At Innovation Zero, Senior Consultant and Carbon Market Specialist at EcoAct, Mireille Meneses spoke on the Carbon Markets and Offsetting Strategies panel talk. Alongside fellow speakers from Imperial College Business School, Earth Finance and Supercritical, Mireille discussed what a successful carbon offsetting strategy looks like and how carbon offsetting strategies are evolving to play a key role in corporate net-zero strategies.
For companies who have a clear understanding of their emission hotspots and carbon footprint, existing emission reduction initiatives and overall climate ambitions, offsetting can play a key role in helping them achieve their climate goals. EcoAct works with clients to help them understand how offsetting can be best used to achieve climate targets as part of an overall climate strategy. For companies who are already aware of how to comply with existing climate regulations, engaging in the voluntary carbon market and establishing a robust carbon offsetting strategy is another way to work towards limiting global temperature increase to 1.5 degrees.
However, offsetting can be a complex topic and often sparks many questions. For those who still have questions or queries on offsetting or how to go about developing robust carbon offsetting strategies as part of your net-zero journey, Mireille answers some frequently asked questions below.
1. Why should I invest in carbon offsetting?
We are fast approaching the 2030 deadline of halving global net emissions, a requirement for meeting The Paris Agreement and a necessity for preventing irreversible damage to the planet. Carbon offsetting is an additional tool to advance climate action now. It can contribute to the global goal of net-zero and help organisations stay on track with current and future climate goals. Offsetting provides vital finance to protect and restore precious carbon sinks and natural habitats on a global scale.
Carbon offsetting converts capital into projects that contribute to the net-zero transition while delivering wider environmental, social, and economic benefits. These types of projects align to the United Nation’s Sustainable Development Goals, such as protection of ecosystems and endangered species, job creation, education, and healthcare.
2. A project must remove carbon permanently. What does this mean and how do you ensure this?
Ensuring the permanence of offsetting projects means that the benefits to the environment are long-lasting. In other words, emissions are permanently reduced or sequestered.
As part of the certification process of offsetting projects, international carbon standards require projects to conduct a risk analysis, including forecasting climate impacts at the project level, which must be demonstrated through project documentation and feasibility studies. Project developers have a real interest in doing everything possible to prevent external events from interfering in their projects by implementing the necessary actions and measures in advance.
In the case of extreme weather events, malicious acts (e.g., deliberate fires), or negligence, standards, such as the VCS, have established “buffer reserves” (also called “pools”). Each project contributes to setting aside a number of offset credits that cannot be sold on the market – these credits are ex-post, meaning the emission reduction has already taken place.
3. Is there not a risk that investment in offsetting now could divert funds from the far more urgent need to reduce emissions?
Reducing greenhouse gas emissions (GHG) should be prioritised by organisations and there is no replacing the need for rapid and deep emissions reductions. Organisations should follow the mitigation hierarchy (avoid, reduce, offset) within their climate strategy.
While reducing emissions is vital, time is not on our side when it comes to climate action. The window to avoid climate catastrophe is rapidly closing and carbon offsetting allows companies to take full responsibility for the emissions that are still being generated today, while working towards long and near-term climate targets.
4. Where does carbon offsetting fit within the SBTi Corporate Net-Zero Standard?
The SBTi’s Net-Zero Standard was launched at the end of 2021 and provides a clear blueprint for organisations wanting to set a net-zero target and strategy aligned to the latest science. This standard requires organisations to reduce emissions by 90-95% and focus on emissions removals for the remaining 5-10% of emissions.
Organisations that set a science-based net-zero target can also, on a voluntary basis, commit to offset their residual emissions through carbon removals and invest in emissions reductions beyond their value chain. The development of voluntary carbon offsetting projects allows organisations to act on both commitments and thus contribute towards reaching global net-zero.
Given the urgent need to mobilise short-term climate finance, the SBTi recommends that organisations invest immediately in voluntary carbon offsetting projects that reduce/avoid emissions outside their value chain.
On the 19th June 2023, the SBTi launched a six-week public consultation on beyond value chain mitigation. This consultation will be used to inform new guidance from the SBTi on the topic to help companies looking to invest in climate finance.
5. Is carbon offsetting greenwashing?
There is a perception that carbon offsetting simply allows polluters to pay to continue polluting. Reducing emissions should always be the first step within a robust net-zero strategy, and the SBTi’s Net-Zero Standard requires organisations to reduce emissions by 90-95%.
Carbon offsetting is not greenwashing if companies have aligned their climate and carbon reduction targets with global goals based on climate science and have clearly defined targets for emissions reductions over the long and short-term. If organisations are using offsets as a means to pay to pollute without engaging in emissions reductions, they will be subject to reputational risk and risks to their business from the impacts of climate change. With public awareness around greenwashing increasing, these organisations will not thrive long-term.
It is crucial that organisations interested in offsetting programmes take the responsibility to collaborate with suppliers or entities that are partners to the most rigorous norms and standards, signatories to best practices and third-party audited. Additionally, organisations must communicate their offsetting strategy transparently, with clear information on volumes of carbon credits purchased and Scopes considered (1, 2 or 3), as well as their selected projects and their impacts.
6. Is it absolutely necessary for companies to adopt carbon offsetting strategies? How challenging would it be to achieve net-zero if a company does not rely on offsets?
In order to achieve net-zero, most businesses will be required to use some form of carbon offsetting.
Nature and biodiversity loss is already causing negative impacts for companies, leading to disruption in their operations and supply chains. Leading organisations acknowledge the dependence on nature and a stable climate and therefore understand the key role carbon offsetting plays in protecting both.
Carbon offsetting allows companies to take full responsibility for the emissions that are still being generated today, after all technically and economically feasible opportunities to reduce emissions have been implemented. The Paris Agreement reminds us that the global goal of net-zero emissions by 2050 will not be achieved unless we use every tool at our disposal – carbon offsetting is one of them.
7. Is there a framework for insetting?
There is currently no standardised definition of insetting, however the Science-Based Target initiative is working towards a standardised definition and accounting approach.
Insetting could be many things, including mitigation projects within a Scope 3 supply chain boundary, a project adjacent to a supply chain boundary, or a project partially within a Scope 3 boundary. As there is no clear definition of what can and cannot be included within these Scope 3 reductions, and the lack of a standardised accounting methodology in place, insetting currently proves challenging.
8. Is there any standard on when we should retire the credits? Should we keep the credits?
Most organisations retire credits within the 12 months after the emissions took place. There is no requirement to do this however, and you can hold carbon credits within a registry for any length of time before retiring on transferring the title of the credits to another party.
To find out more about carbon offsetting please check out our guide here.