What is Carbon Offsetting?

Tom Haddon

Tom Haddon

Oct 6, 2020

Introduction

In the fight against climate change, our first step must always be towards changing our actions and we can start by looking at carbon offsetting, consuming less, consuming better, and reducing our carbon footprint. However, nobody’s perfect. And to become carbon neutral or better yet, climate positive we need to acknowledge the place for carbon offsetting.  

A carbon offset broadly speaking is a greenhouse gas (GHG) reduction or removal, to compensate for CO2 emissions emitted elsewhere. It is a “measurable, quantifiable and trackable unit of greenhouse gas emissions reductions” [1]. What this means is that carbon offsets are often purchased in a direct response to known carbon dioxide emissions. Here’s a quick overview of the two main markets of offsets:

The compliance market

The compliance offset market is the one you’re most likely to hear about on the news. It is laid out by governments where companies (usually heavy industry) have to legally purchase a carbon allowance equal to their annual emissions. This is done in the form of a carbon credit: a transferable instrument that is certified by governments and other established bodies that represents 1 tonne of GHG removed (CO2 or other). 

The regulator of these schemes will then limit or reduce the amount of carbon credits which helps to reduce the amount of carbon emitted over time. When the number of credits in a scheme is limited, this means that participants must trade with each other, and thus it works in their best interest to reduce their carbon emissions to save them buying more carbon credits. This is called a cap and trade system. A prominent example is the EU Emissions Trading Scheme, which accounts for three quarters of international carbon trading. 

Voluntary offset market

Second, is the voluntary offset market. This is a much smaller market comparatively, but is far more relevant on an individual scale. This is where governments, organisations and individuals can buy carbon offsets to mitigate their own carbon emissions, and unlike the compliance market, these offsets are voluntary to buy and can counter individual carbon footprints. This is the type of carbon offsetting that Earthly deals with. 

Criticisms

If you do a quick Google search into the world of carbon offsets, you’ll soon find that the whole concept comes with a fair amount of criticisms. 

First of all there is a lot of concern over the efficiency of the carbon offset funding. In other words, how much of the money spent on a carbon credit actually goes towards the offsetting solution compared to how much is spent on the organisation and management of the schemes. This is a very reasonable criticism, with the BBC finding that in some cases only 30% of the money spent on carbon offsets is actually spent on carbon removal incentives [2], while large amounts of this money go to profits and taxes. This highlights the importance of sourcing your carbon credits through reputable providers, who provide updates and verification from the projects they work with. 

A second criticism of offsets is that they can act as a ‘get out of jail free’ [3] card, giving you licence to act however you want as long as you offset it. One interesting comparison is that they are frequently compared to Roman Catholic Indulgences within the early church [4], whereby the guilty pay for their absolution rather than changing their behaviour. This is a major concern if people are not aware that offsetting alone is not the solution but works in conjunction with behaviour change and physical emission reductions. Earthly prides itself on not only its reliability of natural climate solutions but also the reliability of the information we provide. We are committed to informing businesses on the topic of climate change and their carbon footprints, so we can help them on their journey towards being climate positive. 

Another thing that can be hard is the method of carbon removal used. Many carbon credits suggest that they reduce GHGs however the methods of this may be surprising. For example, some companies use the burning of methane amongst their offsetting packages… If this confuses you, then you wouldn’t be the first. We looked into it and methane is flared, and burnt, giving off carbon dioxide, but because methane has a higher longer global warming potential, it can be seen as beneficial. The carbon dioxide created per tonne is less harmful for the environment, and thus technically can be regarded as an offset. This method has already been used for many companies around the world [5] and was even deemed to comply with governmental offset standards by the Australian environment department [6]. However these styles of offsetting can be seen as buying into the ‘business as usual’ mentality, which finds ways around or to excuse current behaviour instead of looking for solutions.

Even in offsetting projects such as tree planting which appear to make total sense, there are still criticisms and disputes to the correct methodology. Among these criticisms are the type of tree that is being planted. Different species of tree have different CO2 absorption potential, and this can also vary over many years. For example at Earthly, we often support Mangrove planting as one of our climate solutions. Mangrove trees have a very low absorption of CO2 in their first year however, over the course of their life-cycle they have a near-exponential increase in the amount of CO2 they can absorb, with most of it being stored in their extensive root systems. 

For voluntary credits to be considered a quality offset they need to hit certain criteria. 

The key elements to the criteria are as follows:

Additionality. Simply put, the credit can only offset emissions if the emissions come through a project that wouldn’t have happened anyway. They must be additional – an extra effort to remove carbon beyond what would have happened anyway.

Permanence. Once it has been emitted, CO2 sticks around in the atmosphere for a long time, and other GHGs are even more stubborn. For this reason, offsetting projects need to ensure that they are not short-term, and need to ensure a carbon reduction even in the case of something going wrong (e.g. a natural disaster uprooting a reforested area)

No double counting. Double counting occurs when a credit is used more than once throughout the market, and so the actual amount of CO2 reduction is far lower than the estimation.

Overestimation. This is to do with how the baseline emissions are calculated. Baseline emissions are the emissions that would have occurred normally without the demand for the credits. If these calculations show the baseline to be lower than it is, then the impact of the offset becomes overestimated,

What do we think?

