Carbon offsets explained

If you, like many of us, are tentatively planning your next business trip to meet colleagues and clients over the coming months, you might have noticed a nifty new tool rolled out by Google last week. Google Flights now allows you to compare flights by their carbon emissions, showing differences in flights’ carbon footprints based on the route, type of plane, and even how full the flight is.

?Google is only the latest organization of many to embed similar green-focused tools into their platform. ?The most common tool is an offset tool, allowing people to offset the amount of carbon dioxide emitted by their flight.

?But what is carbon offsetting, and how can it help businesses seeking to decarbonize their operations?

?What is carbon offsetting?

?A carbon offset allows individuals, governments and businesses to pay to remove or reduce a certain quantity of carbon from the atmosphere – commonly to offset the carbon impact of a particular activity.

??Some carbon offsetting is required for compliance and regulatory purposes. The European Union dominates this part of the carbon offset market as a result of the European Union Emissions Trading System, a piece of regulation that requires thousands of the bloc’s largest industrial emitters – responsible for almost half of the EU’s emissions of carbon dioxide – to cap their emissions to a certain level and buy carbon offset credits to account for any excess emissions. Under this programme, emissions have been cut by 42.8% of the main sectors covered. In the United States, some regional programmes exist to mandate carbon offsetting, including the Regional Greenhouse Gas Initiative which become the country’s first mandatory programme in 2009.

?Yet the part of the market attracting the most attention is the voluntary market in carbon. Individuals, companies, and governments are increasingly using voluntary carbon offset purchases to reach ambitious carbon neutrality goals. Some of the commonest carbon offsets involve funding renewable energy programmes, energy efficiency solutions, and better land management, including reforestation schemes. The use of carbon offsetting allows any company – big or small – to begin to mitigate its impact on the environment. In the run-up to COP26, the UN’s critical climate conference taking place in November 2021, many companies have published clear strategies for reaching net-zero carbon, many relying on carbon offsetting while implementing more complex carbon-reduction plans across their operations.

?A view from the critics

?Unfortunately, carbon offsets have a history of being unreliable. A lack of commonly agreed standards or best practices has often meant that carbon offsets have failed to deliver the promised emissions reductions.

?In the past, many carbon offsets have not been sufficiently verified and validated, often due to the complexity of validating offset claims, but sometimes due to fraudulent programmes that have given carbon offsetting a bad name. ?Carbon offsets also must adhere to certain principles to be considered legitimate. These include the principle of additionality, which means proving that the emission reduction would not have taken place otherwise, and permanence, which requires the programme reduces emissions for a set amount of time. These can be difficult to prove as they involve assumptions about the future.

?While the types and methodology behind carbon offsets have improved dramatically in recent years, a more existential question remains – if buying offsets wasn’t an option, would we instead commit to more meaningfully reducing emissions ourselves?

?By allowing companies to offset their carbon emissions, carbon offsets might lead many to believe they needn’t change their business practices as a result. In addition, many climate targets now expect companies and governments to go beyond net-zero scenarios towards the total elimination of emissions. Relying on carbon offsets delays the hard decisions required to make this a reality.

?So, what next?

?Companies putting together their sustainability strategy should tread with caution when it comes to carbon offsets – but don’t write them off entirely. As companies transition to a net-zero economy, many– especially in heavy-polluting industries – will need to offset emissions while they adapt and invest in greener ways of doing business. Some industries will require offsets while advanced technologies are developed, to truly accelerate their sustainability goals – low-carbon fuels for the aviation or shipping industry, for instance.

?Assess your footprint – if you haven’t already, the most important step towards reducing your impact on the environment is to first assess your carbon footprint. Doing so will help you identify where your biggest contributions to emissions are coming from. Consider where carbon offsets could fit within your broader sustainability strategy, and whether they could have a significant impact – as they may not be right for every business. Companies engaged in the import-export business, the industrial sector, or companies that are reliant on business travel or shipping and logistics, particularly stand to gain from assessing their carbon footprint.

?Verify, verify, verify – if you are using carbon offsets as part of your sustainability plan, ensure you choose a provider with rigorous verification standards. Some providers will even allow bulk buyers to make their visits to validate the offset programme.

?The consumer comes first – when offering goods and services to consumers, consider providing an offset option in order to raise awareness about the environment and allow your customers to join you in that journey. This is an option offered by many airlines, and a number of apps have been developed to calculate the carbon footprint of consumers’ weekly shop too.

?Empower your employees – many individuals nowadays are auditing their carbon footprint and using offsets to start a broader environmental journey to reduce their impact. Encourage your employees to do the same, offer incentives, and raise awareness within your organization of how you are using carbon offsets as part of a broader set of more fundamental changes.

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