consistent with the country-specific value contained in the study for Ghana, which is 0.33. However, the project now has a clause enabling Ghana and Switzerland bilaterally to adjust the fNRB retrospectively (upwards). The fact that concrete calculations are already being done, from 2025 onwards, on the basis of an fNRB of 0.7629 only comes to light from the PDF document containing the calculations, which was not originally published. The project description fails to mention that plans are already being laid using a higher value, even though it is still to be validated. The value 0.7629 comes from the outdated "CDM tool 30" which is deemed by the FOEN itself to be insufficient as a basis. In the spring of 2024, Ghana invited tenders for an independent study to determine a country-specific fNRB value for Ghana – obviously in the hope that a markedly higher value can be validated. If Switzerland is also to accept it, the study must pass the peer review by UNFCCC bodies. In the light of the aforementioned widely accepted reference study which calculates a country value of 0.33 for Ghana, that is likely to be an uphill task.

 

Das Berechnungsdokument zeigt, dass ab 2025 mit einem mehr als doppelt so hohen fNRB, dem wichtigsten Parameter, gerechnet wird. Die Emissionsreduktionen zwischen 2025 und 2030 werden so gemäss Berechnungen von Alliance Sud um bis zu 92% überschätzt. Insgesamt beträgt die Überschätzung bis zu 79% (unter Berücksichtigung der korrekten Berechnung für 2023 und 2024).

A look at the calculation document shows that as of 2025, calculations are to be based on an fNRB – the most important metric – more than two times higher (line in yellow). According to Alliance Sud calculations, this means that between 2025 and 2030, emission mitigation will be overestimated by up to 92%. All told, the overestimation is up to 79% (using the correct calculation for 2023 and 2024).

 

If a baseline fNRB value more than twice as high is applied, with no basis whatsoever, emission mitigation is being overestimated from the outset. According to Alliance Sud calculations, the project would reduce carbon emissions by 1.8 million tonnes at the most, if the fNRB value is held constant at the more realistic level of 0.3. But the project promises a reduction of 3.2 million tonnes of carbon emissions. It thus overestimates overall mitigation by up to 79%.

Besides, unlike the project owner, we disclose our own calculations, which can be viewed here.

 

Some research lifts the fog…

The absurdity of attempting to describe half of the project documentation as "business secrets" (in the first version of February) is clear from the fact that much of the concealed information is publicly available in other places. If few more minor items of information that had originally been concealed are even available elsewhere in the same document. Further information can be gleaned from Ghanaian Government documents, or can be deduced from other sources.

For example, from an online article by the Ghanaian authorities about a visit by the KliK Board of Directors, we learn who is the project's main distributing partner in Ghana – a Ghanaian company called "Farmerline". Farmerline facilitates access for farmers to agricultural inputs, thereby opening up the global agricultural industry to many new clients from Ghana. The project owner also attempted to conceal this connection. Several references to partnerships in the agriculture sector had originally been hidden in the project documentation, and specific cooperation is still redacted. There are reasons, as a closer look will show.

...lingering pesticide spray

In June 2023, Farmerline announced its cooperation with Envirofit, the cookstove producer and the project owner's implementing partner. The project documentation also describes plans to sell 180,000 stoves to rural dwellers within a short space of time, and notes that the stoves will be available at more than 400 businesses for agricultural inputs. But some posts by Farmerline on the "X" platform do arrest the attention of readers. This year, Farmerline conducted an "Agribusiness roadshow" across various regions of Ghana in cooperation with Envirofit – and with the crop protection company Adama, a member of the Syngenta Group. On each day of the roadshow, farmers were presented with the efficient Envirofit cookstoves and Adama pesticides, both being put up for sale. Adama products are identifiable in the Farmerline videos, including three insecticides and one herbicide containing active substances banned in Switzerland and the EU because of their toxicity to the environment and human health. They are atrazine, diazinon, and bifenthrin. Atrazine pollutes groundwater, hampers photosynthesis in plants and is virtually impossible to remove from the environment; it is also classified as a carcinogen. Diazinon attacks not only the pests being targeted but all insects and can also be highly toxic to humans if it comes into contact with the skin. Bifenthrin poses a danger mainly to aquatic animals but should also not be inhaled by humans (see the Pesticide database maintained by Pesticide Action Network).

 

Sample photo from a Farmerline roadshow video in which the herbicide Maizine 30 OD containing the active substance atrazine – banned in Europe – is also being sold alongside cookstoves.

 

Furthermore, none of the videos contains a demonstration or the sale of appropriate protective clothing. According to various studies (Demi und Sicchia 2021; Boateng et al 2022; and others), the growing use of pesticides in Ghanaian agriculture is leading to considerable health problems for farmers. In the absence of instructions from dealers, many either do not know how to use the pesticides properly and protect themselves in the process, or they lack sufficient funds to be able to afford protective clothing. Besides, they obtain expert information mostly from their personal circles or from some dealers, but no independent agricultural advice is available. In their study, Imoro et al. 2019 found that 50% used no protective clothing at all and another 40% were not sufficiently protected. Asked whether protective clothing was also being sold at the roadshows, KliK replied that the highest standards of sustainability were of course a prerequisite for their cooperation partners. KliK writes that the issues raised by Alliance Sud with this question lie outside the scope of its discretion.

Thus, attempting to obtain a clear statement regarding the benefits of this offset project for sustainable development is still akin to stumbling around in the dark. Cookstove customers will indeed save money and, as there is less smoke, also hopefully improve their health. Yet, they are simultaneously being urged to spend the money saved on pesticides, the increased use of which is damaging the environment and also creating new health problems in many instances. From this perspective, KliK's assessment of its cooperation partners' "highest standards of sustainability" is erroneous. It is indeed reasonable to strive for synergies with existing players in the agriculture sector in order to reach rural dwellers. But had sustainability been the uppermost concern, a partnership with organisations that promote agroecological approaches would much more likely have suggested itself.

