Carbon Offsetting (Climate Contribution): A short guide

This is done via the purchase of carbon credits, with one credit equaling one tonne of CO₂ reduced or absorbed. The value of a carbon credit not only reflects the CO₂ reduction capacity but also encompasses other benefits like ecosystem services, biodiversity protection, social advantages, and contributions to the UN Sustainable Development Goals.

There are two main types of carbon offset markets: voluntary and regulated. The voluntary offset market involves entities choosing to offset their emissions out of their own volition, while the regulated (compliance) market, established by the Kyoto Protocol, mandates companies and governments to account for their greenhouse gas emissions to meet regulatory targets.

The Net Zero Initiative has proposed shifting from the term "carbon offsetting" to "climate contributions" to avoid the negative connotations associated with compensating for emissions and to emphasize support for sustainable projects with positive environmental impacts. This approach aligns with efforts to achieve global carbon neutrality, balancing greenhouse gas emissions with their absorption, and is seen as part of a broader sustainability strategy that includes emission reduction practices.

The importance of combining climate contribution with emission reduction efforts is highlighted, particularly as a means to address residual emissions that cannot be eliminated due to technical or economic constraints. Thus, climate contribution is viewed as a critical component in the global transition to net-zero emissions, aligning with science-based targets and contributing to broader environmental and social goals as outlined by the United Nations’ Sustainable Development Goals.

Organizations can contribute to global carbon neutrality following a path consisting of four steps: measurement, reduction, offsetting, and transparent communication. This short guide will detail each of the four steps to better understand the development of an overall strategy for companies to achieve net-zero emissions.

 

 

The first step an organization can take to fight climate change is to measure its carbon footprint. Carbon footprint measurement at an organizational level follows precise rules. Several protocols exist to measure CO₂, such as the GHG Protocol, which is the most widely used greenhouse gas accounting standard and is internationally recognized.

 

The GHG Protocol divides greenhouse gas emissions into three scopes (Scope 1, 2, and 3), which account for direct company emissions and indirect company emissions from upstream and downstream activities. All greenhouse gas emissions are expressed in tCO₂e, tonnes of carbon dioxide equivalent, which includes other greenhouse gases, methane (CH4), and nitrous oxide (N₂O) being the two main ones. A company’s carbon footprint (Scope 1, 2, and 3) should be assessed once a year and is usually included in the sustainability or extra financial report of a company. In Europe, the measurement of GHG emissions is mandatory for companies with more than 500 employees (6).  

 

 

At an organizational level, measuring the carbon footprint will allow the company to identify the major sources of emissions and design a sustainability strategy to achieve its emission reduction objectives.

 

The Science Based Targets initiative provides companies with emission reduction guidelines that are in line with the achievement of the Paris Agreement objectives. According to the initiative, Scope 1, 2, and 3 targets must be consistent with a level of decarbonization required to keep global temperature increase well below 2°C compared to pre-industrial temperatures (7).

 

 

To reach this ambition, organizations should set medium and long term targets up to 2050. The SBTi recommends using “the most ambitious decarbonization scenarios that lead to the earliest reductions and the least cumulative emissions.” (8). Carbon footprint reduction strategies vary depending on the sector and the type of company activities; however, some general guidelines can be identified.

 

For example, to reduce Scope 2 emissions, the SBTi recommends companies to source renewable electricity suggesting a target of 80% renewable electricity procurement by 2025 and 100% by 2030 as thresholds. For Scope 3 reductions, supplier engagement is key as well as setting targets to influence the behavior of end-users.

 

 

Carbon offsetting is a voluntary action that can be done at either an individual or an organization level. To account for their unavoidable or residual emissions (emissions that persist), organizations or individuals can purchase carbon credits, which are generated by emission reduction projects that either absorb or avoid CO₂. These projects not only have environmental benefits but also co-benefits that target the United Nations Sustainable Development Goals, such as biodiversity protection and support local communities. 1 carbon credit corresponds to 1 tCO₂e avoided or absorbed, which can account for 1 tCO₂e of emitted emissions. 

 

To issue carbon credits, the project must be certified. Following the certification and the issuing of credits, monitoring and reporting activities are conducted to ensure the continuity of the projects. In turn, project activities can be monetized and carbon credits can be distributed and withdrawn by purchasers to compensate for their emissions. This procedure is known as the project value chain. 

 

Carbon credits are issued every year. Third-party auditors verify the number of emissions absorbed or avoided by the project compared to a base-line, 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 standards’ 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 transaction on behalf of their clients, transferring the credits and cancelling them once they are withdrawn.