Here at Earthly we’ve got some thoughts on the way carbon offsetting should be done. In fact, we don’t even use the phrase ‘carbon offsetting’ anymore. We’ll explain…

At Earthly we believe that we can provide a different way to fight against carbon emissions and climate change. We call it the Natural Revolution. And what this means is that we put nature at the heart of everything we do, and every carbon removal project we decide to work with. We believe in this revolution so strongly that we use different terminology altogether. 

Instead of carbon offsetting we prefer to say carbon removal. We don’t want to buy into the mindset of ‘offsetting’ – living a high carbon lifestyle but paying to be guilt-free. We want to help people to understand their carbon footprint and the ways that they can reduce it alongside investing in nature-based climate solutions. Along the same lines, instead of saying carbon offsets, we prefer to talk about climate solutions or nature-based solutions. 

We don’t use traditional carbon credits, such as renewable energy projects but instead we prefer to use Nature-Based Credits. We think standard credits, priced at as little as $0.39 per tonne in some markets, don’t truly represent many of the costs involved – including, critically, the social costs. Lots of the credits in the regular market are attached to renewable energy projects. While this may sound good, The Institute for Applied Ecology recently found that these credits are unlikely to be additional [7] (one of the key criteria mentioned previously). In fact, many of these initial credits were essentially subsidies for renewable energy in developing nations, however, these energy plants can now produce energy so cheaply that they are yielding high profits and are no longer in need of the subsidies anymore. 

Nature-Based Solutions

Despite all of the controversies, what we know is that in the fight against climate change, both carbon reduction and climate solutions should be used. At Earthly we strongly believe that we can achieve the needed carbon removal through natural carbon solutions and natural carbon removal technologies. By this point you might be wondering what exactly is a Nature-Based Solution. 

The first definition of a Nature-Based Solution was created in 2016 by the International Union for Conservation of Nature (IUCN). It defined NbS as:

“actions to protect, sustainably manage, and restore natural or modified ecosystems, that address societal challenges effectively and adaptively, simultaneously providing human well-being and biodiversity benefits” [8]

They simultaneously help with social issues as well as address the issues of climate change. Projects such as reforestation, and forest protection are two examples of nature-based solutions that have been found to be the most effective in terms of overall impact [9].

Nature-Based Solutions should use multiple strategies, and avoid monoculture plantations. This is because forests that are allowed to develop naturally have a higher potential to absorb CO2. They are far better solutions with longer expected lifespan, and less interference needed. Importantly, any nature-based projects must have full consent and engagement of indigenous communities who ideally will be involved along the course of the project. In fact, this is of even more importance when we consider that time-frames must be accounted for when initially investing in a NbS. Since naturally generated and protected projects take time to yield the CO2 reductive benefits, they may over time be affected by threats such as forest fires and therefore not deliver on their ‘promised’ carbon reduction. By working with local communities, NbS help to ensure the longevity of these natural assets, against natural threats that are set to increase with increasing climate change.

Tackling carbon offsetting by working with local communities

VCS Verification taking place © BAM

A final thought… 

At Earthly, we believe in nature and natural solutions to climate issues. But more than this, we believe in a revolution. Carbon reduction must happen – not in the form or mindset of offsetting – but as a simultaneous reduction in personal emissions alongside investment in climate solutions. Only through education and action can we fight climate change effectively.

To learn about the resources and methods you can use, read more on the Earthly Blog, or take a look at our products to see what actionable changes you can make.


Sources 

[1] Hamrick and Gallant. (2018). Voluntary Carbon Markets Outlooks and Trends. https://www.forest-trends.org/wp-content/uploads/2019/04/VCM-Q1-Report-Final.pdf

[2] Kahya. (2009). ‘30% of carbon  offsets’ spent on reducing emissions. http://news.bbc.co.uk/1/hi/business/8399740.stm

[3] UN Environment. (2019). Carbon offsets are not our get-out-of-jail free card. https://www.unenvironment.org/news-and-stories/story/carbon-offsets-are-not-our-get-out-jail-free-card

[4] Monboit. (2006). Selling Indulgences. https://www.monbiot.com/2006/10/19/selling-indulgences/

[5] Maffly. (2017). Firm wants to burn methane leaking from Utah coal mine – creating credits to sell to carbon-emitting companies. https://medium.com/@brianmaffly/firm-wants-to-burn-methane-leaking-from-utah-coal-mine-creating-credits-to-sell-to-carbon-b20b39d5de86

[6] Emissions Reduction Assurance Committee. (2019). Review of the Landfill Gas Method. https://environment.gov.au/system/files/consultations/8dc044f5-4980-47ff-93cc-7c7f55da7402/files/landfill-gas-periodic-review-report.pdf

[7] Cames et al. (2016). How Additional is the Clean Development Mechanism? https://www.verifavia.com/uploads/files/clean_dev_mechanism_en.pdf

[8] Cohen-Sacham et al. (2016). Nature-Based Solutions to address global societal challenges. https://portals.iucn.org/library/sites/library/files/documents/2016-036.pdf

[9] IPCC. (2016). Special Report on Climate Change. https://www.ipcc.ch/srccl/chapter/summary-for-policymakers/

 

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