Carbon offsetting: Complementing decarbonisation strategies

Despite being a tool for climate action that has been around for decades, carbon offsetting can still be a point of conflict and contention — with uncertainty around how or if it should play a role in today’s decarbonisation efforts.  

What is carbon offsetting? 

Any molecule of carbon dioxide we can prevent from entering the atmosphere is a step in the right direction toward combating climate change. But while organisations should be doing all they can to reduce their own greenhouse gas emissions, there will be some emissions they are simply unable to reduce. And this is where carbon offsetting plays a valuable role by enabling organisations to fund projects that reduce emissions outside their organisational boundary. 

These projects generate carbon credits which can be bought before being eventually retired for voluntary or compliance purposes.  

Demand for voluntary offsetting is driven by organisations and individuals that take responsibility for addressing their own emissions on a voluntary basis to meet sustainability goals. Compliance carbon markets require regulated entities to buy and surrender emissions permits or allowances to comply with a national or international regulatory requirement. 

Actual avoidance vs an easy out 

The offsetting space attracts a lively debate and some fair criticism.  Detractors will claim carbon offsetting can potentially be abused by organisations simply looking to buy their way out of the problem instead of genuinely looking to reduce their overall carbon emissions. For offsetting to be a valid strategic tool, it must be part of a broader decarbonisation programme dedicated to delivering ambitious emissions in line with a science-based reduction trajectory. Carbon offsetting must be an “and” and not an “or”; put simply, it must not crowd out investment in operational and supply chain decarbonisation activities. 

Furthermore, not all offsets are created equal, meaning it’s vital to scrutinise for quality before purchasing. To enable this, buyers can scan for the various types of credits and regulatory bodies, with the highest quality offsets meeting the following standards from organisations like the Verified Carbon Standard and the WWF-backed Gold Standard.   

However, with the rapid growth and scaling of the carbon market in the past five years, buyers can now draw on a range of tools, resources and information providers to navigate the 25,000-plus registered carbon projects and make informed purchasing decisions. For example, in recent years a number of independent carbon credit ratings agencies have emerged which assess carbon projects against a range of key criteria (Sylvera, BeZero) and provide a quality rating. 

Types of carbon credits 

Carbon credits (1 carbon credit = 1 tonne of carbon dioxide equivalent reduced, avoided or removed) can be acquired via trading on a secondary market or via direct purchase by signing agreements to purchase carbon credits directly from a project developer.  

They can also be generated through direct development, joint ventures or funding project developers.  

Those projects will typically fall into one of three main types of carbon offsetting projects: 

• Avoidance project — A carbon project that aims to avoid emissions being released compared to the most likely outcome if the project didn’t occur (e.g. off-grid renewable energy projects displacing diesel powered energy generation or nature-based conservation projects that prevent forest destruction). 
• Carbon removal projects— A carbon project that aims to remove or sequester emissions already in the atmosphere, these can be nature based (e.g. afforestation, mangrove regeneration) or technology based (e.g. direct air carbon capture). 
• Reduction projects — A carbon project that aims to reduce the quantity of emissions released compared to the most likely outcome if the project didn’t occur (e.g. cleaner cooking stoves that reduce or displace the need to burn wood) and methane capture and destruction that reduce but do not eliminate emissions. 

Buyers should note these all come with different biodiversity, socio-economic and health impacts, and when implemented successfully can generate significant sustainable development outcomes in line with the UN Sustainable Development Goals. A key feature of these projects being that the monetisation of the carbon impact contributes much more than just a climate change impact, with the co-benefits having real impact on vulnerable ecosystems and communities. Therefore, in addition to the veracity of the climate impact, carbon projects should also be assessed in light of their impact on a just transition. 

Building credibility and trust with carbon offsetting 

The specifics around how and when to integrate offsetting into a corporate decarbonisation programme will vary by region and by sector, but the principle of carbon offsetting is a valid, proven approach to complementing organisational decarbonisation strategies.  

When implemented effectively, high-quality carbon credits can add value to an organisation’s climate and sustainability strategy and provide quantifiable evidence of their commitment to supporting the transition to a low carbon future and a just transition. 

James Ramsay is the Director of Sustainability Solutions at ENGIE Impact.