More and more companies are looking to purchase carbon offsets to compensate for their emissions. But which offsets should companies buy — and where should they source them? We asked Marion Verles, CEO of Sustaincert, which issues certifications for offsets sold on voluntary carbon markets.
How should companies decide on the number of offsets they purchase?
The volume of offsets for companies should be determined by their residual emissions on an annual basis. Companies should follow the mitigation hierarchy, where the primary focus is on reductions and, only after that, on offsetting residual emissions. We can’t say it enough: offsets must be used as part of a comprehensive, science-based strategy — and should never be used in isolation. Otherwise, companies would simply use offsets to continue business as usual.
As companies commit and work to reduce their emissions each year, the volume of residual emissions — and offsets — should also decrease over time. We recommend looking at WWF’s corporate climate mitigation blueprint or SBTI’s corporate Net-Zero standard for best practice recommendations on the use of offsets.
What’s the best framework to use to decide the type of offset companies buy?
Questions on quality are often raised when talking about offsets, and rightly so: not all offsets are equal. Indeed, investigations have found certain projects overstate their impact. So, to make sure you’re buying high-quality offsets you must:
- Only buy offsets from internationally recognised standards. High-quality standards require third-party verification, providing the assurance real impacts are delivered on the ground. Standards you can trust include Gold Standard or Verra. The International Carbon Reduction and Offset Alliance provides a comprehensive list. Offset providers should offer clear additionality evidence and permanence risk management (in the case of removals) and include stakeholder consultation reports.
- Be aware of the risk profile of your project. Some project types are more risky than others. It is, therefore, important that you select the project types that you are comfortable with, and ensure you are aware of the risk profile. The World Wildlife Fund provides a good framework to use as reference.
- Gain clarity on how project funds are spent. If you buy through an intermediary, make sure to ask how much money goes back to the project on the ground. In addition, ask for confirmation that the offset was retired, which means it won’t be sold to someone else, to make sure your project isn’t guilty of “double accounting.”
What trends are going on in the marketplace?
The growth of carbon markets has accelerated further over the past year: a whopping increase of 48% in 2021, with large credits purchasers increasing their demand ninefold compared to 2020, according to the World Bank’s State and Trends of Carbon Pricing 2022. That market growth and increased demand for credits on the voluntary carbon market is largely driven by the growing number of companies making net-zero commitments.
Most of the credits issued are still renewable energy credits, but the growing interest for forest and land use credits is closing the gap. The latter accounted for a third of total credit issuances in 2021 and have increased by 159% over the past year. Afforestation, carbon sequestration in agriculture and improved forest management — nature-based solutions projects that remove atmospheric emissions — are gaining popularity.
However, we must remain cognizant of the problematic side of nature-based offsets. As the University of Oxford highlights, poor quality (non-verified) nature-based offsets can have limited or even negative effects on climate change mitigation and biodiversity, and devastating impacts on local communities. Third party, independent verification is key to ensuring nature-based and other types of offsets have real, positive impact and avoid potential negative externalities.
What cost should companies look to pay?
There is currently no ideal price for a carbon offset. Companies should focus first and foremost on sourcing credits from internationally respected and recognized standards endorsed by ICROA, such as Gold Standard and Verra.
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One thing to remember is that we cannot cheaply “buy” our way out of this crisis, and while offsetting is a useful tool, it is not a silver bullet solution. With that said, when used as part of a holistic climate strategy with the right checks and balances in place, offsets can — and must — play a role in achieving net zero emissions.