It is not always easy for a company to know which offsetting project to choose, what criteria to consider, and how to ensure it doesn't affect its reputation. This article aims to guide you in selecting high-quality carbon offsetting projects.
Before further details, let's get a quick reminder of carbon offsetting.
A carbon offset is any activity that compensates for the emission of carbon dioxide (CO2) or other greenhouse gases (measured in carbon dioxide equivalents, CO2e) by providing for an emission reduction elsewhere (1).
In other words, organizations can compensate for the CO2 emissions they haven't managed to avoid by contributing to a certified emission reduction project (carbon offsetting project). It is important to remember that the offsetting process is complementary to the reduction process of a company and should never replace it. The contribution consists of purchasing carbon credits, where one carbon credit corresponds to 1 ton of CO2.
There are two kinds of offsetting projects:
Avoidance projects: Projects that prevent carbon emissions that would have been released into the atmosphere. Projects examples include forest conservation, renewable energy, fuel switch, and household devices.
Removal projects: Projects that reduce emissions by absorbing them from the atmosphere. Projects examples include afforestation, reforestation, improved forest management, and regenerative agriculture).
Offset projects can be divided into seven categories:
- Forestry and Land Use: projects that protect and restore existing forest areas threatened by deforestation.
- Renewable Energy: renewable power infrastructures that contribute to the decarbonization of the local energy grid.
- Energy Efficiency and Fuel Switching: energy-saving measures that reduce carbon emissions and replace fossil fuels with sustainable energy sources.
- Household Devices, efficient cookstoves that significantly reduce wood consumption or biogas digesters that provide sustainable fuel to local communities, prevent deforestation, and avoid GHG emissions.
- Agriculture, agricultural practices that store carbon in soils while restoring biodiversity and developing new sources of income for smallholders.
- Water Management: projects that supply clean water to households in rural communities, remove the need to boil water and reduce GHG emissions.
- Waste Management: landfill projects designed to capture the methane released by waste disposal, which can turn it into clean fuel.
When a company selects an offsetting project, it needs to verify several criteria that warrant its quality:
A project must be certified by an international or national standard to issue carbon credits. The standard differs depending on the project typology.
Here's the list of the most common international & national standards:
Third-party auditors verify the number of emissions absorbed or avoided during a specific period by the project compared to a baseline (base scenario), following methodologies established by the standards. Then the standards can issue the carbon credits. All credits generated by a certified project are accounted for on the standard's registry (each standard has its registry).
Registries are of fundamental importance to avoid the risk of double-counting, which occurs when two or more organizations monetize and claim the same credit. Once an organization decides to purchase carbon credits, intermediaries such as ClimateSeed settle the contribution on behalf of their clients, transferring the credits and canceling them once the credits are retired.
Following the Certification and the credit issuance, periodical monitoring and reporting activities are performed to ensure the continuity of the projects.
All emission reductions and removals - and the project activities that generate them - shall be proven to have genuinely taken place.
All emission reductions and removals shall be quantifiable, using recognized measurement tools (including adjustments for uncertainty and leakage) against a credible emissions baseline.
The project needs to be issuing carbon credits in a threatened area so that the added value is real. Financial additionality, which means that the project could not exist without the issuance of carbon credits, is also needed.
All emission reductions and removals shall be verified to a reasonable level of assurance by an independent and qualified third party.
No more than one carbon credit can be associated with a single emission reduction or removal as one (1) metric ton of carbon dioxide equivalent (CO2e). Carbon credits shall be stored and retired in an independent public registry.
Carbon credits shall represent permanent emission reductions and removals. Emission reductions represented by the carbon credits cannot be reversed after the issuance of the credits. For instance, if trees are planted but a forest fire or logging happens in the next hundred years, permanence is not met as the sequestered carbon is released back into the atmosphere. Where projects carry a risk of reversibility, at minimum, adequate safeguards shall be in place to ensure that the risk is minimized and that, should any reversal occur, a mechanism is in place that guarantees the reduction or removals shall be replaced or compensated. The internationally accepted norm for permanence is 100 years.
Carbon reduction projects preserve the planet, help local communities, and protect biodiversity. They also support the achievement of the UN Sustainable Development Goals, which lead to co-benefits. (Insert a screenshot of the goals?)
Co-benefits refer to all positive externalities enabled by the project and can consequently increase the quality of the project. The project should match your organization's environmental and social goals.
Ensure that the price margins are clear and the money goes to local communities. It is important to purchase the credits from a transparent player as a common practice in the market is to buy the carbon credits through resellers, which most do not show transparent margins. As a result, contributors do not know how much of their contribution is going to the project and local communities.
No secondary market: the climate contribution to projects is a way to finance much-needed climate mitigation action and support the global transition to a zero-carbon future. Organizations (contributors) must avoid reselling the carbon credits and retire them from the market to complete the climate contribution action.
Transparent reporting and communication related to a company's environmental strategy and carbon offsetting are essential to avoid greenwashing. Here are some tips:
- Communication must focus on the company's whole decarbonization strategy and consider offsetting as a complementary action to strong reduction efforts. In other words, a company should report its annual carbon footprint (scope 1 & 2 and eventually scope 3) and detail its carbon reduction efforts before talking about carbon offsetting.
- It's more strategic to talk about climate contribution rather than carbon offsetting.
- Use the term carbon neutrality correctly. According to the IPCC definition, "carbon neutrality" is a generic term, scientifically valid when considered on a global level. It corresponds to a worldwide equilibrium between anthropogenic emissions and anthropogenic absorption. An organization, product, or service cannot be carbon neutral by itself but can contribute to achieving global carbon neutrality.
- Be careful when communicating about SDGs. Ensure you provide detailed information (KPIs) about how you target them.
Extreme weather events such as droughts and floods have a greater impact on the poor and most vulnerable. Supporting emission reduction projects (offsetting) can allow companies and individuals to truly positively impact the environment and society.
Measure, Reduce, Offset, and Report. These are the four steps for an effective strategy to reach net-zero emissions, which have become necessary to reach the 1.5°C goal established by the Paris Agreement.
If you wish to learn more about carbon offsetting, you might be interested in ClimateSeed's guide on carbon offsetting.
-(1)Selin N.E., "Carbon Offset," 2011, Encyclopaedia Britannica, available at: https://www.britannica.com/technology/carbon-offset/additional-info
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