On our joint journey towards net-zero in 2050, companies, individuals, cities, governments and organisations are all making commitments to curb their contributions to climate change by reducing their emissions, if not removing them entirely. Many of these are doing this via the purchase of carbon offsets.

Carbon offsets fall into two categorical markets: voluntary and compliance. Voluntary offsets are purchased by individuals at their own discretion or by companies that want to improve their corporate social responsibility (CSR). Compliance offsets are purchased in order to meet legal requirements under schemes such as the European Union’s Emissions Trading Systems (EUETs) or the Joint Implementation (JI).

What is carbon offsetting?

The International Organisation for Standardisation (ISO) defines carbon offsets as mechanisms for compensating for all or a part of the carbon foot printing or the partial carbon emissions produced by a company or product through the prevention of the release of, reduction in, or removal of an amount of greenhouse gas (GHG) emissions in a process. For instance, via placing an investment outside the relevant product system in renewable energy technologies, energy efficiency measures or contributing to afforestation/reforestation. Offsets have been used successfully in the past to solve environmental issues such as nitrogen oxide pollution that causes acid rain.

What does a valid carbon offset entail?

  1. Additionality
    Reductions are considered additional if they would have not occurred if the offsetting market were not in place. If the reductions would have happened regardless of the carbon offsetting mechanism in place, the emissions are not considered additional. Additionality is key to the quality of a carbon offset. If offsets are purchased without a correct additionality analysis and a company’s GHG emissions remain the same, this could be considered more damaging to the environment.
  2. Permanence
    To prevent climate change from worsening, it is essential that GHGs are kept out of our atmosphere for as long as possible. Around 25% remains in the atmosphere for hundreds to thousands of years. For this reason, offsets must be related to reductions that are similarly permeant. If reductions are withdrawn or challenged in any way, their permeance is contested.
  3. Double-counting
    When purchasing an offset, it is important to ensure that that offset will not be purchased or used by anyone else. This marks the importance of the existence of environmental registries (link here to blog about registries). A valid offset is considered when it has been appropriately registered and confirmed to be associated to a certain individual, company or organisation.
  4. Leakage
    Leakage arises when emissions are not actually reduced. If there is a reduction in one country, yet an increase in another where there are relaxed emission policies in place, leakage is occurring. For this reason, leakage is considered a negative spill-over. An example of this can be experienced if a company out-sources their highly polluting activities to a country outside the Cap & Trade system.

Limitations to consider with regards to carbon offsetting

Unfortunately, according to Kollmuss, “there are many more bad offsets than good offsets”. Although there are many environmental standards available to the general public nowadays, many of these lack transparency as to how the offset is actually being used and verified. It is important to have expert knowledge in order to purchase a good carbon offset, limiting good offsetting decisions by those who do not have said knowledge – which should not be the case. Offsetting can therefore be a subsequent victim of greenwashing. People are lenient towards offsetting their carbon emissions as they want to feel like they are doing a positive deed and contributing to the fight against climate change, but they do this without full knowledge of where the offset is actually going.

TIP: If you want to offset your emissions in a positive way, investigate the projects that the offset you are contributing towards are and make sure they follow the criteria mentioned above.