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Business use of offsets risks delaying net zero

© Shutterstock / SkazovDa jigsaw puzzle with the words carbon offset on it

The UK Climate Change Committee (CCC) says that voluntary carbon markets (VCM) aren’t working at the moment, but get the rules right and they can make a positive contribution to net zero.

  • Carbon offsets are gaining traction once again but lack of regulation is a concern for authorities.
  • The CCC is concerned that use of voluntary offsets could derail direct decarbonisation efforts.
  • Standards bodies have been working on carbon market integrity for years – governments need to push through clearer frameworks.

Businesses are increasingly turning to voluntary carbon offsetting as they aim to reach Net Zero. But the CCC is concerned that recent market growth is premature.

The committee warns that offsets can mask insufficient efforts from firms to cut their own emissions, they often deliver less than claimed, and they may push out other environmental objectives in the rush to capture carbon.

The CCC has reviewed the evidence on the impact of VCM

The Climate Change Committee believes that there are some significant shortcomings in the voluntary carbon market approach. The current shortcomings can be overcome however,  with stronger governance to ensure high-integrity carbon credits and clearer guidance for businesses to encourage them to cut their own emissions first and foremost, before turning to offsets.

Chris Stark, Chief Executive of the Climate Change Committee said: “Businesses want to do the right thing and it’s heartening to see so many firms aiming for early Net Zero dates. But poor-quality offsets are crowding out high-integrity ones. Businesses face confusion over the right approach to take.

“There is a clear need for Government to make standards stronger and point businesses towards an approach that prioritises real emissions reduction ahead of offsetting. Those businesses that choose to support the economy-wide transition to Net Zero should get the credit they deserve.”

Disconnect remains between net zero targets and action

Many businesses have named ambitious net zero targets but achieving them through an over-reliance on offsets is undermining the economy-wide transition. The development of a clearer definition of a ‘net zero Business’ in the UK will help businesses pursue a strategy that complements the national targets – prioritising action to cut emissions ahead of offsetting.

The committee has said that it sees an important role for the VCM in achieving net zero, given better governance and standards. In particular it can be a useful way of delivering  finance and funding to areas that need it.

The UK already has some of the leading examples of good governance with the Woodland Carbon Code and the Peatland Code. Using these more widely can direct private investment towards new forestry and peatland restoration – two of the largest policy gaps in the UK Government’s current Net Zero Strategy. These codes can also be further improved to deliver wider improvements in biodiversity.

VCM has an important role to play in addressing the nature crisis

Globally, voluntary carbon markets can also help to pay for nature recovery or more permanent forms of ‘engineered’ greenhouse gas removal technologies, but prices need to increase considerably to be effective and it’s unlikely that offsets alone can fill the funding gap.

The global market for voluntary carbon offsets has grown rapidly (up over threefold in 2020-2021 to $2 billion). As it grows demand for standardisation and regulation are intensifying. According to the CCC the Government has an important role in raising standards and has provided a list of suggestions for the government to implement.

This include a clear definition of a ‘Net Zero’ business, where a business or organisation should only be considered to be net zero when it has reduced its emissions as far as possible to be at or close to zero and permanently removed CO2 from the atmosphere to compensate for any remaining emissions. This is in line with the current framework of the Science-based Targets Initiative (SBTI).

Beginning to reduce emissions and using carbon credits to cover the rest requires another term, such as ‘Offset Zero’ or ‘On the pathway to Net Zero’.

  • Government should use the forthcoming ‘Net Zero transition plan standard’ to require UK businesses to disclose their reliance on carbon credits and improve transparency.
  • Government should continue work to improve existing standards for carbon credits in the UK, and to influence and advocate for stronger global standards.

Ultimately, if voluntary carbon markets are genuinely to complement the transition to Net Zero, businesses must be supported to directly decarbonise their operations and supply chains. The role of a carbon credit should be to support, not discourage the reduction of actual emissions.

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