Eye-watering profits for investors

While the new cookstoves enable customers to make financial savings, the project is financially worthwhile for the investors on a much larger scale. It lacks transparency also from a financial standpoint in that the pricing of the stoves is redacted, and the prices of the certificates are a private matter for KliK and its business partners. Moreover, the FOEN is not reviewing a financial plan or anything similar for the project. Yet, from the additional information released following the FoIA request, it is clear that investors are likely to rake in handsome profits. The investors behind this project are invisible, but according to project documentation, can expect an annual return of 19.75% on their investment. A comparison is being drawn with Ghanaian government bonds in order to justify this absurd return. That comparison holds no water whatsoever, as the one thing has nothing to do with the other. The risks associated with investing in a government bond issued by an already highly indebted country are of an entirely different nature – which accounts for the high yields (although it does not legitimise them, as the high interest rates for poor countries are horrific and catastrophic – but again, that is another story).

What this case involves, in contrast, is a project partly financed and secured with quasi-public funds; this could be classified as blended finance, a mix of public and private financing. This is so because fuel importers collect a levy on fuel, by virtue of the CO2 Act. At a purely technical level, should the proceeds of this levy pass through government coffers – as other levies generally do – before being disbursed for carbon offset projects, that would make them taxpayers' money.

That would give rise to a public interest in ensuring that the proceeds from this levy are used efficiently. The funds must go towards climate mitigation and sustainable development in the country concerned, not towards gold-plated returns for investors.

Conclusion

Efficient cookstoves are an inexpensive way of improving the lives of many people while mitigating greenhouse gas emissions. Yet, there are considerable contradictions lurking in the market mechanism under the Paris Agreement when implementing climate mitigation projects in the Global South. It is meant to promote sustainable development locally, but is conceived as potentially lucrative business for investors. And while some emissions are being reduced in the Global South, the mechanism offers a political pretext for postponing climate mitigation activities in a country as rich as Switzerland.

Transparency in the certificate trade is therefore the key to discovering the multilayered and potentially problematic background to carbon offset projects. Switzerland's carbon mitigation project in Ghana is a telling example of this. Neither the overestimation of emission mitigation, the sale of toxic pesticides nor the exorbitant yields could be gleaned from the documents that were published following the authorization of the cookstove project. It was only through an FoIA request and further investigation that Alliance Sud was able to clear the fog of non-transparency shrouding the project documentation: what came to light was the approval of reckless calculation methods, business practices by implementing partners inimical to the environment and to people, and a questionable interpretation of transparency by the main players. However, the possibility of public scrutiny remains crucial to ensuring that carbon mitigation projects do not endanger implementation of the Paris Agreement.

 

 

This case is the second carbon offset project by Switzerland under the Paris Agreement to be looked into by Alliance Sud. A year ago, Alliance Sud and Fastenaktion elucidated the reasons why new E-buses in Bangkok are no substitute for climate mitigation activities in Switzerland.

Article

Carbon offsetting abroad: the illusion of voluntary action

07.12.2023, Climate justice

Pressure from civil society and the media has rightly discredited the carbon markets. The current system is not delivering on its promises and is harming the Global South.

Edited by Maxime Zufferey

Carbon offsetting abroad: the illusion of voluntary action

Excessive recourse to offsetting instead of a substantial reduction in emissions is in no way sustainable.

© Ishan Tankha / Climate Visuals Countdown

The voluntary carbon market facilitates the trading of carbon credits. It allows a company to continue emitting CO2 while offsetting its own emissions by funding projects that reduce emissions elsewhere. On paper, carbon offsetting is seen as the most effective market-based approach for achieving results in terms of reducing global emissions. The idea is to maximise the efficiency of available resources in reducing emissions by using them where they are most beneficial. For example, once a company has reduced its own emissions as cost-effectively as possible, it could then allocate resources to low-carbon technology projects or reforestation projects to arithmetically offset the emissions it has not yet reduced. In practice, however, the assumption that cheap carbon credits are the answer is much criticised. They are seen as undermining the goal of reducing emissions and helping, counterproductively, to maintain the status quo. More recently, increased scrutiny by civil society has raised doubts about the often-misleading promises of 'carbon neutrality' made by some companies under the guise of offsetting, while their emissions continue to rise.

Carbon markets: taking stock

The carbon market has been controversial since its inception in the late 1980s and especially since the signing of the Kyoto Protocol in 1997. Its development has given rise to parallel markets, namely the 'compliance' market and the 'voluntary' carbon market, which are sometimes difficult to distinguish due to the potential overlap between them. The compliance market involves mandatory emission reductions and is regulated at the national or regional level. The best known of these markets is the European Union Emissions Trading Scheme (EU ETS), which Switzerland joined in 2020. Under this mechanism, certain large emitters – power plants and large industrial companies – are subject to an emissions cap, which they can offset by buying allowances from other members who have reduced their emissions beyond the target. This cap is reduced each year. A laborious implementation process, the system has led to a certain reduction in emissions in the sectors concerned. However, there has been criticism that it has been too generous in allocating free allowances to large emitters, that it has allowed an influx of international credits and that it has not set sufficiently ambitious reduction targets. Furthermore, the price of carbon is still too low; it should reflect the social cost of a tonne of emissions and be gradually increased to USD 200. The voluntary market, on the other hand, currently has no minimum reduction targets and remains largely unregulated. Outdated carbon credits are also frequently used, as are credits whose quality and price vary widely, sometimes even below USD 1.

