The math of climate change is unforgiving. Scientists estimate that the world can only emit a few hundred billion metric tons more carbon dioxide into the atmosphere before crossing a significant threshold: warming of 1.5 degrees Celsius (2.7 degrees Fahrenheit) above pre-industrial levels. That’s the limit nations decided to strive for under the Paris Agreement. While a few hundred billion metric tons may sound luxurious, at current emissions rates, we could blow through that budget in the next decade.
If global warming surpasses 1.5 degrees, the climate could theoretically be returned to safer levels later on with negative emissions technologies — various methods to suck carbon dioxide out of the atmosphere and stash it in trees or soils, in rock formations underground, or in long-lived products like cement.
But even the most promising negative emissions solutions are not yet ready for this job, no matter how big or small it ends up being. They are nascent, expensive, and energy-intensive, and their impact can be hard to verify. There’s debate among scientists, policymakers, and activists about whether they will ever be able to clean up the atmosphere at the scale that some proponents suggest. Many in the debate are also concerned that this whole prospect of cleaning up the atmosphere later creates a moral hazard by reducing ambition to cut emissions today.
In a 2016 paper, climate scientist James Hansen and colleagues wrote that delaying mitigation today with the idea that we can fix the climate later “sentences young people to either a massive, implausible cleanup or growing deleterious climate impacts or both.”
For Johannes Bednar, a researcher at the International Institute for Applied Systems Analysis in Austria, one of the biggest problems with this prospective future clean-up job is that there won’t be any way to pay for it.
“If we don’t have a plan right now what to do in the future, then we can be pretty sure that we won’t be achieving the Paris Agreement temperature goal,” said Bednar. “We need a strategy, and we can’t wait.”
Bednar and his colleagues have a novel proposal for addressing this issue, which they describe in a paper published in the journal Nature on Thursday. It lays out a way to tie every ton of CO2 emitted, starting now, to a party responsible for cleaning it up later through a financial tool called a Carbon Removal Obligation, or CRO. You can think of a CRO as a carbon debt, or IOU. One way they might work would be for a country’s central bank to issue a controlled amount of CROs to private banks. Polluting companies would then obtain those CROs as an option for complying with regulations that put a cap on their emissions. Like a mortgage, the CRO wouldn’t cost anything up front — but the company would have to pay interest on it until they eventually “pay it back” by removing that ton of carbon from the atmosphere.
“It takes that burden of removal, and it moves it forward in time to the near term,” said Marcus Thomson, a climate modeler at the University of California, Santa Barbara, and a co-author of the paper. He said CROs could be “an enforcing agent to make sure we don’t just load the future with our problems today.”
Rather than requiring companies to do something about their emissions immediately, which today often leads to the purchase of cheap, spurious carbon offsets, the CRO system would recognize that effective, affordable methods to remove carbon from the atmosphere are not yet available. The authors argue that it could help build a market for negative emissions and phase them in more quickly.
The researchers find that CROs would not only solve the issue of atmospheric clean-up but could have valuable ripple effects. For example, they could encourage steeper emissions cuts today if companies find that reducing their emissions is cheaper than paying interest on CROs. That means less negative emissions will ultimately be needed, addressing concerns that large-scale deployment of these solutions will be unsustainable.
“That is the result we really need; that’s the most important outcome,” said Kate Dooley, a climate policy researcher at the University of Melbourne who has written about the need to consider intergenerational climate justice when it comes to negative emissions.
But Dooley also had substantial concerns about the idea. For one, it mirrors current cap-and-trade carbon pricing programs but doesn’t address any of the problems that plague those programs. She said the European Trading System, for instance, has not achieved significant emissions reductions due to loopholes in the cap on emissions, difficulties enforcing it, and industries lobbying to get free allowances to emit. Also, who will pay if these companies go bankrupt and default on their CROs? Polluting companies have a history of evading clean-up costs through bankruptcy.
“Putting the obligations for, essentially, planetary health, and thinking that monetary policy is going to deliver that I think is pretty scary, with what we’ve seen,” said Dooley, referring to the 2008 financial crisis.
Bednar acknowledged the risk that these debts could end up bundled, resold, and abstracted through financial markets the way that mortgages were leading up to that crisis. “This is the main challenge,” he said. (Carbon removal is already being financialized and traded through existing programs.)
To combat that risk, Bednar said the number of CROs on the market would need to be tightly controlled and remain traceable at all points in time. Banks would also need to learn to assess the costs and practical challenges of removing carbon from the atmosphere.
If companies don’t pay off their carbon debts, he said, or viable negative emissions technologies don’t emerge, banks could simply decide CROs are too risky and stop issuing them, or raise interest rates to levels that companies are unwilling to pay. Bednar acknowledged that in the early days the system would need to be built on trust that viable solutions to remove carbon from the atmosphere will emerge. “If you don’t see these things happening within the next 10 years, then carbon debt will be restricted to what is feasible,” he said.
While Dooley thought the idea was interesting, she pointed to other recent papers that seek to address some of the same issues by instead strengthening net-zero plans. Rather than making vague promises to be “carbon neutral” by 2050, countries and companies could be encouraged or required to set earlier, binding emission reduction targets, publish implementation plans, and describe how they will either maintain net-zero or even go net negative.
“The only lowest-risk option is reducing emissions as quickly as we can,” she said. “The next decade is really critical in reducing emissions, absolutely critical. If we haven’t totally turned that ship around, we’re not going to fix the problem with [negative emissions.]”
This story was originally published by Grist with the headline Carbon IOUs? A new plan to make companies pay back their climate debt on Jul 9, 2021.