New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
New report: Transparency 2.0 - Transparency in an age of unprecedented climate, financial and reputational business risks ·
Category
Impact Assessment
Author
Sonia Kovacevic
Date
18.11.2022
The Intel
Despite a sharp rise in carbon neutral products, global emissions continue to rise. Is offsetting helping or hindering?

The latest Global Carbon Budget unveils a harrowing reality: greenhouse gas emissions continue to rise, and the remaining carbon budget to keep global warming under 1.5-degrees will be consumed within nine years if emissions remain at the current levels. The same report revealed that global carbon dioxide emissions from fossil fuels will hit a record high this year, dealing a further blow to 1.5-degree hopes. The data was gathered by over a hundred scientists as part of the Global Carbon Project, a collaboration between Future Earth and the World Climate Research Programme.

Carbon offsets have received a lot of airtime at COP27, but what role do they have in mitigating climate change?

Category
Impact Assessment
Author
Sonia Kovacevic
Date
18.11.2022
The Intel
Despite a sharp rise in carbon neutral products, global emissions continue to rise. Is offsetting helping or hindering?

The latest Global Carbon Budget1 unveils a harrowing reality: greenhouse gas emissions continue to rise, and the remaining carbon budget to keep global warming under 1.5-degrees will be consumed within nine years if emissions remain at the current levels. The same report revealed that global carbon dioxide emissions from fossil fuels will hit a record high this year, dealing a further blow to 1.5-degree hopes. The data was gathered by over a hundred scientists as part of the Global Carbon Project,2 a collaboration between Future Earth3 and the World Climate Research Programme.4 

Carbon offsets have received a lot of airtime at COP27, but what role do they have in mitigating climate change?

Carbon offsets have been used for decades as a primary tool for businesses to ‘compensate’ for their carbon footprint. The concept of an ‘offset’ was first introduced as part of the U.S. Clean Air Act in the late 1970s, where new emissions in high-pollution areas were only permitted if they could be offset by another source.5

As concerns regarding human-induced climate change grew, the Kyoto Protocol of 1997 mandated that industrialised economies limit and reduce their emissions, allocating them a ‘carbon budget’ – the maximum amount of carbon emissions each country could emit. ‘Emissions trading’ was introduced under the protocol to help countries meet their targets. However, a flaw of the protocol was that it did not include the world’s largest and growing economies, and the USA, historically one of the world’s largest emitters, did not sign up.

Fast-forward to 2022, and the use of carbon offsets has become mainstream. More and more products are labelled ‘carbon-neutral’, yet emissions are still rising. Do offsets work, or are they just a carbon accounting measure?

A ‘carbon offset’ occurs when an emitter of carbon emissions purchases a carbon credit (equivalent to 1 metric tonne of Co2 or an equivalent amount of other GHGs) to fund the removal, capture or storing of emissions elsewhere in the world. Essentially, the goal is to ‘offset’ or balance out the original emissions. But how realistic is this?

In theory, offsetting schemes can channel money into much-needed mitigation projects (like carbon sequestration) until a company can transition to more responsible practices; but the reality presents different challenges, including the essential feasibility to measure emissions accurately – those which need to be offset and in addition, those which are saved elsewhere.6

Carbon credits can be bought on a Compliance carbon market (CCM) or on a voluntary carbon market (VCM). VCMs are where companies or individuals buy credits to ‘offset’ their emissions. Unlike CCMs, which are regulated emissions trading schemes that operate within specific regions to help countries meet their carbon budgets, VCMs are unrestrained by boundaries and are accessible by all sectors. Due to this, critics claim that the $2 billion market of VCMs lack transparency and are a tool for greenwashing.7 As the scheme is unregulated, there is no requirement for companies that are buying offsets to disclose information about the projects. This can lead to the use of low-quality projects that don’t yield durable emissions reductions.