The limits of the voluntary market

The crisis of confidence that has hit the voluntary carbon market is not only due to its unregulated nature and inadequate framework, but also to the technical limitations of the mechanism. Carbon credits rarely correspond to the exact unit of 'compensation' claimed, and their impact is systematically overestimated. This is due to the use of an unreliable quantification method and the lack of a comprehensive monitoring system that is genuinely free of conflicts of interest. Moreover, it is often unclear whether offset projects meet the additionality criterion, i.e. whether they would not have been implemented anyway, without the financial contribution of carbon credits. This is particularly true for renewable energy projects, which have become the most cost-effective source of energy in most countries. Another major challenge is double counting, i.e. the crediting of carbon credits by both the host country and the foreign company. This practice violates the principle that a credit can only be claimed by one and the same entity. The Paris Agreement has increased the risk of double counting because, unlike the Kyoto Protocol, it also requires developing countries to reduce their emissions.

There are also many doubts about the permanence of registered offsets. The extraction and burning of fossil fuels is part of the long-term carbon cycle, while photosynthesis, and hence the sequestration of carbon by trees or the absorption by the oceans, is part of the short-term biogenic carbon cycle. Trying to offset the long-term accumulation of CO2 in the atmosphere with offset projects limited to a few decades therefore seems illusory. In addition, anthropogenic climate change itself, with the increasing frequency of fires and droughts and the spread of pests and diseases, threatens the storage of carbon in temporary sinks such as soils and forests. There is also the risk of leakage, where a project to protect forests in one region leads to deforestation elsewhere. As for the prospects for technological solutions using carbon capture and sequestration devices, these should not be overestimated. They are currently neither competitive nor available on the scale required in the short term. Even in the future, they are likely to play only a limited albeit necessary role.

Carbon colonialism perpetuates injustice

More fundamentally, over-reliance on offsets rather than substantial emission reductions is unsustainable. As Carbon Market Watch points out in its report (Corporate Climate Responsibility Monitor) on the integrity of the climate change targets of companies claiming to be pioneers, the implementation of these companies' current 'net-zero roadmaps' is highly dependent on offsets. At the current rate, demand for land to generate carbon credits will far outstrip availability, directly threatening the survival of local communities, biodiversity and food security. At the same time, emission reduction projects popular in the voluntary market, such as reforestation and other 'nature-based solutions', are often based on 'fortress models' of conservation, in which protected areas are fenced off and militarily protected – at the expense of the original inhabitants. Far from being "empty spaces" to be planted with trees by polluters, these projects often take place on land inhabited by indigenous communities. The new gold rush for nature-based solutions through the privatisation of natural carbon sinks is exacerbating historic and complex land conflicts and confronting forest dwellers with the real threat of dispossession. This rings even truer when such projects deprive indigenous communities of their right to self-determination and to give their free, prior and informed consent to all projects affecting their territories.

Overall, the current system is woefully inadequate to the urgency of the climate crisis, and is also deeply unjust. It grants pollution rights to the biggest greenhouse gas emitters – mainly large corporations and economies in the Global North. They are allowed to continue with business as usual, while economic systems and lifestyles, mainly in the Global South, are restricted. This carbon colonialism thus shifts the responsibility for combating climate change and corporate deforestation onto local communities that have contributed the least to climate change.

 

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The Alliance Sud magazine analyses and comments on Switzerland's foreign and development policies. "global" is published four times a year (in german and french) and can be subscribed to free of charge.

Article

A new El Dorado for commodity traders

07.12.2023, Climate justice

In a carbon market that has demonstrated its limitations, an unexpected player has invited itself to the negotiations. Commodity traders have recently stepped up their CO2 trading, without scaling back their fossil fuel business operations.

A new El Dorado for commodity traders

Emissions trading has also attracted strong interest of the largest emitters, above all commodity traders.

© Nana Kofi Acquah / Ashden 

Natural gas labelled "CO2-neutral" or concrete with "net zero" certification: the list of seemingly climate-neutral consumer goods has grown steadily over recent years. The accounting trick behind carbon offsetting is that a greenhouse gas emitter – whether a company, an individual or a country – pays for another player to avoid, reduce or cease their emissions. This enables companies to market themselves as they see fit by presenting themselves to their customers as committed climate protectors, even though they are not reducing their own emissions. The voluntary carbon market has reached a crossroads, oscillating between an outright boom and the crisis of confidence recently triggered by greenwashing allegations.

On the one hand, there is the economic reality of a voluntary carbon market, which quadrupled to USD 2 billion in 2021 alone – and could well reach USD 50 million by 2030 – and which is attracting strong interest from the biggest emitters, foremost among them commodity traders. This exponential market growth is attributable, in part, to the growing number of "net-zero" commitments by the private sector in the face of popular pressure and, in part, to the economic and logistical alternative that offsetting represents compared with reducing carbon footprints. On the other hand, damning reports about the poor quality of voluntary carbon market projects are coming thick and fast. They caution against the unbridled development of a market whose real impacts on climate protection is depicted as ranging from negligible to downright counterproductive. The ETH Zurich and the University of Cambridge have shown, for example, that a mere 12 per cent of all existing credits in fields where most offsetting occurs – renewable energies, cooking stoves, forestry and chemical processes – actually reduce emissions. Reports on the flagship South Pole project Kariba by the investigative journalism platform Follow the Money have told of vastly overestimated figures. The Zürich-based company then cancelled its contract as Carbon Asset Developer for the project in Zimbabwe. As for the NGO Survival International, it denounces a voluntary carbon offset project in northern Kenya, which is taking place on land belonging to indigenous communities. Their investigation uncovered potentially serious human rights violations that are jeopardising the living conditions of local livestock farmers.

What then is the voluntary carbon market? An ill-conceived marketing solution and dangerous distraction from the urgent need for transformative climate protection measures by the private sector? Or a genuine business opportunity to support corporate efforts to tackle climate change and a much-needed multi-billion-dollar cash injection for projects to cut emissions and protect the biodiversity in developing countries?

