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Why carbon offsetting is a vital tool in the climate change ‘toolbox’

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Carbon offsetting is a mechanism employed to finance the greenhouse gas (GHG) emissions reduction/avoidance, or sequestration equal to the residual emissions of an entity, business, or any other area that goes beyond the value chain.

This financing is achieved through purchases of carbon credits. One carbon credit is equivalent to one metric tonne of reduced/avoided and captured CO2 (CO2) through the project funded by this system.

Once the credit is purchased, it is later retired by publicly accessible emission registries that are governed under international standards and international exchanges. If a credit is used for offsetting, it becomes an offset and then the credit is retired , which means it can’t be reused (for greater transparency and transparency, carbon credits are assigned serial numbers).

Carbon offsetting is effectively putting carbon at a cost for businesses, which will encourage them to speed up internal reductions, such as emission from the supply chain, which will to justify the investment in low-carbon businesses, and will eventually prove that the status quo is no any longer an option.

Achieving net-zero emissions by 2050 at a global level requires massive investments in geological or biological carbon sinks. Carbon offset plays an essential role in the fight against climate change because it allows funds for projects that have high carbon reduction/avoidance or sequestration potential.

By driving finance to projects that reduce/avoid or sequester GHG emissions Carbon offsetting that is voluntary becomes an integral part of a comprehensive climate strategy. It enlists the organization in climate action beyond it’s value chain.

Voluntary carbon offset

Both public and private sectors engage with carbon offsetting in order to comply with regulations or to fulfill voluntary requirements that result in two types of carbon markets: 1.) market for compliance, in which governments set up for example a carbon tax or an ETS or emissions trading system (e.g. ETS,, etc.)) and) non-voluntary carbon markets in which companies that don’t fall under any legislation opt to join voluntarily in taking accountability for their entire emissions, while also providing added value to their clients and investors.

Their motivations are diverse: to act on the issue of climate change; to provide additional value for their customers as well as their investors and citizens to anticipate the future of regulation or engage in a partnership process with principal stakeholders (e.g. employees, customers or NGOs, media) or other stakeholders.

Voluntary carbon offsets consist of financing voluntary actions by buying carbon credit through the voluntary carbon market (VCM) which facilitates an observable and confirmed reduction or elimination or sequestration of GHG emissions elsewhere while supporting sustainable development, often in countries where it is needed most.

Why carbon offsetting is a vital tool in the climate change toolbox’

In conjunction with the intensive efforts to reduce carbon emissions Carbon offsets on a voluntary basis can help with green initiatives and carbon sequestration outside of a company’s value chain.

In the face of climate emergency, it offers the chance to take immediate action to contribute to climate change mitigation and thus accelerate the collective climate action.

For over 10 years the carbon market and the mechanism of offsetting have evolved through a continuous improvement, development and improvement. Its role in complementing emission reduction efforts is the area of consensus in the scientific community. According to the Paris Agreement reminded us that global net-zero isn’t possible if we don’t use every tool that is available to us, and carbon offset is among them. It is the Intergovernmental Panel on Climate Change (IPCC) has highlighted in the last part of their 6th Assessment Report (AR6, April 2022) that the solutions for removing carbon from the atmosphere are vital to offset the residual emissions and reach net-zero.

But, the complexity and the evolution of carbon offsets on a voluntary basis has created some reluctance as well as confusion. This guide will help you better be aware of how voluntary carbon offsetting helps achieve net-zero as well as the sustainable development goals. The guide explains the principles and conditions required to implement voluntary carbon offsetting rigorously, as an addition to, but not a replacement for, a science-based emission reduction strategy.

We will look at the voluntary carbon offset programs thoroughly, including principles for their implementation and the verification and certification that goes with them. We will also provide information on the different kinds of frameworks, projects and the best practices we encourage companies to take on.

With our practices, commitments and techniques we will demonstrate how you can implement a robust offsetting strategy as well as how to create new methods and projects.

