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The Dartmouth
February 20, 2024 | Latest Issue
The Dartmouth

Capone: Money Grows On Trees

Carbon offsets are a sham — for the most part.

Global efforts to reduce carbon emissions have led to a restructuring of how we value the world around us, yet they highlight the major consequences of commodifying nature. The economic value engendered by the renewed emphasis on environmental, sustainable and governmental (ESG) investing is perhaps the most visible corruption of capitalism to date.

Investment analysts highlight the hitherto unrecognized, or “hidden,” enterprise value of trees are carbon sinks. The global voluntary carbon market was valued at just over two billion in 2021 and is expected to reach 17.11 billion by 2027.

Recently, large companies like J.P. Morgan have entered into nine-figure contracts to purchase vast swaths of forested lands. These purchases are none other than a business strategy — accounting for both potential tax exemptions and also as an appreciating, or at the very least, non-depreciating, asset that can be sold without much distress or contingency.

The value of the land comes from its classification as a “carbon offset” — that is to say, all the sources of vegetation draw down carbon dioxide from the atmosphere and sequester it within their trunks, roots and other organic matter in the form of elemental carbon. As a result, this reduces the amount of greenhouse gasses like carbon dioxide present in the atmosphere — a natural process that has been occurring for millions of years, but now companies are able to profit off it.

The purported profitability of carbon offsets comes at the height of calls for a decrease in emissions. Climate change activism has companies shifting to sources of clean energy to reduce their carbon footprint. Regardless, there are just some things that need oil, coal, or other fossil fuels to remain operational.

Carbon offsets thus functionally represent purchasable get-out-of-jail-free cards that enable companies to artificially “lower” their footprint by offsetting their emissions with productive assets that sequester carbon dioxide, such as trees. That is to say, companies can continue pollutive actions and, instead of reducing them (either at all or to a governmentally prescribed threshold), companies “offset” these emissions with assets that actively combat climate change. For example, purchasers of land in the Amazon region could earn carbon credits by refraining from deforestation, which otherwise would likely yield a greater land valuation than if used for conventional agriculture.

This establishes dangerous precedents, however. The first is that it incentivizes companies to buy more land — increasing corporate control and decreasing the sanctity of the natural environment. More importantly, it provides a way for companies to slow, or even temporarily bypass, the reduction of actual emissions. I find that selling parcels of land on the premise that had they not been sold, the buyer or others would have cut down all the trees is an astoundingly far-fetched and laughable conclusion.

In fact, many carbon offset credits actually come from nature reserves selling their land to large corporations — reserves that, by their very nature, should already be protected areas. Take companies like Disney, Shell and Gucci, which have purchased carbon credits from Verra, the largest carbon credits certifier. Through their verified carbon standard (VCS), Verra has issued over three-quarters of all carbon offset credits to date. 40% of these deals come from their established Rainforest Protection Programme. Calls for “Urban Wealth Funds” (UWFs) encourage state governments to sell land in national parks as carbon offsets. Half a world away from their Atlanta headquarters, Delta Airlines invested $30 million in carbon offsets in Southeast Asia. Delta’s 780-square-mile parcel of land was purchased from Cambodia’s Keo Seima Wildlife Sanctuary and Indonesia’s Rimba Raya Biodiversity Reserve on the island of Borneo, which aim “to protect trees from illegal logging and expanding palm oil plantations.” 

However, there are undeniable benefits of the current carbon offset credit system. Delta’s project at Keo Seima has created jobs in law enforcement and community agents, who regularly patrol the reservation and preserve the pledge to increase vigilance against illicit logging, Moreover, Keo Seima includes secured land tenure for the Indigenous Bunong people. And while carbon offset programs tend to happen in areas where mills have closed and log prices have thus declined, certain deals — like J.P. Morgan’s historic $500 million purchase — focus on regions in which logging is still a prominent industry. Thus, these parcels of land are valued much higher, since the likelihood for deforestation is higher. Yet, these carbon credit purchases don’t explicitly prevent deforestation: according to the Wall Street Journal, J.P. Morgan’s deal is for “manag[ing] the commercial forests in Mississippi, Oklahoma and Arkansas for wood production as well as carbon capture.”

I discovered another issue while attempting to calculate the percentage of carbon offset credits that were purchased from a pre-existing wildlife conservation organization, a number I suspect to be surprisingly high. Though I was able to find certain data on specific corporations, when I investigated the globally traded volume and credit issuance of carbon offsets in 2022, the only report that was publicly available was sheltered behind a paywall. In order to access the 200-page PDF, I would have had to pay $2,450 just for a single-user license. I find it ironic that the data that supposedly would bolster corporations’ efforts to promote ESG goals are relatively inaccessible from a practical standpoint.

Another problem of carbon offset credit programs is the issue of mathematical calculations. Geographic differences lead to differences in carbon storage capacities — that is to say, land in the continental U.S. has different plants, which grow in different conditions, than land in Mumbai. Moreover, the ability for plants to draw down carbon is relatively volatile, shifting with seasons, harvests, wildfires, droughts and other natural phenomena. Moreover, as the National Resources Defense Council explains, the ability to calculate how much carbon is actually drawn down (“carbon accounting”) “is based not only on scientific data but also on policy decisions around what data to use, which threats and landscape changes to count, and which forests to include.”

Finally, accepting current carbon offset valuations leads to one of two implications. On one hand, since these carbon credits generally apply to parcels of land valued at prices only affordable to large firms or governments, it can perpetuate the norm that big corporations receive greater flexibility and leveraging powers than the average consumer. Conversely, all non-commercially owned parcels of land are undervalued, since greenery as a carbon stock wasn’t factored into property valuations when it was originally purchased. For example, a home purchased in 2010 for $500,000 reflects the material costs, labor costs, the cost of land and market surcharge, along with other factors. However, it doesn’t include the ‘green potential’ of the on-property flora to draw down carbon from the atmosphere.

The latter would only lead to even greater inflation in the housing market, since if all parcels of land, regardless of size, were subject to valuation based on carbon stock, home prices would continue to rise. Ironically, this represents the opposite of the time-value of money; that is to say, “carbon stock” is time-dependent; operating under the assumption that valuing it as so would lead to greater adoption of carbon credits, it is more valuable today (when there is a greater need for carbon storage and lesser supply) than it will be tomorrow (when more individuals “purchase” carbon stocks).

Ultimately, programs for carbon offset credits reinforce yet another gold rush. A metaphoric mining of the earth, the danger posed by these programs constitute them as a net negative, as they represent yet another way to strip nature of its own resources. What happens when every tree is bought? What becomes ‘nature’ then? If carbon offset programs are here to stay, then the accountability for land preservation, maintenance and protection must be vastly heightened and held to an equitable standard across all socioeconomic strata.

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