CO2 certificates – the commodity of the future

As a pioneer in the bilateral trade of CO2 certificates under the Paris Agreement, Switzerland is a key player in the carbon market, including in its voluntary segment. It is home to South Pole, the leading provider of voluntary CO2 certificates, and to Gold Standard, the second largest certifier. Perhaps more surprising is the market positioning of the Swiss and Geneva-based commodity trading giants, admiralships of a commodities sector that is posting one record a year after another. These new investments are explained by the potential of this opaque market to generate substantial margins and prolong business as usual. It is worth noting that this market is unregulated when it comes to prices or the distribution of revenue from CO2 credits. According to Hannah Hauman, Trafigura's Head of Carbon Trading, the carbon segment is now the world's biggest commodity market, having already overtaken the crude oil market.

In 2021, Trafigura – one of the world's largest independent oil and metal traders – decided to open its own carbon trading office in Geneva and to launch the largest mangrove reforestation project on the Pakistani coast. A year later, however, its coal trading volume increased to 60.3 million tonnes. In its 2022 annual report, not only did Geneva-based energy trader Mercuria declare its carbon neutrality, it also disclosed that 14.9 per cent of its trading volume comprised carbon markets, versus 2 per cent in 2021. In early 2023, Mercuria co-founder Marco Dunand announced the creation of Sylvania, a USD 500-million investment vehicle specialising in nature-based solutions (NbS). Shortly thereafter, he launched the first jurisdictional programme with Brazil's Tocantins State to cut emissions from deforestation and forest degradation, with a volume of up to 200 million in voluntary carbon credits. Even so, at almost 70 per cent, oil and gas still make up the company's main business. Vitol, Mercuria's neighbour on the shores of Lake Geneva and the world's largest private oil trader, can look back on over 10 years of experience in carbon markets and is considering expanding its activities in that field. In carbon trading, the company is aiming for a market volume comparable to its share of the oil market. For 2022, that share was 7.4 million barrels of crude oil and oil products per day, which corresponds to more than 7 per cent of global oil consumption. Communication is less transparent from crude oil trader Gunvor, which is also planning to ramp up its CO2 trading volume in the years ahead; the same goes for Glencore, which has a years-long track record in the area of biodiversity-related offset payments,  central to its sustainability strategy. For 2022, Glencore estimated its emissions throughout the value chain to be 370 million tonnes of CO2 equivalent, or more than three times Switzerland's total CO2 emissions.

These companies describe themselves as drivers of the transition, and take credit for having accelerated that process by incorporating carbon trading into their portfolios. The fact remains that they are pursuing a two-pronged strategy by investing in both low-carbon and fossil fuels, with the latter still clearly dominating. Besides, none of these commodity traders has yet announced their intention to phase out fossil fuels, which is indispensable if we are to remain below the 1.5°C temperature increase stipulated in the Paris Agreement. The opposite is the case: companies are relying heavily on carbon offsetting to fulfil their climate undertakings, and this allows them to continue pursuing their short-term profit targets while delaying the worldwide phase-out of fossil fuels. Given the absence of regulations to limit fossil fuel investments and climate-degrading activities, it is illusory to think that the commodity trading industry can bring about the transition and that the goals can be attained through the voluntary carbon market. So long as companies fail to do the utmost to lower their own emissions, nature-based solutions will remain greenwashing, and declarations of intent in favour of the transition will be no more than a sham. These companies are pretending to put out a massive fire that they themselves keep feeding.

Dubai as referee

The UN Climate Change Conference (COP28), taking place in Dubai in December 2023, is expected to set the course for the future and the credibility of the voluntary carbon market. Among other things, the negotiations will cover the implementation of Article 6.4 of the Paris Agreement, which could serve as a harmonised framework for a genuine worldwide carbon market. And to this end, the prominent role of COP President Sultan Al Jaber, CEO of the world's 11th largest oil and gas producer, the Abu Dhabi National Oil Company (ADNOC) – which has just opened a carbon trading office – and the massive presence of fossil fuel and commodity multinationals at the negotiating table could well tip the balance. The requirements in respect of transparency, generally applicable rules and effective controls in the voluntary carbon market are therefore likely to be watered down.

While advocates of the voluntary carbon market acknowledge some of the sector's current shortcomings, they remain convinced that the various self-regulation initiatives, such as the Voluntary Carbon Markets Integrity Initiative (VCMI), and the formulation of standards will lead to a clear demarcation of credible carbon credits. Opponents, for their part, do not believe in the transformative power of a voluntary, self-regulating market. They see the discussion around carbon offsetting as a possible diversionary tactic that reinforces the status quo. They argue for a complete paradigm shift. The current carbon offset market based on the "tonne for tonne" principle – i.e., a tonne of CO2 emitted somewhere is mathematically offset by a tonne of CO2 saved elsewhere – should be transformed into a separate market for climate contributions based on the "tonne for money" principle, i.e., a tonne of CO2 emitted somewhere is financially internalised at the true social cost of a tonne of emissions. Thus, by setting a sufficiently high internal price for their residual emissions, carbon credits would become the expression of the environmental and historical responsibility of the private sector, without the latter being able to claim paper carbon neutrality. Only then would this instrument be a useful complement to quantifiable reduction commitments – and never a substitute for them! There is also an urgent need for rigorous due diligence for all carbon projects, including mechanisms to safeguard human rights and the biodiversity, as well as an effective complaints mechanism.

 

Investigation

New electric buses in Bangkok – no substitute for climate protection in Switzerland

11.12.2023, Climate justice

Switzerland is celebrating the world's first carbon offset programme under the Paris Agreement that will help the country fulfil its own climate goals. Emissions are being reduced in Bangkok through the co-funding of electric buses. A detailed study by Alliance Sud and Fastenaktion reveals that the investment in electric buses in Bangkok would have taken place by 2030 even without an offset programme.

 

Delia Berner
Delia Berner

Expert on international climate policy

New electric buses in Bangkok – no substitute for climate protection in Switzerland

Bangkok, Rachadamri road, 11th October 2022.

