OPINION: ‘Voodoo economics’: How SB 48 makes Alaska play the fool

This week, the Alaska House and Senate approved Senate Bill 48, authorizing the state to lease public lands for carbon offsets. The proposal is, at best, an exercise in wishful thinking; at worst, SB 48 is a collective delusion. In reality, the program might make money for out-of-state developers, but it would do almost nothing to protect Alaskan forests or the climate.

Carbon offsets are notoriously complicated. The multi-billion dollar market for offsets trades in certificates that are based primarily upon trust, making carbon credits unlike any other commodity. As a result, bad accounting and misrepresentation are rampant. It seems that Alaska’s lawmakers, like so many others, have been fooled by these ecological sleights of hand.

Earlier this year, a team of investigative journalists demonstrated that more than 90% of the credits certified by the world’s largest issuer are “phantom credits” — meaning they do not correspond to real reductions in emissions. How is this possible? Consider how carbon credits are generated. Most rely on a thought experiment: that paying money will result in an action that avoids emitting greenhouse gasses or removes carbon-dioxide from the atmosphere.

For example: paying a utility company to build wind turbines will reduce the use of fossil fuels in a given year. That reduction in emissions could then be monetized as a carbon credit. Companies will buy those credits and use them as allowances so that they can consume fossil fuels but claim to be “carbon neutral.”

In certain instances, this system works well. But it is easily abused. Senate Bill 48 is a case in point.

SB 48 creates a system to lease state forest land to offset developers, who would then “manage” the land to promote carbon storage. That means, in most cases, not cutting down trees and reducing wildfires. But say that a logging firm had been eyeing a particular patch of forest, only to learn that it was protected under a carbon offset program. The outfit wouldn’t pack up, sell its equipment, and fire its employees. Instead, it would turn to the next-best acreage (likely also in Alaska) and set up shop there. The net impact of setting aside one swatch of public forest in a vast state is nearly zero. The reason: because cordoning off one part of a forest does nothing to address the demand-side drivers of deforestation. As a result, these programs simply shift supply from one stand of trees to another.

Imagine that an operator on the North Slope reserved a few acres of their lease on the National Petroleum Reserve for conservation and sold offsets based on that action. The operator wouldn’t drill fewer wells; they would just move the rigs somewhere else. Again, the net impact of these sorts of credits on actual emissions is almost nonexistent. The technical term for this is “carbon leakage,” and it has been documented in depth, including by my colleagues at the University of Oxford.

Senate Bill 48 is just as problematic as the North Slope hypothetical. High-quality carbon offsets exist, but they rarely, if ever, involve protecting mature North American forests from commercial logging.

Skeptics of the bill might have been reassured by a clause requiring that credits issued for state forests must be “validated and verified.” But the industry that certifies credits is completely unregulated. In this carbon Wild West, for-profit companies compete for market share, creating a race-to-the-bottom for the cheapest and least-stringent standards. Many of the world’s leading certifiers are purveyors of shoddy credits, using poor methodologies that put profit over rigor.

The risk for Alaska is twofold. First, leasing out state forests to unscrupulous offset developers in the Lower 48 does nothing to protect Alaska’s biodiversity and subsistence resources. Second, failing to do our due diligence before developing a new revenue stream broadcasts a poor message about Alaska’s business savvy.

Alaska is unwise to engage in state-sponsored offsetting without exercising a higher degree of caution. In this situation, the emperor has no clothes — or a loincloth at best.

If Alaska wants to get into the offset business, it should prioritize integrity over convenience and instruct the Department of Natural Resources to learn the nuances of this complex industry before diving in headfirst. In the best-case-scenario, the state would become a global leader for high-integrity carbon-dioxide removal. There are a number of effective technologies and approaches for achieving this mission-critical task. Setting aside Alaska’s forests simply isn’t one of them.

Rep. Kevin McCabe (R-Big Lake) put it best: “It all kind of sounds like voodoo economics,” he said, before voting for the bill anyway.

Rep. McCabe was right. And Alaska should have no business playing the fool.

Stephen Lezak is a researcher living in Nome, based at the University of Oxford, where he works at the Smith School of Enterprise and the Environment, and the University of Cambridge, where he is a doctoral candidate.

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