Carbon offsetting has developed as a popular way for organisations to reduce or ‘cancel out’ their own climate impact by supporting projects that reduce or remove carbon emissions elsewhere, such as tree planting.
The practice has grown into a global industry worth around $2 billion a year, with some 40 per cent of UK businesses now engaged in voluntary carbon offsetting according to some surveys.
However, while most agree offsetting has an important role to play in tackling climate change, concerns about its scientific rigour have never been far from the headlines.
In January, the industry was rocked by the findings of a nine-month investigation by The Guardian, which concluded that 94 per cent of a certain type of carbon credit offered by one of the world’s leading providers, Verra, provided “no benefit to the climate” (an allegation the company strongly disputes).
Speaking to The Guardian, one prominent climate scientist, Professor Kevin Anderson of the University of Manchester, went as far as describing offsets as “worse than doing nothing” because they risk disincentivising businesses from taking action to reduce emissions themselves.
A group of nearly 50 carbon credit brokers, project developers and offsetting bodies have since signed an open letter in defence of offsetting. While recognising that there are serious problems within the industry, the group argues that carbon credits are crucial in not only offering a “no-regrets” option companies can take to reduce emissions now, but also providing much-needed funding for nature conservation and nature-based solutions to the climate crisis.
“The carbon credit market alone will not solve climate change. Not all credits deliver the climate benefits they claim. These two facts are not disputed. But they also do not mean that offsetting should be totally abandoned and that any engagement with carbon markets is greenwashing,” the open letter reads. “Carbon credits are one of the few mechanisms we currently have for funding the wide-scale conservation of natural carbon sinks [such as rainforests] and wider climate solutions.
“The fact that all carbon credits are not perfect does not mean we shouldn’t use them—it is too late for that… We need every tool in the box, including carbon credits.”
The big sticking point for critics has been the largely unregulated nature of the voluntary carbon credit market and an oversupply of cheap, poor quality credits that can be misused as a ‘get-out-of-jail-free card’ by businesses. Some types of offset are more controversial than others, such as those that avoid new emissions (for example protecting forests from deforestation) rather than removing emissions entirely.
A recent global survey of sustainability professionals found that around two fifths do not trust using carbon credits because of a lack of transparency and credibility.
However, carbon offset bodies say big strides are being made in the pursuit of credible, high quality credits, which are beginning to command a price premium.
Research suggests the era of easily affordable, low quality credits could come to an end as the market matures and if stricter standards become mainstream.
According to energy research firm BloombergNEF, if the market is just restricted to higher quality removal-based credits, prices could rise to over $200 per tonne by the early 2030s, compared to just $2.50 on average in 2020.
“As the market matures – which it will – and processes are put in place to make offsets resemble a traditional commodity, prices will inevitably rise and companies will need to prioritise their [direct] gross emissions more than ever,” explained BloombergNEF’s head of sustainability research, Kyle Harrison.
Experts on both sides of the debate agree that organisations need to prioritise the prevention and reduction of their own emissions above investing in carbon credits.
“Carbon credits should be complementary [to emissions reduction], not a substitute,” Nat Keohane, president of the Center for Climate and Energy Solutions in the US, told The Guardian.
For their part, the carbon offset bodies agree. Their open letter states: “We actively promote adherence to the ‘mitigation hierarchy’ – companies must first avoid and reduce emissions, using credits only to compensate for emissions they are unable to avoid – in line with the leading net zero guidance from the United Nations and the Science-Based Targets initiative.”
To avoid accusations of greenwashing, businesses are encouraged to share their criteria for carbon credits and be completely transparent about their use.
The WWF has produced a comprehensive guidance document for businesses on how to approach offsetting and avoid making misleading claims, setting out a list of carbon credit quality criteria and a template businesses can use in their communications.