© KEYSTONE / Markus A. Jegerlehner

Under the 1997 Kyoto Protocol, industrialised countries were already able to offset greenhouse gas emissions through projects in the Global South. The Clean Development Mechanism (CDM) was developed for that purpose. The voluntary offset market developed in the wake of the CDM, for example, allowing companies to promote "carbon neutral" products without actually reducing their emissions to zero. Both mechanisms, the CDM and the voluntary mechanism, have repeatedly attracted criticism. Studies and research papers show that many of the associated climate projects eventually turn out to be largely useless, and in some cases, harmful to local communities.

The Paris Agreement, which succeeded the Kyoto Protocol, redefined the carbon market and made a distinction between an intergovernmental mechanism (Article 6.2) and a multilateral mechanism (Article 6.4). Under the Agreement, all countries are required to pursue the most ambitious possible climate policy. Article 6 provides that the aim of both mechanisms is to allow for higher ambitions through such cooperation. In other words, carbon emissions trading should enable countries to lower their emissions more quickly. In the negotiations, Switzerland did much to promote this bilateral trade in certificates, and is now leading the way in operationalising it. Switzerland has already signed a bilateral agreement with 11 partner countries, and another three agreements are expected to be concluded at COP28 in Dubai.

Art. 6 of the Paris Agreement

1. Parties recognize that some Parties choose to pursue voluntary cooperation in the implementation of the nationally determined contributions to allow for higher ambition in their mitigation and adaptation actions and to promote sustainable development and environmental integrity.
[...]

 

Domestically, the Swiss government and the centre-right parliamentary majority interpret this possibility as carte blanche not to pursue the country's stated goal of a 50 per cent reduction in emissions by 2030, within Switzerland. In other words, the possibility to buy certificates is not being used to reach higher goals. This is eminently clear from the current review of the CO2 Act, as it provides for remarkably limited emission reductions in Switzerland for the 2025–2030 period. Compared to 1990, the rollover of the measures currently in place is expected to yield a 29 per cent reduction by 2030. Under the government's proposal, the new CO2 Act is expected to produce a mere five percentage point reduction, i.e., -34% vis-à-vis 1990. However, if Switzerland is still to achieve its 50 per cent reduction target on paper, it will have to purchase more than two-thirds of the additional reduction needed (15 per cent of 1990 emissions) in the form of certificates from partner countries. The partner countries must forego including those emission reductions in their greenhouse gas balance. As the first chamber, the Council of States proceeded to further water down the government's already weak domestic ambitions in the CO2 Act, i.e., to a less than four percentage point reduction in five years. In so doing it has intensified the pressure, in the short time remaining until 2030, to produce sufficient certificates in partner countries, and this to very exacting qualitative requirements. That this is no simple matter is borne out, not least of all, by the problems mentioned initially, which have already come to light in the CDM and the voluntary carbon market.

Switzerland has approved three offset programmes since November 2022. Two were developed by the United Nations Development Programme (UNDP). The first is intended to reduce the output of methane from rice farming in Ghana, and the second, to promote the use of decentralised mini-solar panels on outlying islands in Vanuatu. Both programmes are intended to serve the federal administration's voluntary carbon offsetting endeavours.

The third programme approved – the Bangkok E-Bus Programme – is the world's first, under the Paris Agreement, in which emission reductions are to count towards the reduction goals of another country, namely Switzerland. The programme was commissioned by the KliK Foundation  and is being implemented by South Pole, in partnership with the Thai company Energy Absolute – which is 25 per cent owned by UBS Singapore. Its purpose is the electrification of publicly licensed buses in Bangkok, which are operated by the private company Thai Smile Bus. The additional funding derived from the sale of certificates to the KliK Foundation in Switzerland is intended to cover the price difference between traditional and electric buses, as investing in new electric buses is not financially viable for private investors and would therefore not happen. Replacing old buses and operating some new bus lines is expected to save a total of 500,000 tonnes of CO2 between 2022 and 2030. The new buses began operating in autumn 2022.

Alliance Sud and Fastenaktion have studied the publicly available documents on the Bangkok E-Bus Programme and identified shortcomings in the additionality aspect, and in the quality of the information provided. They heighten concerns that the purchase of offset certificates is no equivalent substitute for domestic emission reductions. The certificate trading approach is fundamentally at odds with the principle of climate justice, whereby the countries mainly responsible must cut their emissions as quickly as possible.

KliK


The Foundation for Climate Protection and Carbon Offset KliK is owned by Switzerland’s fuel importers. The CO2 Act requires these companies, at the end of each year, to surrender offset certificates to the federal government, whether from Switzerland or abroad, covering some part of their fuel emissions. To that end, KliK develops programmes with partners through which it can purchase certificates

 

Shortcomings regarding additionality

One key condition for a one-tonne CO2 reduction elsewhere to become an equivalent substitute for one's own reduction is that of additionality. This means that without the additional funding from emission certificates, the emission-reducing activity such as replacing diesel-driven buses with electric ones, would not have taken place. This condition is crucial if a climate benefit is to exist. It is also enshrined in the CO2 Act. This is because a traded tonne of CO2 legitimises a further tonne of CO2 emissions by the purchaser, which is then shown on paper as a reduction.

Those in charge of the Bangkok E-Bus Programme must therefore prove that without the programme, the public bus lines run by private operators like Thai Smile Bus would not be using electric buses before 2030. Various factors must be considered in the process: For one thing, this electrification must not have been part of an already planned government subsidy programme, and for another, this investment may not be undertaken by private parties anyway.

Subsidy programme: The official programme documentation barely explains the government's failure to subsidise the introduction of e-buses to replace the old buses, which also contribute substantially to local air pollution. According to the programme documentation, promoting electromobility and energy efficiency in the transport industry in general is part and parcel of government plans. But subsidies were granted only to public bus operators, not to private ones, in other words, not to the programme's target group. The document does not explain why government subsidies are available only for public operators. Besides, no mention is made of Thai subsidies (mainly tax advantages) for private investors engaged in the manufacture of batteries and E-buses, for instance, and of which Energy Absolute is also a beneficiary.

