Greenhouse gas (GHG) emissions trading systems are one of the mechanisms employed to mitigate climate change in the United States and around the globe. When emitters exceed their permitted amount of GHG emissions, they can purchase emission reduction credits from those in the market who are below their own emissions threshold. This results in a carbon offset where an emission reduction or equivalent removal of carbon dioxide (CO2) from the atmosphere by one entity is used to compensate for emissions produced by another entity. This system of regulating carbon emissions is also known as cap-and-trade.
Forests play an essential role in GHG emissions trading systems given their propensity to sequester and store carbon. The biological growth of trees naturally captures CO2 from the atmosphere and provides a low-cost GHG mitigation tactic that does not require the development of new technology. A forest carbon offset is defined as a metric ton of CO2 equivalent purchased by a GHG emitter to compensate for emissions occurring elsewhere. Projects that produce carbon offsets can include afforestation (planting trees in previously unforested sites), reforestation (planting trees in previously forested sites), and other forest management activities aimed at either increasing carbon storage or preventing loss of carbon stored in trees.
Despite the great potential of forests to combat climate change, forest carbon offsets face numerous challenges and have not gained the traction necessary to be a more effective global solution. For example, carbon leakage occurs when payments that promote activities to sequester carbon lead to changes in land use elsewhere that result in additional CO2 emissions. While tree growing may not require the use of new technology, there is a lack of tools to accurately monitor, report, and verify carbon sequestration progress, especially in developing countries. Impermanence is another concern associated with forest offset projects since they are susceptible to reversal, or the release of stored carbon back into the atmosphere. The reversal of forest offset projects is exacerbated by the increasing risk of natural disturbances such as fires, insects, and severe weather. Obtaining carbon credits through forest offset projects can also disincentivize emitters from investing in emissions-reducing technologies because the offsets lower the costs of complying with CO2 targets.
The problems identified above are inherent within forest carbon offsets and the emissions trading scheme context. However, there are serious problems with forest carbon offsets that hit closer to home: environmental justice issues are of increasing concern, particularly in California’s cap-and-trade system.
California launched its cap-and-trade program in 2013 as part of its statewide initiative under the Global Warming Solutions Act to lower GHG emissions by 40 percent by the year 2030. The cap-and-trade program is one of the largest of its kind in the world and the first carbon market in the United States to allow for forest offset projects. The types of projects eligible for offset approval include Improved Forest Management (IFM) projects (thinning or stocking more trees), avoided conversion (commitment to retain forest as forest), and reforestation. The California Air Resources Board (CARB) administers the program and approved the first two forest management projects in the state and the first out-of-state project located in Maine during the first year.
Since the forest offset projects can be located outside the state, California’s cap-and-trade program does not always benefit its residents and has even led to greater inequitable environmental harm. A 2019 study found that the facilities regulated under the program are disproportionately sited near low-income and minority neighborhoods. Another report discovered that a higher concentration of GHG-emitting facilities in an area was correlated with a higher percentage of minority residents. Even more troubling is the fact that most of these facilities reported higher annual average GHG emissions since the program’s inception. While total emissions remain well below the established threshold, California’s disadvantaged communities are experiencing more air pollution.
How is it possible that a program aimed at reducing state emissions totals is actually resulting in greater harm? The answer lies in the process of carbon trading. For example, when a company operating an oil refinery in California purchases carbon credits through a forest offset project, it is buying the right to continue polluting. If the company had instead been forced to decrease its on-site emissions, the amount of pollution affecting adjacent communities would have been reduced. At minimum, the company could have purchased its credits through a forest project near its facility so that those living nearby might enjoy the health benefits of outdoor recreation. Instead, under California’s cap-and-trade program, “[e]very offset credit purchased from a far-off forest management project is a lost opportunity to reduce pollution . . . .”
The problem of exporting climate benefits out of the state has grave implications for the communities situated near GHG-emitting facilities. Large emitters not only release CO2, but other hazardous pollutants such as sulfur dioxide, carbon monoxide, particulate matter, and lead. These pollutants have been shown to cause respiratory infections, asthma, headaches, and nosebleeds amongst nearby residents who are forced to inhale the toxic air each day. Thirty-five percent of the revenues generated by California’s cap-and-trade program are required by law to be directed to environmental justice communities; however, polluters have been allowed to avoid localized emission reductions while denying public health benefits to disadvantaged groups who end up bearing the brunt of the impacts.
Environmental justice advocates have continuously criticized California’s cap-and-trade program and the outsourced forest offset projects that do not benefit those who pay the immediate price of pollution. In addition to the environmental justice implications, analysts have voiced reservations about whether the cap-and-trade program has had any significant effect on overall emissions at all. As experienced by the low-income communities and communities of color living near refineries and other emitters, carbon offsets have enabled pollution to remain trapped at the sources themselves. The inequities of the cap-and-trade program has spurred discussion at the state level and California Governor Gavin Newsom recently announced plans to prepare an assessment of the state’s various climate change initiatives. The results of the program assessment are not expected to be released until the end of 2022 and any potential changes may not be implemented until 2024.
Achieving environmental justice in the emissions trading context will require intentional policies and carefully crafted carbon markets. In particular, incentivizing local emissions reductions could enhance air quality for disadvantaged communities and increase the equity of California’s cap-and-trade system. Forest carbon offsets can be a component of this solution if the resulting projects support local communities and help to address harmful emissions at the source. Projects to protect forest resources can and should certainly occur, but they cannot come at the expense of those who already suffer due to air pollution exposure.
