What is carbon offsetting and how does it work?

As you all (may) know, carbon emissions must be halved by 2030 and reach net-zero by 2050. Thus, as planet earth’s citizens, our absolute priority is to reduce the carbon intensity of anthropogenic activities (see our previous blog post on the topic). But what can we do when we reach the limit of the carbon emission reduction potential of an activity? Carbon offsetting is an alternative to adjust your net emissions in the short term.

Simply put, carbon offsetting enables an organization to further act on  its carbon footprint by supporting projects that reduce the amount of carbon in the atmosphere. The organization finances a project that captures carbon or avoids an emission. In exchange, the organization receives a carbon credit that can be accounted for as a decrease in the organization’s net emissions. The credit can be created through different methods. The most well-known example and also the most used is forestry and land-use projects. These projects generate credits based on reforestation, avoided deforestation, improved forest management or ecosystem restoration. The principle is simple: any healthy tree captures carbon and if several project criteria are met, credits are emitted on the carbon captured by the trees. The same mechanism applies for renewable energy, household devices (such as cookstoves and water purification systems), waste disposal or energy efficiency projects (check Tapio’s projects).

The COMACO Landscape Management Project (CLMP) promotes sustainable agriculture and forest conservation in the Eastern Province of The Republic of Zambia. The main objectives of the project are twofold: to sustainably increase smallholder farmer crop yields, income and welfare; and to reduce uncontrolled forest loss and degradation, and increase net forest cover.

The required criteria are standardized across all projects. They ensure that every carbon credit is emitted ex-post, only when the carbon has been captured or avoided. These criteria are commonly referred to as “PAVER”:

  • Permanent: the reduction or avoidance must be perpetual;
  • Additional: the project would not have occurred without the offset project;
  • Verifiable: the project must be able to be verified with data;
  • Enforceable: the credit must be emitted only once, and then retired;
  • Real: the credit must not be emitted due to false accounting methodology

Certifications ensure that these criteria are met and register all the emitted credits. The certifications are granted by international specialized certification agencies, such as Gold Standard, Verra, or Plan Vivo. They guarantee the equivalence of carbon credits: every credit has the same validity, independently of how they were generated. On top of that, they also analyse to what extent each project contributes to a wider social or environmental impact (co-benefits), like the Sustainable Development Goals.

Back in the early 2000s, carbon offsetting was considered a very niche type of initiative for idealistic tree-planters. Nowadays, offsetting carbon has come under the spotlights, with a yearly transaction volume of credits of 100 million tonnes of CO² equivalent in 2020, expected to be multiplied by up to 15 by 2030 and up to 100 by 2050, according to McKinsey and the Network for Greening the Financial System (NGFS)

Note that we are speaking here about the voluntary carbon offset market when organisations proactively decide to offset their emissions. This voluntary aspect differentiates itself from regulated markets of carbon credits such as the EU ETS. These regulated markets work according to different principles, generally through a “cap and trade” mechanism.
In our case, voluntary carbon offsetting works with certified projects that generate credits that can be bought by organizations willing to offset carbon emissions. 

At Tapio, we select the most suited project according to your volume needs and sustainable development preferences. To us, carbon offsetting is an essential tool to compensate for the emissions you cannot abate today. However, when targeting net-zero, you must first focus on your carbon reduction goals using our solutions generator. Carbon credits come second and provide you with a way to correct your trajectory over time while supporting meaningful projects.

Sources:
Taskforce on Scaling Voluntary Carbon Markets
Science Based Targets Initiative
Forest Trends
Gold Standard
Verra
World Bank

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