Investment decision: For additionality to exist, the project owner must demonstrate that no positive investment decision could have been possible without the emissions-related funding. To that end, the programme documentation contains a calculation which is meant to prove that without the additional funding from the sale of certificates, the private investment would not have been profitable and hence would not have taken place. The sales proceeds are expected to cover the cost difference between the new purchase of traditional buses and the new purchase of e-buses, calculated for their entire service life. However, neither the price difference nor the way it was calculated is mentioned in the official documents. When contacted, KliK furnished no detailed information, stating that this was "part of the contract negotiated for financial support of the E-Bus Programme", in other words, a private matter between KliK and Energy Absolute. It is therefore not possible to examine the key argument as to why the funding programme is needed for the e-buses. Consequently, additionality is at best non-transparent, and at worst, non-existent. But the price difference argument is also remarkable, in that as an investment firm, Energy Absolute specialises in green technologies. As such, the firm would hardly have decided to invest in the purchase of buses with combustion engines. On the other hand, it is plausible that a major investment in e-buses would have taken place in the next few years anyway, because, even before the 2022 launch start of the programme, Thai Smile Bus had been operating e-buses on the streets of Bangkok, a fact borne out by several media and a Twitter post with pictures (see Figure below). Hence, there must have been funding pathways for e-buses prior to the Bangkok E-Bus Programme. This clearly contradicts the assertion that e-buses would not have been introduced in Bangkok without the offset programme. At a minimum, the programme documentation should have laid out this problem in detail and explained why, despite this, the programme is deemed to entail additionality.

A Twitter post by a subcontractor dated 13.10.2021 proves that Thai Smile Bus had been operating e-buses one year before the start of the E-Bus Programme.

Lack of transparency and poor quality of the publicly available information

Once a programme is approved by both participating States, the Swiss Federal Office for the Environment (FOEN) publishes the programme documentation. It explains and lays out the methods used to calculate the expected emission reductions and also how additionality is to be ensured. The programme rationale is also explained, and other aspects such as the positive implications for the UN sustainable development goals are also addressed. This is intended to make the programme comprehensible to outsiders. A test report by an independent consulting firm is also made available, confirming the information given in the programme documentation. On the basis of these documents, FOEN and the Thai authorities verify, then approve the programme. Switzerland's approval is also made public.

The Bangkok E-bus Programme lacks transparency around key aspects. First, the programme documents refer to an Excel document in which the expected emission reductions are calculated – but the document containing the calculation is not made public. Alliance Sud requested and obtained it, and sees no reason why it should not be published. Second, key aspects such as the cost of the certificates and the scale of the requisite funding are negotiated in the private contract between Energy Absolute and the KliK Foundation. KliK writes the following in that regard: "The commercial aspects are confidential." The contractual conditions between the programme owner Energy Absolute and the bus operator Thai Smile Bus also remain private. This gives rise to the aforementioned lack of transparency around additionality. Even the FOEN, which must verify the additionality aspect of the programme, is unable to access the information in the private contract for that purpose. Responding to an enquiry from Alliance Sud, the FOEN confirms that the contracts are not part of the project documentation.

Qualitative shortcomings can also be detected in the information published via the programme documentation. The following are some examples:

●    The roles and responsibilities of the players involved remain somewhat unclear. The investment is being made by Energy Absolute, although it is Thai Smile Bus that needs the vehicles. There is no mention of the fact that the Energy Absolute group of companies not only produces renewable energy, batteries and charging stations, but also holds a stake in the e-bus manufacturing company – and, as gleaned from internet searches, acquired a stake in the Thai Smile Bus company concurrently with the launch of the programme. The long-term benefits of such an investment for the financially successful Energy Absolute group are not discussed.

●    There is contradictory information regarding the scale of the programme. The programme documentation speaks of a maximum reduction of 500,000 tonnes of CO2, for which at least 122 bus lines are being electrified (at least 1900 buses). A few pages on, however, it is stated that funding through the certificates is needed for the first 154 e-buses, which will ply eight routes and account for a fraction of the anticipated CO2 emission reductions. Besides, the investment return is calculated for just 154 e-buses. When contacted, however, KliK writes that the certificate price will cover the funding gap for all e-buses under the programme, not just the first 154.

●    Promises are made that are hard to keep. For example, the PM 2.5 air quality level is to be monitored in order to gauge the reduction in the air pollution caused by the old buses. The positive, non-polluting nature of e-buses is rightly mentioned, but even if air pollution were to diminish measurably, it would be extremely challenging to establish a causal link to the activities of this programme. The programme document outlines no such procedure.

●    The programme's "pioneering achievement" is being exaggerated, for example, through assertions that “it introduces new technology to the Thai public” – although the same company had previously been operating e-buses on the streets of Bangkok. The Klik website even contains manifestly false statements: "Thailand is currently not using electric buses on scheduled routes as a means of public transport. This is the result of a lacking infrastructure and manufacturing capacity of e-buses & batteries. This programme is therefore to be seen as a first-of-its kind undertaking to push Thailand on its EV journey towards a decarbonised economy."

