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All you need to know about carbon offsetting
Just like our current climate, have you heard of a hotter topic of conversation than carbon? Carbon offsets, carbon credits, carbon neutral, carbon, carbon, carbon… Navigating the carbon market can be confusing, but we're here to help! This guide will break down everything you need to know about carbon offsetting. First things first, let's start with a bit of definition.
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What is carbon offsetting?
A carbon offset is another term used to describe the removal or compensation of carbon emissions. It is defined as a 'measurable, quantifiable, and trackable unit of greenhouse gas (GHG) emissions reductions'.
In a broader sense, carbon offsetting refers to voluntary carbon removal, an increasingly popular mechanism for businesses to meet emissions reduction targets. Offsetting correctly and responsibly requires a rigorous plan to reduce emissions simultaneously. Offsetting cannot be seen as a plaster over the problem but must be used alongside absolute emission reduction. It is not a substitute for reducing emissions at the source and is intended to be an additional way to address climate change. At Earthly, we firmly believe that we can achieve the needed emission reductions with the help of nature-based solutions in the form of natural carbon removal technologies.
Carbon offsetting can be done by purchasing carbon credits, representing the reduction or removal of one metric ton of carbon dioxide or its equivalent in other greenhouse gases. These carbon credits can be bought from various organisations, such as third-party providers or governments, and are used to fund projects that aim to reduce or remove carbon emissions. Common carbon offsets include planting trees, renewable energy or nature-based solutions.
In the last decade, demand for offsets has grown by over 140-fold, from 0.3 MtCO2e in 2008 to 42.8 MtCO2e in 2018. This demand has been fueled by major brands such as Disney and Microsoft beginning to use offsets as part of their CSR strategies.
Carbon offsets vs carbon credits
Carbon offset and carbon credit are terms that are often used interchangeably but have distinct meanings.
Carbon offset refers to a reduction in greenhouse gas emissions made in one location to compensate for emissions produced elsewhere. The idea behind carbon offsetting is to balance an individual's or organisation's carbon footprint by funding projects that remove an equivalent amount of carbon from the atmosphere. This can be achieved by investing in nature-based projects like reforestation or seaweed farming or clean energy projects such as carbon capture and storage technologies.
On the other hand, a carbon credit is a tradable certificate or permit that represents the right to emit one metric ton of carbon dioxide or its equivalent. Carbon credits are used in emissions trading schemes, such as the European Union Emissions Trading System (EU ETS) and the Regional Greenhouse Gas Initiative (RGGI) in the United States, which set caps on the total amount of greenhouse gases that can be emitted by participating companies. These companies must then either reduce their emissions or purchase carbon credits from other companies that have reduced their emissions below their allocated limit.
In that sense, carbon offsetting is a way to balance one's carbon footprint by funding projects that remove carbon from the atmosphere. In contrast, carbon credits are a way to trade the right to emit greenhouse gases within a cap-and-trade system. Both concepts aim to reduce greenhouse gas emissions and mitigate the impact of climate change, but the implementation and mechanism of each is different.
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How does carbon offsetting work?
The offsetting process typically begins by measuring an individual or a company’s carbon footprint, the total amount of greenhouse gas emissions produced as a result of activities. This can include emissions from transportation, energy use, and waste.
Once the carbon footprint has been determined, the individual or organisation can then purchase carbon credits. For example, they may buy carbon credits to support the construction of a wind farm or solar power plant, which can help to reduce the amount of carbon emissions that are produced by traditional power plants. Similarly, an organisation may purchase carbon credits to support reforestation projects, which can help remove carbon dioxide from the atmosphere by absorbing it through photosynthesis and helping natural ecosystems.
It's essential to note that carbon offsetting is not a substitute for reducing emissions at the source. It should be used in combination with other strategies such as energy efficiency, renewable energy, and emissions reduction. It is also important to ensure that the project that the carbon credits are purchasing is legitimate, has been verified by a third party and is not just a hypothetical project that has yet to be implemented.
How are businesses approaching carbon offsetting?
More and more businesses start to recognise that they have a responsibility to address their carbon impact and contribute to the fight against climate change. Carbon offsetting can be a way for businesses to take accountability for their emissions, as well as to invest in projects that reduce or remove carbon from the atmosphere.
One approach that some are taking is using carbon offsetting as a way to achieve carbon neutrality. This involves calculating their total emissions, then purchasing carbon credits from verified projects that are designed to reduce or remove an equivalent amount of carbon from the atmosphere. This allows businesses to balance their emissions and work towards achieving their net zero targets.
