Carbon offsetting is a tool that allows organizations to fund projects that reduce emissions outside of their own operations. These projects generate carbon credits, which can be purchased and eventually retired for voluntary or compliance purposes. Voluntary offsetting is driven by organizations and individuals that want to address their own emissions on a voluntary basis to meet sustainability goals. Compliance carbon markets, on the other hand, require regulated entities to buy emissions permits or allowances to comply with regulations.
However, there is some criticism surrounding carbon offsetting. Detractors argue that it can be abused by organizations that simply want to buy their way out of reducing their overall carbon emissions. To be a valid strategic tool, offsetting must be part of a broader decarbonization program that is dedicated to delivering ambitious emissions reductions.
Not all carbon offsets are created equal, so it is important for buyers to scrutinize their quality before purchasing. Buyers can look for credits that meet standards set by organizations like the Verified Carbon Standard and the WWF-backed Gold Standard. They can also rely on independent carbon credit ratings agencies to assess the quality of carbon projects.
Carbon credits can be acquired through trading on a secondary market, direct purchase from project developers, or through direct development, joint ventures, or funding project developers. There are three main types of carbon offsetting projects: avoidance projects, which aim to avoid emissions compared to the most likely outcome if the project didn’t occur; carbon removal projects, which aim to remove or sequester emissions already in the atmosphere; and reduction projects, which aim to reduce the quantity of emissions released compared to the most likely outcome without the project.
Carbon offsetting can contribute to sustainable development outcomes, including biodiversity conservation and socioeconomic improvements. When implemented effectively, high-quality carbon credits can add value to an organization’s climate and sustainability strategy and demonstrate their commitment to a low-carbon future and a just transition.
Overall, carbon offsetting is a valid approach to complementing decarbonization strategies, but it must be part of a comprehensive effort to reduce emissions and should not replace investment in operational and supply chain decarbonization activities.