 

549600500_highres.jpg

Busstop at Rachadamri road in Bangkok.
© KEYSTONE/Markus A. Jegerlehner

Conclusion: Offset certificates are no substitute for emission reductions at home

The switch to e-buses in Bangkok is a significant and good thing in itself. Switzerland, however, is a striking example of the failure to use the partnership mechanism under Article 6 of the Paris Agreement for the purposes of higher ambitions and greater climate protection. Switzerland's aim, by 2030, to cut its emissions by 50 per cent from their 1990 levels, is less ambitious than that of the EU (-55%) which, rather than rely on offsets abroad, negotiates political reforms to facilitate rapid decarbonisation in Europe. Following the defeat in the referendum on the CO2 Act in 2021 in Switzerland, the government and the parliamentary majority were all too willing to give up the pursuit of any ambitions within Switzerland. The strong reliance on carbon offsetting is not a reflection of technical challenges in implementing Switzerland's climate policy. On the contrary, Switzerland is delaying possible domestic measures, so that even faster reductions will later become necessary. Offsetting abroad is a political decision taken by the centre-right majority in the government and parliament, even though many additional measures in Switzerland would have been approved by a majority of the electorate. The market mechanism in Article 6 can jeopardise the achievement of the Paris climate goals, as it is the easiest way for a rich country to meet its goals on paper. This therefore makes a mockery of the true purpose of the Paris market mechanisms, that of helping to raise climate ambitions.

From the standpoint of climate justice, this pathway is all the more disturbing, considering that the climate crisis is hitting the world's most vulnerable people the hardest. Switzerland owes it to these people and to future generations to lower greenhouse gas emissions as quickly as possible. The International Panel on Climate Change has underscored that the world must achieve net zero emissions by the middle of the century if the Paris climate goals are to be met. There is no place in a net-zero world for substantial trading in emission reduction certificates. The Swiss policy of purchasing such certificates is therefore unnecessarily and unfairly delaying action that is urgently needed here in Switzerland. This injustice is deplored also by civil society organisations in countries in the Global South.

Lastly, like similar journalistic research on other programmes, this study also shows that offset schemes can offer no real assurance of additional emission reductions. At no level is the purchase of certificates an equal substitute for emission reductions at home.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Opinion

The solution does not grow in rice paddies

06.12.2022, Climate justice

With Ghana, Switzerland is implementing the world's first foreign climate protection project under the Paris Climate Agreement of 2015. But this project misses the mark.

Andreas Missbach
Andreas Missbach

Director

The solution does not grow in rice paddies

© Dr. Stephan Barth / pixelio.de

The climate circus on the African continent has taken down its tents again. Admittedly, there is, at last, a fund for loss and damage. However, the way it will be structured and, most importantly, how it will be financed, are still very open questions. On balance, the upshot of COP27 is: “It’s good that we have talked about it”, so let us now talk about something else.

At the very start of the conference, the New York Times threw a spanner in Switzerland’s works by publishing a critical article about its carbon offsets abroad. The first project to be implemented under a bilateral climate protection agreement between Ghana and Switzerland was unveiled five days later. In order to offset the Federal Government’s emissions, rice farmers in West Africa are to cease permanently flooding their fields. The intention is to reduce methane emissions. Implemented by the UN Development Programme, this project may well make perfect sense, but it misses the most significant challenges of reducing greenhouse gases in Africa.

Some 600 million people in Africa have no electricity, and two-thirds of their power is currently produced from fossil fuels. Yet it is possible to provide decentralized, reliable and CO2-free electricity. The money from the trade in indulgences in the form of emission certificates would best be dedicated to that purpose.

In the run-up to the conference, the UN’s Trade and Development organization pointed to an even bigger challenge: one-fifth of the countries in Sub-Saharan Africa depend on oil exports. Other countries could also be exploiting fossil deposits. The Democratic Republic of the Congo, for example, is currently putting new concessions up for auction; and as long as the USA and Australia continue to produce natural gas and coal, respectively, the North lacks any legitimacy whatsoever to preach self-denial to this extremely poor country. “Leave it in the ground” is a recommendation with a price, and Africa is unable to pay it.

It will also take enormous sums of money if today’s exporters are to forego their principal source of income. This would make it all the more crucial for the remaining oil revenues to be used for this transition, but a substantial portion of it has so far been squandered through corruption, embezzlement and mismanagement. Switzerland is in part responsible here, as borne out yet again by a court ruling in early November: Glencore employees were criss-crossing Africa with suitcases full of cash in order to obtain oil at bargain prices. Commodity trading needs to be regulated such that Switzerland ceases to bear any part of the responsibility for the resource curse. This could offer Switzerland a way of providing Africa with much more funding than by purchasing emission certificates derived from rice paddies.

Article, Global

Justice cannot be offset

23.03.2023,

Switzerland will be voting on urgent climate goals in June. Meanwhile, the Government is relying on offsets abroad for one third of its emission reductions up to 2030. That is not how climate justice works.

Delia Berner
Delia Berner

Expert on international climate policy

Justice cannot be offset

Rice cultivation in Nasia, Ghana: Is climate resilience increasing or just productivity?
© Foto: Nyani Quarmyne/Panos Pictures

It was not without pride that the Federal Office for the Environment (FOEN) unveiled the "world's first foreign climate protection project under the Paris Agreement" before the UN Climate Conference in November 2022: it is a project to reduce the methane output from rice cultivation in Ghana. Since 2020, Switzerland has concluded bilateral agreements with 11 countries in the Global South for the funding of climate protection projects whose emission reductions can then be attributed to Switzerland. Offset projects abroad had already been contemplated in the Kyoto Protocol. The rules have been reset in the Paris Agreement, which now requires not just industrialised countries but all contracting States to pursue the most ambitious possible climate policy and to report on their progress.

Switzerland is leading the way in implementing this new market mechanism, and is therefore able to set certain standards. But some crucial issues do arise, especially for wealthy Switzerland:

The issue of justice

Switzerland has committed to halving emissions by 2030, achieving net zero by 2050. It is among the countries that are still driving climate change through their high levels of greenhouse gas emissions; at the same time, the country is well-off enough financially to cope with the impacts of climate change here at home. Contrastingly, there are numerous countries and millions of people who have so far emitted virtually no greenhouse gases and yet are suffering much more from the climate crisis, as they are much more vulnerable to its adverse effects and have more limited financial resources for adaptation or for repairing the damage. The unwillingness of rich countries to reduce their considerable domestic emissions quickly and transition to climate-friendly technologies therefore runs counter to climate justice. Instead, foreign offset projects are being registered as their own reductions. This has already elicited international criticism, for example, from the New York Times.