It’s important to know that carbon offsetting is not a sufficient solution on its own, and that businesses should also focus on significantly reducing their emissions rather than relying solely on offsetting. There are concerns about the effectiveness and legitimacy of some carbon offsetting projects, as well as the potential for offsetting to be used as a way for businesses to continue emitting without addressing the root cause of their emissions.
Overall, businesses are taking a variety of approaches to carbon offsetting. The effectiveness of these approaches will depend on factors such as the types of projects being supported, the rigour of verification and monitoring, and the overall commitment of businesses to addressing their carbon impact.
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What are the pros and cons of carbon offsetting?
Carbon offsetting is a hot topic. So here are some advantages and disadvantages of carbon offsetting for businesses:
Pros:
Reduce carbon footprint: Offsetting allows businesses to compensate for their unavoidable carbon emissions, thus reducing their overall carbon footprint.
Achieve sustainability targets: Carbon offsetting can help businesses meet their sustainability goals and demonstrate their commitment to environmental responsibility.
Increase corporate goodwill: Carbon offsetting can demonstrate a commitment to addressing climate change and reducing the environmental impact of the business. This can be seen as a positive action by consumers, investors, and other stakeholders who are increasingly concerned about the impact of climate change and the role that businesses can play in addressing it.
Supporting sustainability projects: By investing in carbon offsetting projects, businesses can support environmental projects that benefit local communities and ecosystems.
Co-benefits: Many offsetting projects offer positive impact beyond just carbon removal. They include co-benefits such as promoting biodiversity, improving air and water quality, reducing waste, supporting local communities, and creating employment opportunities.
Cons:
Not a solution to the problem: Offsetting does not solve the underlying issue of reducing carbon emissions but only compensates for them.
Quality of offset projects: Not all carbon offset projects are created equal, and some may not be effective in reducing emissions or have negative social or environmental impacts.
Contentious issue of additionality: The idea of additionality is that carbon offset projects should result in emissions reductions that would not have happened without the project, meaning that the project has an additional impact beyond business as usual. This can be difficult to determine, as it requires estimating what would have happened in the absence of the offset project.
Permanence issue: there can be a risk that the carbon stored or sequestered as part of a project may be released back into the atmosphere in the future. For example, if a forest suffers environmental damage, all the carbon it had been storing would be released back into the atmosphere. This means that the carbon offset that had been created by the project is no longer valid, and the emissions associated with it would need to be accounted for differently. Therefore, ensuring the permanence of carbon offsets is a critical challenge for the credibility and effectiveness of offsetting schemes.
Greenwashing: Some companies may use carbon offsetting as a tool to create a false impression of environmental responsibility without making meaningful efforts to reduce their own emissions.
It's worth noting that while carbon offsetting can be a useful tool for businesses to reduce their carbon footprint, it is not a replacement for reducing emissions at the source. Many experts agree that the most effective way for companies to address climate change is to prioritise emission reductions within their own operations and supply chains, and to only offset unavoidable emissions.
Is carbon offsetting good or bad?
If you do a quick Google search into the world of carbon offsets, you’ll notice there is a divide as to whether carbon offsetting is beneficial to the climate crisis or not. Although this is a hot topic, industry experts believe that carbon offsets have an important role to play in helping us reach net zero targets.
One of the key benefits of carbon offsetting is that it can help reduce greenhouse gas emissions and mitigate the effects of climate change. By supporting projects that remove or reduce emissions, carbon offsetting can help balance out the emissions that an individual or organisation is responsible for. As a company takes measures to reduce its carbon impact, some emissions might be unavoidable, in which case offsets can be useful to compensate these remaining emissions. Companies should aim to reduce at least 90% of their emissions and only offset the remaining.
Another benefit of carbon offsetting is that it can help support projects with multiple benefits beyond just reducing emissions. For example, reforestation projects also provide other benefits such as biodiversity conservation, water management, and soil conservation.
Additionally, carbon offsetting can help individuals and organisations take responsibility for their carbon footprint and take action to reduce their impact on the environment.
However, there are also some concerns about the effectiveness and potential negative consequences of carbon offsetting. One major issue is greenwashing, meaning that carbon offsetting can be used as a way for individuals and organisations to avoid reducing their own emissions at the source. By purchasing carbon credits, they can continue to emit greenhouse gases while also claiming to be "carbon neutral." In that sense, offsetting may perpetuate climate change. This is a major concern if businesses do not recognise that offsetting alone is not the solution and that it should be used in conjunction with behaviour change and physical emission reductions.