 

There are different types of emission reduction projects that generate carbon credits, such as: 

 

• Forestry and Land Use: projects encompass a range of initiatives focused on sustainable management and utilization of forests and land resources.

• Renewable Energy: energy that is natural and self-replenishing. These are energies that are alternatives to fossil fuel electricity and heat production.

• Household and Community Devices: centers around benefiting local communities, using their knowledge and having them involved in the decision making processes.

• Blue Carbon: refer to Wetlands Restoration and Conservation (WRC) projects dedicated to protecting, rehabilitating, and conserving wetland ecosystems, including marshes, swamps,  peatlands, and other ocean and coastal ecosystems. 

• Waste Management: projects focus on how we handle waste to minimize its impact on the environment and on human health. Instead of treating waste as the last part of the production chain, these projects are working with the waste to create sources of energy, reduce pollution and reduce carbon emissions. These projects adopt a more circular approach to climate solutions.
  
  
• Agricultural Land Management: involves removing carbon from the atmosphere and sequestering it in the soil. Plants and crops make up part of the carbon cycle as they use CO₂ from the air during photosynthesis. When the plants and crops decompose, some of the CO₂ is stored in the ground and some is released back into the atmosphere.
  

Agricultural land use project in Punjab

• Transportation: one of the largest contributors to greenhouse gas emissions. These emissions primarily come from burning fossil fuel for our vehicles, ships, trains and planes.
  
  
• Tech-based and Hybrid: Beyond nature-based carbon removal projects, other projects focused on technology as well as hybrid solutions have emerged in the market. These projects have become attractive because they can remove carbon from the atmosphere and store it for thousands of years; however, today these projects are small-scale and costly.

 

When contributing, companies should ensure they are supporting high-quality projects. Thus, the first element to consider is the project certification, that is if the project is certified by an international standard such as Gold Standard, VCS, Plan Vivo, or Climate Action Reserve or a national standard such as Label Bas Carbone in France. Once the project has been certified, it is verified periodically by a third party, so the standard can issue the relevant amount of carbon credits the project has absorbed or avoided for that period. For the standards to issue carbon credits, the projects must follow specific rules and procedures. Specifically, the project must be real, measurable, permanent, additional, independently verified, and unique. 

 

To ensure that a project is of the highest quality, ClimateSeed performs additional audits, which include banking due diligence and the review and validation from our internal Sustainability Committee.

 

Communicate your climate action to your stakeholders. 

1. Avoid the terminology “carbon offsetting” and favor “climate contribution” instead. The concept of climate contribution is not to compensate for negative emissions, but to contribute to projects that capture or avoid CO₂ emissions to accelerate the fight against climate change. Projects supported through climate contributions go beyond carbon absorption or avoidance and achieve other environmental and social impacts that are aligned with the United Nations’ Sustainable Development Goals (SDGs), such as benefits on health, biodiversity, gender equality, and economic development. The more we contribute to high-quality emission reduction projects, the bigger the positive impact on climate and natural ecosystems.

2. Avoid being vague and quantify your impact. Make sure to define the scope (1,2,3) your climate contribution accounts for.

3. Refrain from claiming your company to be “carbon neutral” as a universal definition of carbon neutrality at a company level has not been defined yet.

4. Disclose the number of credits purchased, in tCO₂e, to support an emission reduction project.

5. Communicate about your climate action by following ISO 14021.

6. Educate and inspire your stakeholders to also support an emission reduction project to generate a larger positive impact.

 

These are some recommendations to select projects that are not only high-quality emission reduction projects, but also meet your organizations’ needs and objectives. In particular, the WWF has outlined several characteristics for carbon credits to be considered high-quality (9): 

 

Additional recommendations:
- Ensure that the selected projects match your organization’s environmental and social goals. You can rely on experts to select the appropriate projects.
- Ensure that the price margins are clear, and the money you are paying for actually reaches the projects and the local communities. 
- Match the project location to where your organization operates or sells its products. 
- Match the project typology with your company’s activities or interests.

- Conduct a banking due diligence on the project developers.
- Ensure that the project meets the highest quality standards by ensuring that the project is certified by either an international or national standard such as Gold Standard, VCS, Plan Vivo, or Climate Action Reserve.

 

For more information on how to select climate contribution projects, please contact us.

Supporting emission reduction projects can allow companies and individuals to achieve a truly positive impact on the environment and society. Please download the full contribution guide: "From Carbon Offsetting to Climate Contribution" for more information. 

 

We hope that this short guide on climate contribution has helped you to better understand the importance of supporting emission reduction projects and has provided you with relevant information to reach net-zero emissions and join the fight against climate change.