Purchasing carbon credits is now a common business practice and can play an important role in climate action, but mounting controversy is leaving many organisations questioning how to proceed.
Earlier this year, The Guardian published findings of a nine-month investigation into the quality of a popular type of carbon offset certified by the world’s largest carbon credit issuer, Verra.
The investigation concluded that more than 90 per cent of Verra’s rainforest carbon credits, which ‘avoid’ carbon emissions by protecting land from deforestation, generated no benefit to the climate whatsoever.
Verra strongly disputes the findings, although it has since announced that it will replace the rainforest offsets scheme by mid-2025.
The case has blown the debate over the true value and impact of carbon offsetting wide open. Supporters argue that, while imperfect, offsets are a vital instrument for tackling the climate crisis because they have an immediate impact and make climate action more accessible – especially where emissions are difficult or prohibitively expensive to eliminate directly. High quality offsetting projects can also provide additional social and economic benefits to the countries and communities that host them.
However, critics say the science of offsetting is woolly and credits are too cheap. There are also concerns over climate justice, with many arguing that offsetting simply allows the wealthiest to pass the buck of carbon responsibility to others.
One climate scientist, professor Kevin Anderson from the University of Manchester, even told The Guardian offsets are “worse than doing nothing” on the basis that they remove the incentive for businesses to reduce emissions themselves, which encourages the continuation and even expansion of high carbon activities (although conflicting research suggests companies that buy carbon credits are on average decarbonising their business faster than those that do not).
Regulators are now moving closer to overtly labelling offsets as a form of greenwash. The Guardian has revealed that the UK’s Advertising Standards Authority (ASA) will soon begin a crackdown on the unqualified use of terms like ‘carbon neutral’ and ‘net zero’ when the claim is based on the purchase of carbon credits. The EU is exploring similar action.
The growing debate has already stirred some companies into pre-emptive action. Italian fashion firm Gucci had used Verra-certified carbon credits to claim to be carbon neutral, but it has since removed the claim from its website. Instead of purchasing offsets, some companies, like fintech leader Klarna, have said they will fund climate and nature initiatives directly.
Many others have confirmed they will continue to use offsets alongside wider efforts to reduce their emissions. Most experts agree that high-quality carbon credits are a valuable tool as long as they are used responsibly – as secondary to reducing emissions at source and reported separately and transparently.
Organisations are also being encouraged to focus on ‘removal-based’ carbon credits that actively reduce emissions, rather than ‘avoidance-based’ credits like those at the centre of the Verra controversy.
Either way, the cost of carbon offsetting is set to rise significantly over the coming years. According to recent analysis by PwC, the price of carbon credits could increase by between 256 per cent to over 1,000 per cent by 2030.
Ian Milborrow, sustainability partner at PwC UK, commented: “Companies across all sectors must consider the potential financial impacts of rising offset prices. If we get to that stage where the use of offsetting to reach net zero targets becomes sufficiently expensive so as to become unviable, and in the absence of other strategies, companies will be unable to meet their net zero commitments in the timeframes they have published.”
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21 November 2024
19 November 2024