The efficiency of the carbon offset funding is also often questioned. Some critics argue that a significant portion of the money spent on carbon offsetting goes towards the organisation and management of the schemes rather than the offsetting solutions themselves, with the BBC finding that in some cases, only 30% of the money spent on carbon offsets is actually spent on carbon removal incentives, while large amounts of this money go to profits and taxes. This highlights the importance of sourcing carbon credits from reputable providers who provide updates and verifications from the projects they work with. That’s why we created our Project Assessment, so verified and unverified projects can be evaluated on their potential to deliver impact on biodiversity and social impact goals, as well as carbon.
Another concern is that carbon offsetting projects may not be well-designed, implemented or verified, leading to the potential for "offset fraud", where carbon credits are sold without corresponding emissions reductions. This undermines the effectiveness of carbon offsetting as a way to address climate change.
Carbon offsetting can also lead to unintended consequences, such as displacement of local communities, deforestation, or even increased emissions if the projects are not well-designed or implemented. It's also important to ensure that carbon offsetting projects are not simply displacing emissions from one area to another.
So, what do we think...
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What is Earthly's position on carbon offsetting?
At Earthly, we believe in a different approach to addressing carbon emissions and climate change.
Instead of focusing on carbon offsetting, we prioritise putting nature at the centre of everything we do and every project we support. We want to help organisations understand their carbon footprint and how they can reduce it while investing in nature-based solutions.
Investing in nature-based solutions is one key initiative all businesses can take to help reduce climate change and its effects. We believe nature-based solutions are more effective in addressing the root cause of climate change. In fact, 'nature-based solutions can contribute to 37% of the climate mitigation needed by 2030'. Unlike traditional carbon credits, which are priced as low as $0.39 per tonne, nature-based solutions take into account the social costs and other factors contributing to climate change. This approach will lead to more meaningful and sustainable results in the fight against climate change.
It's worth noting that while carbon offsetting can be a useful tool for businesses to reduce their carbon footprint, it is not a replacement for reducing emissions at the source. Many experts agree that the most effective way for companies to address climate change is to prioritise emission reductions within their own operations and supply chains, and to only offset unavoidable emissions.
Is carbon offsetting greenwashing?
There are concerns that carbon offsetting can be used as a way for companies to improve their image and use it for their own benefit. That is greenwashing, a practice consisting of making false or misleading claims about a product or service's environmental benefits
Why is it happening? Because consumers are genuinely more and more concerned about sustainability. The Global Sustainability Study of 2022 reports that sustainability is an important purchase decision for 71% of consumers globally. Companies can see this as an opportunity to attract more customers. In the context of carbon offsetting, greenwashing can show up as claims about carbon-offsetting efforts without providing adequate information or transparency about the projects supported or the amount of emissions being offset. For example, a company may claim to be "carbon neutral" without providing clear and tangible details.
Another concern is that carbon offsetting projects may not be well-designed, implemented or verified, leading to the potential for "offset fraud", where carbon credits are sold without corresponding emissions reductions. This can create a system where companies can buy and sell carbon credits without actually reducing emissions and use the proceeds to benefit their image.
Some companies may also use carbon offsetting as a way to avoid reducing their emissions at the source. By purchasing carbon credits, they can continue emitting greenhouse gases while claiming to be "carbon neutral." This can lead to a lack of progress in reducing emissions and create trust issues regarding any efforts to impact nature positively.
Transparency is everything when it comes to preventing greenwashing. Making sure that carbon offset projects are verified by third-party or renowned bodies can help projects meet their goals and bring transparency to offsetting claims. The key here is to ensure that carbon offsetting projects are well-designed, implemented, verified, and not used as a substitute for reducing emissions at the source.
On the other hand, companies are also responsible for being truthful and not using consumers' concerns to their own benefit. If a company makes sustainability claims, it should provide adequate information and transparency about the process and plan used to meet these claims. Businesses should clearly and accurately communicate the environmental benefits of their products or services.
Here are a few actions companies can take to prevent making false claims:
Be transparent about your environmental impact and any trade-offs.
Back up any environmental claims with third-party certifications or verifications.
Don't exaggerate or make misleading claims about the environmental benefits of your products or services.
Continuously strive to improve your company's environmental performance rather than relying on greenwashing as a one-time solution.
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