(July 4): Virtually every established company on the stock market, globally and locally, has produced plans on achieving net-zero emissions through decarbonization initiatives, although this is often conflated with offsetting emissions, most notably via the carbon market. Several Malaysian companies, such as Petronas, have recently announced a commitment to offset Scope 3 emissions, which are from sources not directly owned or controlled by an organisation.
The voluntary carbon market exchange was launched by Bursa Malaysia in December 2022 and gave room for a local carbon market to flourish. Alongside the mandatory sustainability reporting enforced by Bursa for listed companies to report ESG efforts, the general trend of ‘sustainability’ in Malaysia seemed to be headed towards offsetting carbon emissions.
But is this the main solution to the climate action challenge and net zero targets that we ought to have?
On April 11 this year, I learnt that the UN-supported Science Based Targets initiative (SBTi), a major climate-certification organization, announced a controversial plan to allow companies to meet their climate targets via offsetting Scope 3 emissions, via carbon credits purchased through the carbon market.
Staff of SBTi disapproved: they released a statement calling for the withdrawal of the SBTi statement allowing offsetting, and demanding the resignation of the CEO and the board members, as reported by The Guardian UK.
The collective protest was to ensure that “SBTi does not become a greenwashing platform where decisions are unduly influenced by lobbyists, driven by potential conflicts of interest and poor adherence to existing governance procedures”.
If carbon markets allow companies to offset emissions by a simple purchase, they would allow pollutive industries to carry on business as usual without significantly affecting their business model. This will disincentivise businesses from focusing on the more urgent matter of reducing greenhouse gas emissions.
Despite much praise for the voluntary carbon markets initiative, including erroneous claims by think tanks and corporate analysts, the carbon markets, alongside other offsetting methods are giving an illusion that climate targets are going to be met. This is a fundamental distraction from the more immediate need by industries to cut greenhouse gas emissions.
While many potential benefits have been proposed in funding the climate transition, including climate restoration projects, community mitigation, and so forth, much of it remains speculative.
It cannot be verified fully that revenue from carbon offsets is channelled into local communities for climate action. Many benefits are claimed about climate restoration projects, with little to no action taken nor attention given by investors. Often, these projects are not even effective.
Investigations from The Guardian news media, and researchers from Corporate Accountability, a non-profit, revealed that of the top 50 carbon credit schemes in the global market, 39, or 78% of these projects failed to meet their promised emission cuts due to exaggerated climate benefits and underestimated potential harms. They could not guarantee the cutting of greenhouse gases, but rather shifted them elsewhere or were leaking emissions.
These projects constitute US$343 Million of sold or retired carbon credits, amounting to nearly one-third of the entire global voluntary offset market, totalling about US$2 billion, the Guardian reported in the same investigative report.
Suppose this approach continues towards cutting emissions via carbon credits, offsetting rather than committing to a straightforward phase-out of fossil fuels and other greenhouse gas-intensive industries. In that case, we cannot prevent global warming from breaching the 1.5° Celsius limit adopted under the Paris climate treaty.
2023 was the hottest year ever measured: The European Union’s Copernicus Climate Change Service reported that from February 2023 to January 2024, global average temperatures rose 1.52° Celsius. If this persists for consecutive years until the average global increase reaches the tipping point of 2° Celsius and beyond, we could start seeing irreversible damage to the climate, the IPCC AR6 Synthesis Report 2023 stated with high confidence.
At COP28 last year, the parties agreed on an unfortunately ambiguous statement to phase out fossil fuels without concrete action plans. Transition plans have repeatedly emphasised on energy security, still allowing the use of fossil fuels as a necessity during the transition period. However, this still justifies the repeated expansion of fossil fuel projects worldwide, with Australia having 116 new oil and gas projects in the pipeline, and the UK beginning the licensing of new oil and gas fields in the North Sea.
Back in May 2021, Fatih Birol, the executive director of the International Energy Agency (IEA) told The Guardian UK that “there can be no new investments in oil, gas and coal, from now — from this year,” if policymakers are serious about attaining net-zero.
Petronas however still assigns a ‘role’ for oil and gas in the energy transition, despite its infeasibility in a net zero decarbonization scenario, with Carbon Capture and Storage Projects (CCS) being lauded as a way to mitigate the climate crisis. It is but another justification for the continued reliance on fossil fuel extraction.
By the time carbon offsetting products and experimental technology in CCS are implemented and become fully operational, emitted greenhouse gases will have already caused much more damage. More funds will then be needed to repair the damage on a global scale. What is needed now is to cure rather than prevent an increasingly fatal disease.
Simply put: we are betting in a leisurely fashion on future solutions, instead of urgently resolving the problem with our harmful carbon-producing industries now.
Continuing to pour out more greenhouse gas emissions while offsetting some of them ignores a straightforward and most comprehensive solution — taking steps towards closing fossil fuel refineries, and halting new fossil fuel extraction projects — that would immediately reduce these emissions.
The major problem is not issues with decarbonization, regulations or compliance with sustainability goals. Instead, it is a need for an immediate reduction in greenhouse gases contributing to global warming, against the risk of exceeding a global temperature increase of 1.5° Celsius to prevent a climate catastrophe.
We do not have time for fancy words, or complicated offsetting emissions plans that cling to short-term profit models. It is clear that a full-scale reduction in carbon emissions, and greenhouse gas reductions by industries, including the petrochemical industry, is absolutely needed.
We cannot afford any distractions in the form of the carbon market. The entire national and global community, encompassing the business, investing, and policymaking sectors, needs to be clear on the urgency of the matter and head rapidly towards an immediate downscaling.
The world must head towards a full scaling down and halting of all harmful greenhouse gas emissions immediately. This includes a divestment from fossil fuels and carbon-intensive industries. The funds from these sectors must be allocated to a full-scale investment in deploying renewable energy, and on pollution-free production methods.
Malcolm Wong Jun Xiang is an undergraduate student at the University of Nottingham in Malaysia