Carbon offsetting explained

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What is carbon offsetting?

Scientific consensus states that carbon emissions must be reduced by 80% by 2050 to avoid catastrophic climate change.  Businesses have an important and essential role to play in meeting these targets and carbon offsetting schemes enable them to play their part in the climate change battle. 

Carbon offsets are credits for reductions in greenhouse gas emissions made at another location, such as wind farms which create renewable energy and reduce the need for fossil-fuel powered energy. 

Carbon offsets are quantified and sold in metric tonnes of carbon dioxide equivalent (CO2e).  Buying one tonne of carbon offsets means there will be one less tonne of carbon dioxide in the atmosphere than there would otherwise have been.  This could be, for example, a project to swap coal-fired power stations with solar panels or hydro power.  Carbon offsetting is often the fastest way to achieve the deepest reductions within businesses and it also often delivers added benefits at the project site, such as employment opportunities, community development programmes and training and education.

For a carbon offset to be credible it must meet essential quality criteria, including proof that it is additional (the reduction in emissions would not have occurred without the carbon finance), that it will be retired from the carbon market so it cannot be double counted, and that it addresses issues such as permanence (it delivers the reductions it stated) and leakage (the emission reduction in one area doesn’t cause an increase in emissions somewhere else).

What is the value of offsetting your carbon emissions?

Growth in the world’s population and increasing consumption is expected to lead to a three-fold rise in energy demand during the next century, which is thought will lead to a 2–4º centigrade increase in average global temperature.  Scientific consensus is that we need to reduce emissions 80% by 2050 (against a baseline of 1990 levels) to stabilise our climate and prevent unprecedented negative impacts on the economy and our climate.

Against that backdrop, any and every means to tackle climate change has to be embraced.  An offset-inclusive carbon reduction programme is an immediate and cost-effective way to meet stakeholder pressure by setting and meeting stretching carbon reduction targets, prepare for increasing regulation and mitigate future risks as carbon becomes an increasingly costly commodity.

Why do businesses offset?

Businesses choose to offset because they realise they are an integral part of any solution to climate change and they wish to prepare for a future where carbon is likely to be high cost and highly regulated. 

In order for businesses to commit to and achieve significant emissions reductions, they need a robust carbon management plan which combines internal reductions with a carbon offset programme.  There are many changes companies can make to internal processes, behaviour and facilities in order to reduce their carbon emissions but there will always be things they can’t change because it’s essential to their business or cost-prohibitive to alter.  Carbon offsets enable them to take full responsibility for their carbon emissions immediately and cost effectively.  Carbon offsets also provide a critical source of financing for renewable energy and other emissions-reducing projects. 

By offsetting the emissions they can’t reduce through internal change, businesses reduce their impact on the climate and help to finance important projects which would not otherwise be viable.  The atmosphere does not care where GHGs are emitted, nor does it care where they are prevented.  What is essential from the point of view of climate change is reducing the total amount of emissions. 

How are carbon offsets guaranteed?

In order to ensure the quality and integrity of carbon offsets, a robust programme of standards, verification processes and registries have been put in place. 

High quality offsets are validated by the Verified Carbon Standard (VCS), Gold Standard, Climate Action Registry (CAR), American Carbon Registry and the Clean Development Mechanism (CDM). Each of these standards has specific requirements to ensure the emissions reductions they generate are real, measurable, permanent and additional, i.e. they would not have happened without carbon finance.

Third party registries such as APX ensure that the offsets sold are retired in order to avoid double-counting. The CarbonNeutral Company also sells carbon offsets that are certified by Green-e Climate.

Does carbon offsetting provide a solution to global warming?

On its own, carbon offsetting does not provide an answer to global warming, but it does have a large part to play in the overall approach to carbon management.  ‘Internal’ reductions take time to kick in (the change of the profile of a car fleet, for example), and even targets of 20% reductions are stretching to growing businesses.  Carbon offsetting brings the possibility of 100% reductions – achieved cost-effectively and immediately.  At the same time, the emission reduction projects supported by the money paid for offsetting helps communities globally to get on to a low carbon path.

Is it a real emission reduction?

Yes.  Example: Business A1 is unable to reduce 100 tonnes of its CO₂ emissions in the short term.  There is a project somewhere else in the world which could save 100 tonnes easily, but they need a cash injection.  For example, a community in India could swap from carbon intensive kerosene as an energy source to solar panels – but they can’t afford the solar panels.  Through the purchase of carbon offsets, you provide the financial assistance to subsidise the cost of getting solar panels onto housing, and through that means you have enabled a saving of 100 tonnes of CO₂. Business A1 has therefore reduced global net CO₂ emissions by 100 tonnes.  The added benefit is that Business A1 has helped facilitate a step change in local technology in a developing market.