In addition to reducing greenhouse gas (GHG) emissions aligned with scientific research and restoring and protecting carbon sinks in their value chain for instance mangroves and forests along the coast Carbon offsets that are voluntary allow organizations to also finance projects with a high environmental impact outside its value chain.

What can carbon offset offset do to assist us in reaching net-zero?

There is immense pressure from all angles to reach zero net emissions as soon as it becomes possible. We are facing a global emergency that requires immediate and aggressive action from business using every method possible.

Organisations cannot offset their way to net-zero. Net-zero is an ambitious goal that requires a complete decarbonisation of 90-95% of emissions and removal of the remaining 5 to 10% of residual emissions. In the near-term, organisations are advised to fund carbon offset projects which reduce emissions from outside their value chain to eliminate the following global gaps:

Timing gap: As a species, we have to reduce carbon emissions as fast as possible. The current plans of governments across the globe could cause overshooting of the required timelines as recommended by the IPCC and climate science.

Ambition gap according to the Climate Action Tracker, all the global commitments and targets which are currently in force will result in approx. 2.7degC of warming by 2100. Concerning climate policies in the real world, it could cause approx. 2.5degC – 3.5degC in warming.

Finance gap: Governmental financing of low-carbon paths is not enough by themselves. The United Nations Environment Programme (UNEP) states that the gap in finance currently stands at USD 4.1 trillion. The private sector is an essential tool for mobilizing capital, and this must be utilized in a productive method.

Carbon offsetting plays an essential role in helping bridge these gaps. Even though it shouldn’t be viewed as the only solution but rather as an effective way to fund sustainable development and help fund initiatives that are doing essential work to conserve habitats, ensure sustainable development practices and improve people’s lives whilst eliminating some of the global carbon emissions.

International initiatives that are in development or already in place define the role of voluntary carbon offsetting to reduce net emissions at the organizational level. These include The Oxford Principles for Net Zero Aligned Carbon Offsetting as well as The Science Based Targets Initiative (SBTi) and The Integrity Council for the Voluntary Carbon Market (ICVCM; the Voluntary Carbon Markets Integrity Initiative (VCMI), along with the ISO 14068 standard. These two will publish their respective documents in 2023.

For example, according to the Oxford Principles of the Net Zero Aligned Carbon Offsetting There are four essential elements that make up credible net-zero aligned offsetting:

Prioritize reducing the emissions of your company first, ensure the integrity of the environment of offsets you use, and disclose how those offsets operate.
Offsetting shifts towards carbon removal and long-lived storage offsets remove carbon out of the atmosphere for a long time or at least for a long time.
Contribute to the development of net zero offsets that are aligned.
Use a responsible, nature-based method to offset carbon, for example, forest restoration.

A strategic framework for business activity that includes the SBTi’s Corporate net-zero Standard

In October 2021, the SBTi launched the Corporate Net-Zero Standard framework, working with CDP, Global Compact, the World Resource Institute and WWF. The Corporate Net-Zero Standard is first of its kind in the world for corporate net-zero target setting which is compatible with climate science. It contains the guidance in terms of criteria, recommendations, and guidelines companies need to set science-based net-zero targets that meet the criteria of setting a limit on global temperature rise of 1.5degC.

How do we ensure the viability of offset projects?

Climate change is already having an ongoing impact on global ecosystems with rising sea levels and frequent floods, droughts, wildfires and more. All these risks must be more effectively integrated, not just into carbon finance but also (and foremost) into every environmental project.

As part of the certification process, the international carbon standards require that projects to conduct a risk assessment and forecast climate impacts at the level of the project, which must be demonstrated through documentation for the project as well as feasibility studies. For instance, if a portion of a mangrove has been predicted to be damaged by sea level rise within 100 years, then the VCS certification procedure requires that the mangrove area cannot be considered in the calculations in the absence of an adaptation plan implemented to stop the erosion. They also need to implement precautions against risk (such as fuel treatments, the construction of fire breakers and fire towers as well as conservation easements,.) to decrease the risk of reverses.

