As the world works to bring global emissions down, we are still continuing to emit CO₂. This has opened up the need for an interim solution to allow companies to reconcile the negative environmental consequences of their business operations.

Carbon offsetting is a trading mechanism that allows governments or businesses to compensate for their greenhouse gas emissions by investing in projects that reduce, avoid or remove emissions elsewhere. Carbon credits are the most common form of offsetting and work like permission slips for emissions. By purchasing a carbon credit, usually from a government or verified carbon market, the company gain permission to generate one ton of CO₂ emissions.

 

Types of carbon offsetting:

There are two main type of carbon offsets – CO₂ removal (CDR) and avoidance credits:

Avoidance credits minimise the volume of greenhouse gases being emitted e.g., replacing a fossil fuel power plant with a wind farm or a solar farm.

Many of the traditional carbon credits found on offsetting markets (e.g., Gold Standard) focus on carbon avoidance. Whilst these credits do help to support important projects to help mitigate future carbon emissions, they fail to address the emissions that are already polluting the atmosphere.

CDR credits offer a means to actively remove CO₂ from the atmosphere, which presents a more fair trade for the environment e.g., reforestation or biochar.

Current reports from the IPCC suggest that CDR could be used to reverse the global increase in temperature following an overshoot of the 1.5 degree Celsius that is targeted, by removing large quantities of CO₂. However, it is important to remember that CDR is not a silver bullet for rising emission levels, and there should still be a continued focus on decarbonisation to meet the Net Zero targets in line with the Paris agreement and the IPCC.

There are many exciting new methods being developed in the CDR realm. An example of this is aquatic biomass sinking, where large clusters of seaweed are sunk to the bottom of the ocean using gravity as a means of storing carbon for hundreds of thousands of years. Although with the implementation of more high-tech carbon capture methods, such as direct air capture, there is a growing risk that the average market user is priced out of the most robust CDR offsetting credits due to their price being up to 10 times higher than that of nature-based solutions, such as forestation or biochar.

 

What makes a good Offset:

Whether it be a new CDR technology or a traditional credit, there are 5 key pillars which define a rigorous offset:

1. Additionality – The additional level of CO₂ that is removed beyond what would have happened naturally (e.g., from forests or oceans)
2. Permanence – The amount of time that CO₂ sequestered by the credit will remain removed from the atmosphere
3. No Leakage – All the CO₂ that is captured remains sequestered in a secure manner
4. No double counting – Ensuring a carbon credit and the climate impact it represents isn’t claimed by more than one entity
5. Verifiable – There is measures in place to ensure that the offset is delivering on its promises

 

According to the Oxford Offsetting Principles, there is currently a lack of regulation and robust quality control in place for carbon credits. This has led to more than 90% of the current carbon market being over credited, with many being low-quality credits.

To help tackle this issue, new measures are being implemented. An example of these measures is the Voluntary Carbon Markets Integrity initiative (VCMI), which helps to drive real change to meet the 1.5˚C target set by the Paris Agreement by fostering a vision of high-integrity carbon offsets. The Oxford Offsetting Principles introduced a new framework that supports this new vision, which ensures that offsets are used as a mechanism for good. The framework follows the following principles:

 

1. Cut emissions as a priority, ensure the environmental integrity of credits, and regularly revise as best practice evolves
2. Transition to carbon removal offsetting for any residual emissions (away from emissions avoidance or reduction) by the global net zero target date
3. Shift to removals with durable storage and low risk of reversal
4. Support the development of innovative and integrated approaches to achieving net zero

 

Conclusion:

Whilst in principle the concept of a carbon credit is a great idea, in practice it leaves a lot to be desired. In their current state, many carbon markets are broken. This comes down to the fundamental link between offsetting and Net Zero, as it has caused a radical shift within businesses and institutions to move their focus away from decarbonisation and simply rely on carbon credits as a way to absolve responsibility for their carbon emissions and negative environmental impact.

With international travel and in-person events remaining fundamental to IR activity, we believe it is vital to use offsetting in addition to finding ways to mitigate the amount of carbon emitted to ensure a minimal environmental impact.

This is echoed in our GreenerRoadshows mantra: “first we mitigate, then, what we cannot avoid, we look to offset”. To maximise our impact in line with science-based research such as the aforementioned Oxford Offsetting Principles, we have recently developed a tailored project portfolio with Klimate, including 7 projects with a mix of CDR methods.

The main conclusion of this blog is that decarbonisation should remain at the forefront of any ESG or Net Zero strategy. It is important to remember that offsetting should be a last resort when it comes to reducing a company’s environmental impact, as avoiding producing emissions where possible provides a clearer and longer-term solution for reducing the overall environmental footprint of a business.