In other cases, there are concerns about credits being exploitative, derived from dubious sources, lacking certainty of permanence, and having transparency issues around pricing, quality and quantity verification.8 One example included an ‘enhanced oil recovery’ project with offset provider Bluesource and Merit Energy, where Co2 was captured and pumped underground to extract more oil from a well. While the Co2 that was put into the ground counted as carbon credits, the Co2 of the extracted oil was ignored.9 Further, although greenhouse gas emissions mix globally in the atmosphere (which is the basis for why offsetting theoretically works), there are other emissions-adjacent impacts that can have ongoing local effects, such as ecosystem disturbances that can further contribute to changes in the climate.10

As carbon offsets enter the mainstream, heavy reliance on offsetting as climate action is emerging.11 This deflects away from commitments made under the Paris Agreement and the Science-based Targets Initiative (STBi) (the framework that companies align their ‘net zero’ pledges). Both frameworks outline that decarbonisation as close to zero must be prioritised, with the SBTi highlighting that offsets are only an option for companies wanting to finance additional emissions reductions beyond their science-based target or net zero target.12 The UN reiterated this in a new report, sharing guidelines to bring integrity, transparency and accountability to net zero.13 The report outlines three primary recommendations for the purchase of voluntary carbon credits:

  • urgent and deep reduction of emissions across an organisation’s value chain must be prioritised, with high-integrity carbon credits only used for beyond value chain mitigation;
  • once interim net zero targets are met, annual unabated emissions can be balanced out by purchasing high-integrity carbon credits; and
  • a high-quality carbon credit, should at minimum, fit the criteria of additionality (i.e. the mitigation activity would not have occurred without the incentive created by the carbon credit revenues) and permanence.

In addition, senators from the U.S. Democratic Party are pushing the federal regulator, the Commodity Futures Trading Commission (CFTC), to develop “standards for offsets, investigate cases of potential fraud, and convene a working group to study the risks to investors of offsets and derivative products” due to greenwashing concerns.14 This was in response to the CFTC’s work to better understand climate-related financial risks as they relate to commodities markets, which include the purchase and sale of carbon or other climate-related products.15 The U.K.’s Climate Change Committee also warned that without reform, offsetting was a risk to meeting Net Zero targets. This interrogation and criticism of offset effectiveness have resulted in some stakeholders looking for alternate solutions.16

Recently, Verra, the world’s largest carbon offset certifier, announced that it had issued its one billionth carbon credit for a conservation project in Kenya’s Chyulu Hills. The official press release states, “this announcement represents one billion fewer tonnes of Co2 in the atmosphere.”17 While this is the case on paper based on how the market, in theory, is meant to work, in reality, it is much more nuanced and far from clear that each associated carbon credit equates to one fewer tonne of Co2 in the atmosphere. One reason is that credits will not always be a ‘like for like’ neutralisation of emissions as the reduction, sequestration, or capture takes time to materialise and remove the emissions from the air.18 This lack of correlation to direct impact reduction presents a risk to net zero.

Simply put, on a global level, there are more emissions generated every year than sequestered, and by extension, that can be ‘offset’ within carbon markets. As production and consumption of goods and services continue to increase, so do carbon emissions from the main source of emissions (fossil-powered energy) across the world. The fashion industry is one sector with extreme sensitivities to climate-risks and the immense pressure to decarbonise in the context of its increasing growth projections. As offsetting requires land mass and time-consuming programmes to implement conservation, planetary boundaries are increasingly being challenged. Ultimately, offsetting is a short-term and overarchingly flawed approach that has arguably slowed down the shift away from fossil fuels.19,20 The solution to staying within the 1.5-degree pathway is unequivocally this: decarbonise energy supplies and use less energy.21 Neither of these can be achieved by offsets because, fundamentally, it exists for a different purpose. As the name suggests, offsetting is not an emissions reduction solution. So what is?

Stay tuned for a follow up article where we explore an antidote to carbon offsetting: carbon insetting.

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