By Lydia Peraki, Sustainabity Specialist

Individuals and organizations can invest in environmental projects worldwide to compensate for their own unavoidable emissions. By definition, a carbon offset is a removal or reduction of greenhouse gas emissions by compensating the emissions generated elsewhere. Offsets are measured in tonnes of carbon dioxide equivalent (tCO2e) reduced or removed from the atmosphere. One carbon offset represents one tonne of carbon dioxide or its equivalent in other polluting greenhouse gases.

There are two categories of offset projects, 1) avoidance and reduction projects, where emissions are avoided or mitigated and 2) removal projects which support the capture and sequestration of greenhouse gas emissions, for example by planting trees or removing CO2 out of the air. Carbon offsetting can be implemented in a voluntary or compliance market base. The voluntary market applies to individuals, companies, or other organisations that purchase carbon offsets to mitigate their greenhouse gas emissions. There are different certification programmes which provide standards, guidance, and requirements for project developers to ensure that the carbon offset credits meet quality standards. This means, as different labels have different standards, prices per carbon credit can vary widely. In contrast with the voluntary scheme, compliance market such as the European Union Emission Trading Scheme, organizations, governments, or other entities purchase carbon offsets to achieve obligatory and legally binding limits on the total amount of CO2e they are allowed to release per year. In case of not meeting these agreements, it will result in fines or legal penalties.

However, following the Paris Agreement and starting from 2020, companies in the EU Emission Trading Scheme are not allowed anymore to use carbon credits to cover their emissions since it was observed that it is required larger attention to the subjective reduction of greenhouse gas emissions at all stages of a value chain within an organization, to realistically achieve a global emission decrease. Consequently, to achieve net-zero targets, companies must reach 90-95% of decarbonization across all scopes before 2050. When a company reaches its net-zero target, only the limited number of residual emissions (5-10% max) can be neutralised with carbon removals by offsetting. Therefore, these investments are not a substitute for a company’s own emission reductions and cannot count towards the 90%+ reduction.

Although the aim of carbon offsetting is a more equal and globally shared responsibility of lowering greenhouse gas emissions, many agree that offsetting is unhelpful in the fight against climate change or even worse than doing nothing. Firstly, the financial incentives enhance the set-up of non-complete programmes. For instance, promised trees are planted but not maintained, resulting in dead trees and space to start the false carbon-offset cycle again. In a worse scenario, as in some cases, natural areas are destroyed to make room for planting trees funded by carbon offsets. To add insult to injury, if compensating emissions is easier or cheaper than cutting emissions, carbon offset projects can discourage direct decarbonization activities. Therefore, a slowdown in the transition to a more sustainable society can be observed by this psychological effect. Therefore, carbon offsets should be seen as ‘green investments’ rather than compensation strategies to reduce one’s own emissions. It can also be considered a good practice which enables organisations and individuals to quantify their goodwill.

To make the long story short, offsetting is to be seen as a tool, not a sustainable strategy to reach global emission reduction goals. Therefore, the first and most significant action to mitigate someone global warming is by reducing greenhouse gas emissions in the value chain of the relevant organization or individual. This means that we must consider offsetting as a green investment rather than a carbon compensation. And when buying carbon offsets, carefully investigate the type of project to avoid supporting false projects that focus on making money at the cost of the environment.