The term carbon offsetting is often in the spotlight, causing a little controversy and a whole lot of confusion. Are you still unclear on what offsetting really means, where the money goes, if offsetting is good or bad and whether it is really one of many available solutions to climate change? These answers to the FAQs aim to clear up the confusion and settle the debates.
What is carbon offsetting?
Offsetting is a mechanism used to finance greenhouse gas (GHG) emission reductions, removal or sequestration equivalent to the residual emissions, or beyond, of an organisation, business or territory. This financing is achieved through the purchase of carbon credits in the voluntary carbon market (VCM). One carbon credit equates to one tonne of CO2 that has not been emitted. Once purchased the credit is then retired through registries held by the international standards and global exchanges.
What is often missed in the definitions or lost in the debate are the actions behind this financial transaction. The money paid for carbon credits is funding vital social impact projects which help to support sustainable development and improve the lives of communities in some of the poorest countries in the world. Check out this interview with Mathilde Mignot about the positive impact projects have.
What exactly is an offsetting project?
An offsetting project can be many things.
It could be a project distributing cleaner cookstoves to thousands of poor families who risk fatal diseases daily by cooking on open fires in their homes. It could be a forest conservation project in the Amazon rainforest which reduces deforestation and preserves precious biodiversity and protects endangered species. It could be a tree planting project that sequesters carbon and provides an income to local families. It could be a renewable energy project helping to build the renewable infrastructure needed in a fast-growing developing country.
It must ultimately result in a measured reduction in carbon emissions and must meet international standards that are independently verified. It should also result in a measured positive social, economic and/or ecological impact, helping to stimulate sustainable development.
Why do prices vary so much?
The carbon market like any other market is driven by supply and demand, competition, and competitive pricing. In addition, market dynamics mean that project developers adjust their pricing to reflect market demand.
However, we also need to consider that the price of a carbon credit must account for the costs of setting up a project, it’s ongoing monitoring and the cost of gaining verification. Most importantly, it must enable its long-term viability. This project could be in any country in the world and take a variety of forms and scales. Therefore, it is natural that these costs will vary significantly.
Beyond operational costs, the geography of the project, delivery time and the different types of projects, the price of a carbon credit is also influenced by the volume of credits purchased at a time and the credit vintage. The vintage of a carbon offset refers to the year that its associated credits were issued. The older the vintage the cheaper the price.
Is offsetting good or bad?
As a project developer, we have witnessed first-hand the positive impacts of good quality certified offsetting projects. For example, for a Sudanese woman, one of our cookstoves could mean her no longer having to spend laborious hours collecting firewood and then inhaling the smoke it produces that can cause health problems for her and family. It might now giver her time to have a job, possibly, even helping to administer the project. Carbon offsetting project can help empower women and offer life changing opportunities.
Then there is the carbon impact. By the end of 2019, the Voluntary Carbon Market (as the regulated offsetting market is also known) achieved emissions removals or reductions of over 608 million tonnes of CO2e. This is a huge amount of carbon that would otherwise be in our atmosphere and impacting our climate. Controversy aside, the action funded by offsetting can be an incredible force for good.
Why the controversy?
There is a perception that offsetting enables polluters to simply pay to continue polluting. In our experience working with companies, this is not necessarily the case.
Reducing emissions should always be the primary focus of a net-zero strategy. If organisations are merely using offsets as a means to pay to pollute without engaging in reducing their emissions, they will be subject to increasing risks to their business both from the impacts of climate change as well as the risks associated with their reputation, their ability to gain investment and the demands of upcoming legislation. These organisations will not thrive long-term.
Robust carbon offsetting strategies acknowledge that offsetting is no replacement for emissions reductions. Such strategies need to also detail the scopes the offsetting accounts for, and the number of credits purchased (in tCO2e), as well as include information about the projects supported in terms of environmental and social impacts generated. Read our eBook on how to transparently and comprehensively communicate your climate commitments.
How do I know which offsetting credits I should buy?
Only carbon credits from projects accredited by third parties according to internationally recognised standards should be considered.
Verified carbon offsetting projects ensure that the credits are high-quality and offer measured emissions reductions, which have been subject to a rigorous auditing process. They also ensure that the projects provide additional and measured value to the communities in which they operate. As a founding member of the governing body, the International Carbon Reduction & Offset Alliance (ICROA), we work to set and uphold these international standards. Embedded in these values is that we always urge our partners to set ambitious emissions reductions targets alongside any offsetting programme. Supporting emissions reductions is where the majority of EcoAct’s work is focused.
Is offsetting one of many solutions to climate change?
First and foremost, reducing emissions is vital. There is no replacing the urgent need for emissions reductions along a trajectory aligned with climate science.
Having said this, businesses and individuals need to take responsibility today for the emissions that are still being generated in their day-to-day activities. At this point in time, eliminating all emissions is extremely difficult. Realistically, turning global emissions off tomorrow is unlikely. Offsetting is a way for businesses and individuals to take responsibility for all of their emissions now and invest in the transition to a low carbon economy.
As a global society, we need to implement multiple ways of tackling the climate crisis. This includes urgently counteracting deforestation, supporting reforestation and financing renewable technologies and the infrastructure needed to expand their reach. Carbon credits are financing these activities.
We also need to help poorer international communities, many of whom will be/are most impacted by climate change, to develop sustainably and empower people to have ownership of a more sustainable future. We cannot successfully tackle climate change if we neglect social justice and fail to deliver equitable sustainable development. Good quality carbon offsetting projects focus on the additional benefits to people’s lives: their health, their well-being, their economic prosperity, etc.
Projects which sequester carbon and avoid carbon emissions will be one of many vital tools along our journey to a net zero future and in achieving the reductions required to keep global temperature increase below 1.5°C. Given the lack of time we now have to respond to the climate emergency, we’re unlikely to achieve this in time without them.
EcoAct is a leading project developer and founding member of ICROA. If you are interested in offsetting or project development, please get in touch.