Owing to its consumption-based footprint, its companies with worldwide operations, and its financial centre, Switzerland indeed bears some part of the responsibility for emissions abroad. However, climate protection projects abroad should be funded in addition to emission reduction projects in Switzerland – they would represent a fair share of international climate funding.

The issue of ambitions

Officially, the market mechanisms under the Paris Agreement should allow for more ambitious reduction targets, as these can be achieved at less cost and therefore lead to further emission reductions. In the short term, the cost argument can make sense for a country that emits substantial amounts of greenhouse gases, and buys certificates. For the partner country, however, it could mean that selling certificates is tantamount to giving away the low-cost possibilities for reducing greenhouse gases. What then remains for achieving their own climate goals are the more costly and complex options, as already shown in a study by the New Climate Institute. The yardstick for more ambitious goals is that a project must come in addition to other planned climate protection projects, and not be a replacement for another. In many instances, this is hard to prove. In terms of Switzerland's ambitions, this means that offsets are of additional utility only when it is not possible to make the corresponding greenhouse gas reductions in Switzerland. In the light of Switzerland's rather insufficient climate protection measures, the policy aim of not fully implementing the goal of halving greenhouse gas emissions in Switzerland by 2030 must be seen as a rejection of a more ambitious climate policy. In Switzerland's case therefore, foreign offsets cannot be described as ambition-raising.

The big question is, what becomes of the ambitions of market participants if a large number of countries enter this market. The mere possibility of purchasing low-cost certificates could induce rich climate offenders to become negligent towards their own domestic climate goals. Inversely, the ambitions of some partner countries regarding their own climate goals can hardly be raised, if climate protection is possible for them financially only if they sell their emission reductions. This is all the more so considering that, according to the International Monetary Fund (IMF), some of Switzerland's partner countries are heavily burdened with debt. In the final analysis, Switzerland is promoting a dangerous experiment that is putting the global climate at risk.

The issue of quality

If emission reductions from a climate protection project based on the bilateral agreement are to be transferred to Switzerland, the project must meet certain qualitative specifications. Besides the aforementioned additionality, and the proven reduction of greenhouse gases, a project must also contribute to sustainable development locally. Moreover, it must assist the partner country in acquiring new technologies. This approach rules out some categories of projects from the outset, e.g., those that the partner country itself can implement (called “low-hanging fruits”). These quality criteria are paramount. The ability to observe them could nonetheless be compromised, should there be substantial demand on the part of Switzerland and other countries for cheap offset certificates. In this context, the inclusion of the local people and the availability of sufficient avenues for redress are paramount. The FOEN will find it difficult to monitor the quality of these projects should their number increase substantially, and if they are distributed all around the world.

Ultimately, these issues all pertain to global climate justice. Switzerland should not use foreign offsets as a pretext for delaying its own transition to a climate-friendly future. Offset projects should by no means be simply rubber-stamped as a good thing, but must be assessed jointly with the people in the Global South. They should never replace an ambitious climate policy in Switzerland. This makes it all the more crucial to lay the groundwork for this by voting "Yes" to the law on climate goals on 18 June.

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The Alliance Sud magazine analyses and comments on Switzerland's foreign and development policies. "global" is published four times a year (in german and french) and can be subscribed to free of charge.

Offsetting abroad

Carbon offsetting abroad

Switzerland must at least halve its greenhouse gas emissions by 2030 – but the Government and Parliament are unwilling to do this through their own efforts in Switzerland. They are instead relying largely on carbon offset projects in the Global South. This violates climate justice.

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Publikationstyp
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Whether in regard to the CO2 Act or the new austerity programme: Swiss policymakers are relying increasingly on carbon certificates from abroad to meet their own climate target by 2030. Yet the plan could fail – the first programmes are already showing serious shortcomings. An analysis by Delia Berner

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Investigation Switzerland in the dense fog of carbon offsetting
Climate justice

With the purchase of new cookstoves, Ghana is expected to save more than 3 million tonnes of carbon emissions, thanks mainly to women – as a substitute for emission mitigation in Switzerland. Alliance Sud criticises the project's glaring lack of transparency and highlights controversial details that project owners attempted to hide from public view.

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New electric buses in Bangkok – no substitute for climate protection in Switzerland
Investigation New electric buses in Bangkok – no substitute for climate protection in Switzerland
Climate justice

Switzerland is celebrating the world's first carbon offset programme under the Paris Agreement that will help the country fulfil its own climate goals. Emissions are being reduced in Bangkok through the co-funding of electric buses. A detailed study by Alliance Sud and Fastenaktion reveals that the investment in electric buses in Bangkok would have taken place by 2030 even without an offset programme.

 

Read more

What it is about

Dubious emission reduction calculations have repeatedly elicited criticism of the voluntary carbon offset market. However, offset certificates are not only available for purchase by private players. Switzerland is the first country to turn to carbon offsetting projects approved through bilateral agreements with countries in the Global South, as a means of fulfilling its official climate targets under the Paris Agreement.

Alliance Sud is critical of this inglorious pioneering role for several reasons. For one thing, a wealthy Switzerland is denying the technological possibilities that have long existed for further reducing its domestic emissions, instead using money to shift responsibility abroad. For another, in many instances, the real utility of compensation projects to the global climate cannot be proven beyond doubt – and this ultimately undermines the rationale of carbon offset projects.

Rather than attempting to "offset" its own emissions, and besides making deeper cuts at home, Switzerland should fund more climate protection abroad, as a way of making its fair contribution to climate justice.
Alliance Sud monitors the offset projects approved by the Swiss government for their climate benefits and their impact on local people in partner countries.

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