Carbon offsetting explained

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What is carbon offsetting, how does it work and what is it's role in reducing risks and impacts of climate change?

What is carbon offsetting?

Scientific consensus states that carbon emissions must be reduced by 80% by 2050 to avoid temperature rise of more than 2oc. 

Carbon offsetting is the use of carbon credits to enable businesses to compensate for their emissions, meet their carbon reduction goals and support the move to a low carbon economy.  Businesses compensate for their environmental impact in order to meet increasing stakeholder pressure and are able to demonstrate leadership, differentiate from competitors and engage internal and external stakeholders in their action.

Carbon offsetting delivers finance to essential renewable energy, forestry and resource conservation projects which generate reductions in greenhouse gas emissions.  In order to ensure this finance delivers genuine results, the projects which are supported must be high quality and ‘additional’, proving that they would not happen without the sale of carbon credits.  Projects follow a comprehensive set of validation and verification procedures to demonstrate that they are generating emission reductions and are monitored on a regular basis through independent third parties.

A credible carbon management programme should always include internal reductions, such as reducing energy use, business travel and waste.  However, for many businesses there is a point at which the emission reductions that can be achieved through internal reductions are cost-prohibitive or will have a negative impact on performance.  It is at this point that a carbon offset programme can deliver greater returns in terms of the emission reductions generated, enabling a business to meet a stretching reduction target immediately and compensate for its environmental impact. 

Please view our range of carbon offsets. To discuss how carbon offsets can compliment your internal reductions, establishing your organisation as a market leader and reducing its impact on the environment, then please contact us via UK email or telephone +44 (0)20 7833 6000 or US email or telephone 1-212-390-8835.

How does carbon offsetting work? 

By purchasing carbon credits to offset their emissions, businesses contribute essential finance to renewable energy, forest protection and reforestation projects around the world that would not otherwise be financially viable.  These projects play an important role in the mitigation of climate change. 

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Carbon offsetting works by purchasing carbon credits which are sold in metric tonnes of carbon dioxide equivalent (tonnes CO 2e). Projects which sell carbon credits include wind farms which displace fossil fuel, household device projects which reduce fuel requirements for cookstoves and boiling water in low-income households, forest protection from illegal logging, methane capture from landfill gas and agriculture, reforestation for small-hold farmers and run-of-river hydro power and geothermal energy.  These projects have to demonstrate that they require carbon finance from the sale of carbon credits in order to be financially viable and achieve greenhouse gas emission reductions. 

Every carbon credit that is generated by a project has a unique identification number.  When a business purchases carbon credits to offset its emissions, those carbon credits are retired through third-party registries.  The retirement of the carbon credit ensures a business can claim that emission reduction and the credit cannot be sold to anyone else.

Offsetting one tonne of carbon with a carbon credit means there will be one less tonne of carbon dioxide in the atmosphere than there would otherwise have been. 

To find out more about the carbon offsets projects and Green Power instruments we provide to help you achieve your business and carbon reduction goals, please contact us via UK email or telephone +44 (0)20 7833 6000 or US email or telephone 1-646-367-5800.

How is quality of carbon offset programme guaranteed?

For a carbon credit to be genuine, the project must meet essential quality criteria, including proof that it is additional - the reduction in emissions would not have occurred without the carbon finance.  A high quality project must also addresses issues around permanence (it delivers the reductions it stated) and leakage (the emission reduction in one area doesn’t cause an increase in emissions somewhere else). 

In order to demonstrate they are following robust methodologies for measuring the emission reductions they generate, projects use third party standards such as the Verified Carbon Standard (VCS), Gold Standard, Climate Action Registry (CAR), American Carbon Registry and the Clean Development Mechanism (CDM). and they must use independent third parties to validate and verify their claims.  This enables a business purchasing the carbon credits for their carbon offset programmes to ensure their finance is delivering results. 

Many projects also deliver added Sustainable Impacts to local communities and the environment, such as job creation, health and well-being improvements and protection of biodiversity. Some projects use standards like the Climate, Community and Biodiversity Standard (CCB) to verify these additional benefits. 

Following the purchase of carbon credits and their use to offset the carbon footprint of a business, the credits are retired through registries in order to ensure they cannot be sold elsewhere.  

What is the role of carbon offsetting in reducing the risks and impacts of climate change?

On its own, carbon offsetting will not provide a solution to global warming, however it does enable business to deliver finance to essential projects around the world that are reducing emissions and contributing to building a low carbon economy.  These projects would not be financially viable without the finance delivered through the sale of carbon credits.

Many projects play an important role in the creation of sustainable supply chains and are based in some of the regions already most impacted by the negative impacts of climate change: wind farms in India meet the growing demand for energy from a rapidly growing economy, improved cookstoves in Bangladesh improve health and well-being for communities in one of the countries most at risk from sea-level rise, and community reforestation in Kenya helps create more sustainable farming for small-hold suppliers of tea.

To discover how supporting carbon offset projects will benefit your organisation, please contact us via UK email or telephone +44 (0)20 7833 6000 or US email or telephone 1-212-390-8835 or visit our carbon offsets page.