Is carbon offsetting a viable tool in a company’s transition to net-zero emissions?

By Sancroft Team

7th Dec, 2020

By Dom de Ville, former Director at Sancroft.

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The simple answer is ‘Yes ……. But’.

As with many complex problems that businesses need to tackle, carbon offsetting is not viable as the first or only action towards a net-zero business, and there are pitfalls to be aware of.

So, if you are tasked with deciding whether your business should pay into offsetting schemes to help reach a net-zero commitment, what should you advise?

Should my company be ‘Net-zero’ or ‘Zero emissions’

The first step is to make sure everyone understands what net-zero is and that it is a steppingstone to the ultimate goal of zero emissions.

The UK government has committed, in law, to bring all greenhouse gas (GHG) emissions to net-zero by 2050. Net-zero means any emissions produced by the UK as a whole ‘would be balanced by schemes to offset an equivalent amount of greenhouse gases from the atmosphere’.

However, for net-zero to happen as a country, the government needs most of us to get as close to zero emissions by 2050 as is feasibly possible. This is to allow for sectors which may be unable to eliminate emissions entirely, such as, for example, the airline industry.

So, whilst eliminating emissions entirely before the 2050 deadline should be the ultimate aim for your business, the first step many are taking is to commit to achieving ‘net-zero’[1]. This means eliminating operational carbon emissions as far as possible, and then balancing the remaining emissions with the equivalent amount of carbon sequestered or offset (in natural systems like soil or forests, or through carbon capture and storage technology) – or by buying carbon credits to make up the difference.

What are offsetting schemes

Essentially there are two types of offsetting schemes:

1. Carbon avoidance: Paying money into projects to stop emissions that would otherwise have occurred. Examples could be purchasing clean cooking stoves in the Global South, funding the building of renewable energy projects that do away with fossil fuel power stations, conserving forests that are at risk of being cut down etc.
2. Carbon removal: Paying money into projects that remove emissions from the atmosphere (for as long as possible). Whilst engineered processes for carbon capture, use and storage (CCUS) have been around since the 1930s, this is still an underfinanced and emerging industry. Currently most removal projects are nature-based. These include activities such as tree planting, habitat restoration (e.g. peatlands), sequestration through agriculture (e.g. to soil or crushed rock), ocean fertilisation, use of algae etc. Other removal projects include bioenergy with carbon capture and storage (BECCS), which involves capturing and storing carbon from biomass combustion.

What are the pitfalls of offsetting schemes

Offsetting schemes have been likened to paying for absolution whilst continuing to sin. Whilst there is much debate around this, some of the controversies and pitfalls to be aware of when considering purchasing offsetting credits are:

• Ongoing debate around exacerbating injustices caused by climate change. The argument is that offsetting allows rich businesses to continue polluting and contributing to the climate crisis, which disproportionately impacts the poor, whilst claiming green credentials. The counterargument is that offsets can be a way of transferring wealth and the benefits of development from the rich to the poor – such as investing in cheap, renewable energy projects in a developing country.
• Offsetting schemes are a largely unregulated space. This opens the door for schemes that don’t achieve the reduction or avoidance that is promised, that have little or no additional benefit or are actively fraudulent (e.g. double counting)
• A lot can go wrong, despite good intentions. For example, planting trees might seem like a no-brainer. But to be successful many factors have to align (e.g. right trees in the right location, no forest fires etc.). If the scheme doesn’t work, then you are not balancing your emissions.
• Proving additionality is difficult. Carbon reduction projects are an additional benefit only if they result in an action that would not have happened without you paying into the scheme. The challenge is that this is difficult to prove and is open to misuse. Some carbon reducing activities might be required by law, so paying into them is not providing anything additional (e.g. reducing landfill emissions). Similarly, if a renewable energy project was going to happen anyway then paying into it is of no additional benefit.
• Avoidance or reduction amounts attributable to a particular project are hard to measure. This complicates the goal of balancing your company’s carbon emissions with the same tonnage of carbon offsets.
• There are cost and timeframe issues. It is possible to purchase accredited carbon offsetting from a variety of providers for as little as £2 per tonne of carbon emitted, which many believe is not the true cost of reducing carbon emissions. Furthermore, many commercially available carbon offsetting schemes are based on a 60-year duration, which may not be sufficient or effective when a company is emitting the carbon today.

Should I consider offsetting in my road map to net-zero?

Yes

Climate change is a complex problem that requires a variety of solutions. And carefully selected carbon offsetting projects, whether that is around avoidance or removal, are all considered a necessary part of the solution. Tackling the climate crisis requires a combination of genuine efforts such as on forestry conservation, habitat restoration, ensuring a just energy transition, financing renewable energy projects, natural sequestration, engineered CCUS and so forth.

But

• Emissions avoidance and reduction in your own business and supply chain should always be the first step. Offsetting should only be considered as an additional effort on your ‘ultimate road to zero’ to balance today’s emissions while you work to eliminate them structurally in the medium-term.
• Do your research on the best offsetting schemes, to increase the chance of success whilst reducing the risk of adverse impacts. All schemes have a risk of failure, but some are better than others. The Gold Standard Scheme or the Verified Carbon Standard are considered good places to start.

What do I do now? 5 steps for a route to net-zero

1. Set your reporting period – such as your financial year or a calendar year
2. Measure and calculate your GHG emissions for the previous reporting period, ideally covering all of Scope 1 & 2 and the majority of Scope 3. [2]
3. Set a net-zero commitment, along with specific milestones and dates. Best practice suggests this should include the majority of scope 3 emissions and be aligned with Science Based Targets [3] and a 1.5-degree limit of global warming.
4. Develop a road map for how this will be achieved. This would ideally not just involve moving to a renewable energy provider, but actively investing in measures to avoid carbon across your business, decarbonise operations and increase biodiversity (e.g. cut down business travel, invest in energy efficiency improvements on buildings and low carbon heating systems, reduce operational energy demand, conduct rewilding/planting where possible etc.).
5. Purchase credits to offset any emissions that remain to achieve a net-zero balance. This is assuming:
   • All measures for reducing GHG emissions have been reasonably exhausted
   • You have undertaken research to procure credible offsets directly or via a recognised existing offsetting framework.
   • You can demonstrate additionality, the avoidance of any double counting and a clear process for verification of carbon avoidance or removal

While we can’t promise absolution for your sins of emissions, we can help you find the best overall net-zero solutions for your business. Get in touch with via hello@sancroft.com if you’d like to know more.

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[1] In September 2019, the SBTi published a discussion paper describing net zero for a company as ‘achieving a state in which the activities within the value chain of a company result in no net impact on the climate from greenhouse gas emissions. This is achieved by reducing value chain greenhouse gas emissions, in line with 1.5°C pathways, and by balancing the impact of any remaining greenhouse gas emissions with an appropriate amount of carbon removals’. https://sciencebasedtargets.org/resources/legacy/2019/10/Towards-a-science-based-approach-to-climate-neutrality-in-the-corporate-sector-Draft-for-comments.pdf

[2] Debate continues around whether scope 3 should be included in a net zero commitment. Trends suggest that more and more companies consider ‘true’ net zero commitment would include at least 66% of Scope 3 emissions (e.g. business flights).

[3] SBTs ensure that carbon reduction targets are rooted in the best available science and calculated based on what is needed for the industry you are in and the size of your company. A SBT can vary in its ambition, but ideally should be aligned with limiting global warming to 1.5°C.