Trey Hill’s family has been working the land around Rock Hall, Maryland, since the early 1900s. Their company, Harborview Farms, now harvests corn, wheat and soy from thousands of acres. But something is different this year. The Hill family has a new crop: sequestered carbon, which they sell to individuals and companies across the United States.
Hill is doing his carbon farming in partnership with Nori, a Seattle-based startup that sells what it calls “carbon removals.” Hill deploys regenerative agriculture techniques, such as the use of cover crops, to draw carbon dioxide from the air and lock it into the soils he works. Nori then helps Hill verify the amount of carbon that he has removed from the atmosphere and sell the associated credit as a carbon offset. For $15, anyone can now fund Hill — and soon, many other farmers — to remove one ton of carbon dioxide (CO2) from the atmosphere. (For comparison, a round-trip economy-class flight between San Francisco and London generates around a ton of CO2, according to the International Civil Aviation Organization).
The idea that companies can shrink their carbon footprints by paying other organizations to reduce greenhouse emissions is around two decades old. But Nori represents several game-changing trends, including the use of new technologies and an emphasis on removing CO2 from the atmosphere rather than reducing emissions. Together with the arrival of new buyers, most notably from the aviation industry, these trends will bring major changes to the market for carbon offsets in 2020 and beyond.
Until now, the bulk of the spending on offsets has gone to projects that avoid emissions. Some companies work with conservation organizations to prevent deforestation, for example. Others fund the development of renewable projects that displace fossil-fuel plants. This work remains essential, but recent reports from the Intergovernmental Panel on Climate Change have made it clear that emissions reductions alone are not enough — we also need to remove billions of tons of greenhouse gases from the atmosphere if we’re to avoid the worst effects of climate change.
In anticipation of future demand for removal offsets, Nori has built a digital marketplace that connects buyers with projects that draw down and store CO2, starting with a focus on farmers using regenerative agriculture to increase levels of soil carbon. Another new marketplace, developed by the Finnish company Puro, is offering removal credits linked to the production of biochar (a charcoal-like substance used to safely store carbon) and construction materials made in part from greenhouse gases.
The arrival of these marketplaces looks to be well-timed, because a few first-mover companies have already announced plans to invest significant amounts in carbon removal. Last August, payment services company Stripe committed to investing at least $1 million a year in carbon sequestration projects. A month later, Shopify, which develops e-commerce software, matched that target and declared that it would focus on industrial-scale solutions that involve capturing CO2 from the air and storing it deep underground. “Our goal is to kickstart the demand and predictability of this market so industrial engineering can scale and the price can come down,” says Shopify CEO Tobi Lütke.
When Stripe and Shopify make their investments in carbon removal, they will have the option of working with Nori, Puro and other more established offsets sellers, such as Natural Capital Partners. Many of these firms are likely to see a surge in business as the demand for offsets of all kinds increases.
In 2018, the market for voluntary offsets more than doubled in size to 98 million tons, according to Ecosystem Marketplace, which collects data on market-based approaches to conserving ecosystem services. “In the past decade, a good year was always old companies doing new buying,” says Steve Zwick, the publication’s managing editor. Now major new buyers are entering the market. Companies are learning they can’t reduce emissions as deeply as they want to, and so are investing in offsets as well as reduction, explains Zwick.
One significant new buyer is Shell, which in 2019 committed to spending $300 million on forestry projects and other nature-based solutions over the next three years, in part to offset some of the emissions produced by the aviation fuel it sells in Britain and the Netherlands. Airlines will also likely be buying large quantities of offsets in coming years. British Airways and Air France have committed to offsetting 100 percent of emissions from their domestic flights starting this year.
And the industry as a whole has committed to capping emissions from international flights at current levels, which is forecast to require purchases of around 150 million tons a year by 2025.
Any company purchasing an offset should be asking hard questions about the ability of the project to reduce emissions. Offsets are sometimes criticized as unreliable, a complaint that surfaced again recently after an investigation by ProPublica into one class of offsets — forest-protection projects — concluded that polluters often “got a guilt-free pass to keep emitting CO2, but the forest preservation that was supposed to balance the ledger either never came or didn’t last.” Proponents of forestry projects noted that while ProPublica highlighted real problems, it also ignored known solutions to those problems. Nevertheless, the reputation of offsets probably took a knock.
It will always be challenging to plant and protect forests in remote areas of the world, particularly in regions of political instability. But another trend may help matters. Over the past few years, the resolution and coverage of satellite imagery have improved while prices have fallen. These changes make it possible to monitor forests at a new level of accuracy.
“You can identify someone who’s cutting down a tree with one day of notice,” Diego Saez-Gil, an entrepreneur working in this space, told Fast Company. Saez-Gil’s startup, Pachama, combines data from satellites, drones and a laser-scanning technology known as lidar with machine learning to create a dashboard that estimates the amount of carbon stored in a forest.
The emergence of these technologies suggests that the market for offsets is going to grow both in size and impact. At a time when the governments of the world’s two largest emitters, the United States and China, are failing to recognize the magnitude of the climate crisis, that’s a welcome piece of good news — and a great example of how the private sector can help fill the gulf left by government inaction.