This is a difficult exercise that requires foresight on a project levels, yet will allow us to think about the significance of adaptation measures. This is a crucial aspect to think about: in order to have a better chance of functioning the carbon offset project regardless of whether it is restoration, reforestation, afforestation or conservation, must immediately implement measures to improve its adaptation capabilities and consider climate risks.

In short, developers of projects are interested in doing everything possible to prevent this kind of incident from disrupting their plans by implementing the necessary measures and actions in advance.

In the case of extreme weather conditions, malicious acts (e.g. deliberate fires) or negligence, standards, such as the VCS have set up “buffer reserves” (also called “pools”) which are pools to which each project is responsible for making a selection of offset credits that cannot be sold on the open market and are considered ex-post, which means that the emission reduction is already in place.

As per the process in an insurance plan, the credits set aside (reserved) can be drawn upon to compensate for reversals of any kind for any project. Put into practice, in the event of a reversal occurs, the credits reserved are removed from the buffer reserve to ensure that the credits issued still reflect real reductions in emissions.

The amount of credit the project has to reserve is usually based on an assessment of the project’s risk for reversals. The current trend of diversifying the projects (types or locations) makes sure that buffer reserves are able to withstand and not impacted even from extreme weather conditions, malicious acts, such as deliberate fires, or negligence.

For Gold Standard accredited projects, they rely on the concept of a “Compliance Buffer” which remains unaltered even after the crediting duration of the project, thereby reducing the risk of reversal and non-permanence.

The buffer reserves are frequently updated to take into account the evolution of scientific knowledge especially regarding climate change. Information and data regarding the reserves are available online.

Projects to offset carbon emissions of various kinds

Restoring the ecosystem (reforestation of forests that have been degraded, mangrove restoration Agroforestry, ecological conservation and reduction of deforestation etc. ).
Renewable energy production on a small scale or in regions not connected to electricity grids (solar or wind, biomass and so on. ).
Improved energy efficiency (energy-saving and more efficient cookstoves).
Improved recycling of waste (biogas biochar, biogas. ).

All these types of projects are recommended by the scientific community as stated in the latest IPCC report, published by the IPCC in April of 2022 (AR6 WGIII).

It is crucial to help offset projects that provide both environmental and social benefits for individuals, and are aligned with UN SDGs. These include objectives like the reduction of poverty in all forms, providing safe drinking water and sanitation to everyone, ensuring gender equality and empowerment of all women and girls, and more. Beyond protecting the environment, offset projects should aim to bring tangible and measurable benefits to the communities where they operate, which will empower them to be the owners of an environmentally sustainable future.

For example, EcoAct’s prestigious Sudan Low Smoke Cookstoves project that was the first to be developed in a conflict zone, will bring economic and health advantages to Sudanese households, and with a an emphasis on concentration on women’s empowerment.

The Hifadhi Livelihoods Cleaner Cookstoves (financed via The Livelihood Fund and developed in partnership in collaboration with EcoAct) is instructing local artisans and officers in the management of the distribution of better and more efficient cook stoves in rural Kenya, which has positive impacts on communities, families and the environment.

A lot of carbon offset projects are part of solutions based on nature.

Nature-based solutions are defined in the International Union for Conservation of Nature (IUCN) as “actions to preserve the environment, sustainably manage and restore natural or altered ecosystems that address societal challenges effectively and in a way that is adaptive, while providing both biodiversity and human benefits”.

Solutions based on nature include:

The protection of ecologically sound and functional ecosystems
Ecosystems that are sustainable in their management
The restoration of ecosystems damaged by degradation or the creation of ecosystems

A report entitled The State of Finance for Nature in the G20 which was released in January 2022 showed that the current G20 investments in solutions based on nature is not enough. Nature-based solutions are a valuable method of reducing climate impacts as well as adaptation. They also offer numerous social and environmental co-benefits. They can play an important role in creating a sustainable and sustainable future and supporting an equitable global transition.