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.

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

As a company, how to lower your carbon footprint ?

As a company, why do you need to take control of your environmental footprint now

  • Hop on the momentum : Paris Agreement, Green Deal, … scientific recommendations are all pointing in the same direction.
  • Engage your stakeholders : employees, clients, investors, suppliers, … show them your commitments and onboard them on an impactful journey. 
  • Create a competitive advantage : differentiate yourself from your competitors.
  • Get ahead of regulation : start now and you will be prepared for future uncertain economic imperatives.
  • Enable cost reduction : on the long run, you will earn a high return on your carbon reduction investments even though the investment cost seems massive in the beginning of your process

Now, in order to take control of your environmental footprint, you need to develop a carbon strategy.

What is a carbon strategy?

The plan a company has to build when they decide to take their environmental responsibilities and play a role in the ongoing sustainable transition. The carbon strategy’s purpose is to manage and reduce all Greenhouse Gas (GHG) emissions generated by a company’s activity. Different gases are emitted but for practical purposes, the term ‘CO2 equivalent’ describes those GHG in a common unit. 

The problem is, once a CSR reflection is engaged in a company, people often struggle to start, set targets and make decisions about carbon emissions. 

Actually, it makes sense that companies do not turn into carbon experts overnight. They have their own reality, limitations, economical restrictions and ressources. It creates a paradoxical situation where companies want to act but do not know where to start or do not have the necessary resources to launch such a process.

A carbon strategy is not an end in itself but a necessary means to achieve a sustainable transition.

Tapio is a Carbon Management Software helping companies to understand, set and follow in time a carbon strategy. All carbon strategies will end up being unique but four essential elements have to be addressed and represent the four main pillars on which Tapio’s platform is based.

  1. Measure and Analyse – you cannot solve what you do not understand.

A carbon report is an estimation of all carbon emissions from a company’s activity. As the starting point of a carbon strategy, it sets the baseline on which to take action. To easily analyse data, Tapio offers an overview of the company’s carbon report through relevant and visual dashboards. 

Here are some extra tips to keep in mind along the way:

  • Do not try to skip this step, it will decredibilize all the strategy. 
  • Choose an external partner that follows protocols (GHG or Bilan Carbone) : you will have to collect and provide specific data but cannot make the assessment yourself.
  • Do it at least once a year to keep the big picture in mind and track your progress towards your goals. 

  1. Reduce – the perfect ton of CO2 is the one that is not emitted.

Sustainable transition means cutting GHG emissions in order to limit global warming and achieve a net-zero carbon future. After analysing where there is room for improvement in the carbon report, solutions can be established. Tapio provides a generator of clean and alternative solutions aligned with the company’s needs and financial resources. 

The objective here is to reduce all the emissions of your activities which sometimes implies to restructure some operations or rethink the way you perform. As laborious as it may seem, keep the big picture in mind, you commit, at your scale, to help reverse climate change. 

  1. Offset – what you cannot reduce today, you can offset.

You’ll have to make choices and accept a certain level of non-compressible CO2 emissions in the first years. Those incompressible emissions should be reduced at most. However some will stick around. Therefore offsetting is a possible option : financing carbon capture projects to compensate these remaining emissions. Tapio works with experts to offer certified and transparent projects. Social impact is also part of these offsetting projects: Tapio ensures that these initiatives bring co-benefits to local communities and their environment.

  • To reduce is your highest priority, only afterwards would offsetting come in handy. 
  • Choose wisely your project, if they are not certified or transparent enough, you’ll probably give your money to the wrong organisation and risk backlash. 

  1. Engage – Discuss the matter and spread the word 

Acting towards sustainable transition by setting a carbon strategy is essential but also profitable. Customers, investors and the next generation of employees are in demand of transparency, sustainable purpose and resilience. A sustainability aligned strategy is key for future market leadership. By taking action on your environmental footprint, stakeholders’ interest will be higher and will create more opportunities. Tapio makes it possible to publish and report a company’s carbon strategy to the world (or specific actors, employees for example). By spreading the word, we will convince others to follow and the impact will be exponential.

  • Feel comfortable to communicate on your carbon strategy even though it is not perfect. Transparency speaks for itself, the objective is not to be the best in class immediately but to show you aim for improvement.
  • Onboard your employees in your carbon strategy to keep them engaged and attract new talents.  

This is how Tapio, all-in-one Carbon Management Software, has been conceived. It provides companies with a guide towards carbon neutrality and gives them the latest science-based and business insights on the subject. Reach out to us for any additional information, we will be happy to talk and guide you through our software and tools. 

Bonus Tips – avoid the traps. If you decide to start your sustainable transition, it needs to be real and fully transparent. Expectations are high today (and will only increase further) and people are not ready to believe everything they read. Make your initiatives, objectives and progress public.

A carbon strategy is not a presentation of the final results but of the journey. Do not hesitate to share an unperfect current situation. It’s the reason why you are implementing your strategy. The plan must be solid and flexible to easily integrate feedback and improve.