In 2013, California passed a landmark law that capped greenhouse gas emissions, but let companies offset their pollution overages by investing in forest preservation throughout the country — the idea being that trees absorb excess carbon from the atmosphere. The statute was considered a model initiative to combat climate change, while providing businesses some flexibility in reducing their pollution.

Eight years later, though, there is a big problem: As of last week, there were more than 41,000 wildfires across the country, torching more than 4.6 million acres — a swath nearly the size of New Jersey. And more than 150,000 of those acres have been in West Coast forests that were supposed to be offsetting corporations’ carbon emissions.

When the original program was conceived, California presumed that some forests would naturally burn — and therefore the law required polluters to buy slightly more woodland as an insurance mechanism to account for such losses. But experts say the amount of woodland set aside in these so-called “buffer pools” wildly underestimated the amount of trees that are now burning in the era of climate change.

And companies that invested in forestland to counter their greenhouse gas pollution and look responsible are not obligated to invest more when wildfires subsequently incinerate those offsets.

The result: The fires are now burning up the much-touted emissions reduction projects that are necessary to combat the climate crisis.

Underestimating Wildfire Risks

When forests burn, they release carbon dioxide. That’s why California’s carbon offset projects were designed to set aside 2 to 4 percent of their forests as excess woodlands to account for such emissions. But the size of these buffer pools are “nowhere near adequate for the risks that forests face in the United States in a changing climate,” said William Anderegg, Associate Professor, University of Utah and lead author of a 2020 paper that assessed climate-driven risks to carbon offset projects.

Anderegg has found that the risk of moderate and severe wildfires across the U.S. roughly doubled between 1984 and 2000 — an increase partly driven by climate change. According to him, the 2 to 4 percent of woodland set aside in California’s carbon offset projects were never enough to cover wildfire losses, even before accounting for the impacts of climate change.

“If you look at the historical record alone and we assume that the the rest of the century looks like the 2010s — a very low estimate — the [wildfire] risk is 10 percent,” he said. “But the probable risk, if you account for climate change, is in the 20 to 30 percent range.”

Recent wildfires have confirmed Anderegg’s warnings. This fire season alone, blazes have consumed significant portions of several of California’s carbon offset projects around the West Coast, including almost a quarter of the Klamath East project in Oregon and 12 percent of the Colville project in Washington state.

Discrepancies like that are supposed to be covered by the fact that all carbon offset projects contribute credits to a shared pool of excess trees, such as how insurance companies use risk sharing to protect against isolated losses.

But according to Bodie Cabiyo, a PhD candidate at UC Berkeley’s Energy and Resources Group, “many of these forest offsets are in wildfire-prone western forests, like in California.” That means the portfolio isn't diversified enough to cover wildfire risks over the next 100 years.

These buffer pools of trees are also plagued by another problem. A recent study by the climate-research nonprofit CarbonPlan found that the environmental benefits of California’s carbon-offset forest projects are being systematically over-valued, so much so that they are being credited with removing 30 million tons of carbon emissions that they didn’t actually offset.

Such over-appraisals also apply to the sections of the projects set aside to cover wildfire risks.

“Buffer pools are filled with credits which were already overestimated,” said Barbara Haya, lead author of the CarbonPlan study and director of the Berkeley Carbon Trading Project. That means these pools are even less likely to adequately cover the emissions impact of forest fires.

Representatives of the California Air Resources Board, (CARB) which runs the state’s cap-and-trade program, did not respond to a request for comment.

“We’ve Bought Forest Offsets That Are Now Burning”

Major brands have invested in carbon offset forest projects to meet emission reduction targets — and many of those companies publicly brag about them to try to convince customers and investors that they are environmentally responsible businesses.

Now some of those offset projects are going up in smoke —but the companies that used those offsets to comply with the program do not have to buy up more forestland to compensate for the losses if they burn through their buffer pools.

Microsoft, for example, publicly boasted of its investments in carbon offsets. That included a major investment in California’s Klamath East project, a stretch of protected woodland managed by a forest products company that lost nearly 100,000 of its 400,000 acres to this summer’s Bootleg Fire in Oregon.

“We’ve bought forest offsets that are now burning,” Elizabeth Willmott, Microsoft’s carbon program manager, said at a carbon removal panel earlier this month. “We don’t want this to force us to pull out of investing in nature-based solutions… [but companies must] get really smart about what the risks are.”

Similarly, BP, the multinational oil and gas company, recently touted its investments in carbon offsets after spending more than $100 million to purchase 13 million emission credits from the massive Colville carbon offset project in Washington state. But this summer, roughly 50,000 of the project’s 450,000 acres burned to the ground.

Last year, a California state working group tasked with revamping the state’s offset protocols submitted a report recommending prioritizing fire suppression efforts in carbon offset forest projects, among other endeavors.

But Anderegg at the University of Utah said that the task force’s recommendations were skewed towards business interests that benefitted from carbon offset projects, including timber companies. And earlier this year, several environmental advocates resigned from the task force, said Anderegg, because “the group was not taking their interests into account.”

According to Haya, director of the Berkeley Carbon Trading Project, no amount of project tweaks or offset recalculations will address the core problem of California’s carbon offset program: Companies are choosing to invest in forest offsets because it allows them to avoid the difficult but more important work of fully reducing their own emissions.

“If we want our climate policies to succeed, we need to take a clear look at the evidence and decide whether we should rely on offsets at all,” said Anderegg. “Reducing emissions directly will be far more effective and less risky.”

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