New forests larger than the land area of North America would need to be planted to offset the potential carbon dioxide emissions from the fossil fuel reserves currently held by the world’s 200 largest fossil fuels companies.
The finding comes from an analysis published in Communications Earth & Environment, which also suggests that most of the companies would have a negative market valuation if the cost to offset their entire reserves was deducted from their current valuation.
Future emissions scenarios usually include both a reduction in carbon dioxide emissions and some offsetting of these emissions. Offsetting is necessary as most scenarios assume that during the transition to clean energy there will be some use of the 182 billion tonnes of carbon currently held in the reserves of fossil fuel companies. Afforestation — planting trees to create new areas of forest — is often proposed as an offset solution because of the low cost. However, the practicality of afforestation for widespread offsetting is currently unclear.
Alain Naef and colleagues assessed the viability of using afforestation to offset the total potential emissions from the current reserves of the world’s 200 largest fossil fuel companies by 2050. They found that, to offset the existing reserves, afforestation would be needed over an area greater than 24.75 million square kilometres — larger than the continent of North America. Such a large area could only be converted to forest by displacing existing communities and farmland, and disrupting existing essential natural habitats.
The authors also estimated the “net environmental valuation” of the studied companies. They defined this as the financial value of a company if the cost to offset the potential emissions from their existing fossil fuel reserves was deducted from their current market valuation. The authors found that, at the 2022 average European emissions offset cost of US$83 per tonne of carbon dioxide, 95% of the companies would have a negative net environmental valuation.
The authors conclude that, while their analysis has several simplifications, the results show that it would be more economically profitable for companies to stop extracting fossil fuels than to extract and offset them, and that afforestation is not a viable method for offsetting all carbon dioxide emissions.
