The term carbon offsetting is back in the spotlight, causing a little controversy and a whole lot of confusion. Here, EcoAct, a privately held international sustainability consultancy and project developer, aims to clear up the confusion and settle the debates through a series of FAQs.
What is carbon offsetting?
Very simply put, carbon offsetting is a mechanism used to compensate for your carbon impact through the purchase of carbon credits that are equivalent to your carbon emissions in tonnes. 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.
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 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 is driven by supply and demand, competition and competitive pricing.
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.
Is offsetting good or bad?
As a project developer, we have witnessed first-hand the positive impacts of good quality offsetting projects. For example, for a Sudanese woman who no longer has to spend laborious hours collecting firewood and then inhaling the smoke it produces alongside her children, who might now have time to have a job, possibly, even helping to administer the project, a carbon offsetting project is life changing.
Then there is the carbon impact. By the end of 2016, the Voluntary Carbon Market (as the regulated offsetting market is also known) had reduced or prevented emissions of over 1 billion tonnes (https://www.cbd.int/financial/2017docs/carbonmarket2017.pdf). 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.
In EcoAct’s research into the FTSE 100 companies this year (https://info.eco-act.com/sustainability-reporting-performance-ftse-100-2019), we found that 92% of companies that purchase carbon credits also have an emissions reduction target. 51% have set or committed to set a science-based target (a target to reduce emissions in line with limiting global warming to relative safe levels as determined by science), which are the most ambitious and do not permit offsets to be used to achieve the target.
If companies 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 up and coming legislation. These companies will not thrive long term.
How do I know which offsetting credits I should buy?
Only 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, and entrenched in these values is that we must encourage our partners to set ambitious emissions reductions targets alongside any offsetting programme. Supporting emissions reductions is where the majority of our work is focused.
Is offsetting a solution 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 will 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 both 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 1.5C. Given the lack of time we now have to respond to the climate emergency, we’re unlikely to achieve this in time without them.