Explainer Series | What is carbon offsetting?
Carbon offsetting is the practice of compensating for greenhouse gas (GHG) emissions. This is often done by buying carbon credits generated by projects that reduce or remove carbon emissions from the atmosphere. A good example is native forest regeneration projects like Hinewai Reserve, which have protected forest blocks that absorb (or sequester) carbon.
A single carbon credit is a tradable, non-tangible instrument representing one tonne of reduced, avoided, or removed carbon emissions. Once cancelled from an appropriate registry, the credit is taken out of circulation and not used more than once. Carbon credits can also range in quality and price. There are internationally recognised carbon credit standards that issue high-quality carbon credits.
Why do we need carbon credits?
Everyday activities of businesses, communities and individuals create carbon emissions. The problem is that carbon emissions accumulate in the atmosphere and contribute to climate change. We all must reduce our emissions, but carbon credits are also needed to slow the rate of emissions accumulating in our atmosphere.
What types of carbon credit projects exist?
Two common types of projects are avoidance and removal projects.
Removal projects involve removing GHGs from the atmosphere through carbon sinks, such as planting forests, mangroves or other blue carbon initiatives. Projects can take place on a local or national scale.
The benefits of carbon credit projects aren’t limited to controlling GHG levels in the atmosphere. Projects can bind together communities, protect local environments and improve ecosystem health.
Benefits of offsetting
Carbon removal projects can draw down carbon from the air, and we know carbon emissions are directly linked to warming the planet. So, removing carbon from the atmosphere is undoubtedly appropriate when tackling climate change.
Carbon removal projects can spur local communities into action, improve biodiversity, prioritise landscape preservation, increase knowledge, and create project templates that can be used to scale up action further both locally and globally.
Many employment and research opportunities are attached to these projects, which form a vital piece for solving the climate puzzle.
While useful, carbon offsetting is an incomplete solution
Like all initiatives, there are drawbacks to carbon offsetting. One such issue involves double counting or claiming - when a single tonne of GHG emission reduced or removed is counted more than once towards climate change mitigation.
Let’s consider a forest plantation, for instance:
- a large forest may be planted in a country to act as a carbon sink. Great!
- the entity that funded the project may claim the removal. But…
- the nation where the forest is planted is doing the same
- Now, we have two entities claiming the benefits of one carbon removal project.
The projects must meet the standard of additionality, i.e., the project goes above and beyond what reductions would have already occurred. The reduction or removal would not have happened unless the project didn’t exist.
We also need to ensure the offsetting project causes no net harm. This is especially important with matters concerning indigenous rights and land use. For example, a reforestation project may require a road to be built for transport. Building that road may destroy the natural habitats of threatened or endangered species. In such cases, the net harm caused by the project could outweigh the potential benefits.
Aspects of offsetting can also be misunderstood, particularly when you factor in government legislation. For example, an organisation should not claim carbon neutrality for simply following NZ ETS compliance requirements. Even if it is done through the ETS, planting exotic monocultures presents multiple issues as they tend to have poor impacts on biodiversity, a shorter life span than indigenous forests, and as a result, are less climate-resilient.
An over-reliance on offsets will not achieve appropriate science-based emissions reductions targets. These are targets in line with the latest science of meeting the goals of the Paris Agreement. Furthermore, significant offsetting raises the issue of practicality. Where will communities and countries allow extensive tree planting, and on what available land? Are the trees being planted suitable for the chosen location?
Science-based targets require emissions reductions to happen and happen quickly. This is where it’s best to consider the mitigation hierarchy when reducing our emissions.
- Firstly, we want to avoid creating emissions where possible.
- From there, we can focus on reducing our emissions (switching from a petrol-powered car to a hybrid or electric vehicle, for instance).
- Finally, we compensate for the stubborn emissions we can’t avoid via offsets.
Following the mitigation hierarchy can help transform the Aotearoa and the global economies to help meet national and international climate goals. The right combination of emissions avoidance, reduction and offsetting can help us meet our Paris climate targets. This is in line with the Science Based Targets Initiative (SBTi), which aligns with the latest climate science to limit warming to well below 2°C over pre-industrial levels – with the ideal being 1.5°C. Under SBTi, offsets are only considered a recommended action for an organisation’s journey to a Net Zero end-state, where an organisation will finance additional emission reductions beyond their science-based emissions reduction target. The more organisations committing to and following Science Based Targets, the greater our likelihood of meeting the Paris climate goals.
- Offsetting is a valuable tool, but we need to be reducing emissions first and foremost. Toitū certification programmes support organisations to avoid and reduce emissions before focusing on offsetting carbon emissions. This is the best way to move Aotearoa New Zealand, towards a net-zero economy
- Science aligned targets and adopting the mitigation hierarchy will become the norm, so we need more organisations and nations setting and achieving science-based targets (i.e. to do what is required to meet Paris climate goals)
- Integrity of claims and avoiding double-counting will require deeper transparency and a clear focus on reducing emissions
- Responsible means net-zero, while best leadership goes further and faster. Such leadership will be judged on the ability to spur others to follow
- There is a need for transformative system change as opposed to incrementalism. This is where the mitigation hierarchy comes in and sharpens up where clients can focus their climate efforts
Carbon Sequestration - removing carbon from the atmosphere and depositing it in a reservoir.
Double claiming - a situation in which the same emission reduction or removal is claimed by two different entities towards achieving climate change mitigation, e.g. once by the country where the emission reduction or removal occurs, and once by the entity using an emissions unit or credit.
Double counting - a situation in which a single greenhouse gas emission reduction or removal is counted more than once towards achieving climate change mitigation. Double counting can occur through double issuance, double use, and/or double claiming.
Double issuance – a situation in which more than one emissions unit or credit is issued for the same emissions or emission reductions. This leads to double counting if more than one of these emissions units or credits is counted towards achieving climate change mitigation.
This can occur, for instance, when the same project is registered under two different carbon programs or twice under the same carbon program. This situation can lead to double issuance where offset credits are already cancelled by one program before they are reissued by another. Therefore, carbon programmes must place appropriate controls to avoid this overlap and ensure the integrity of the offset.
Greenhouse gas (GHG) - means carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, nitrogen trifluoride (NF3) and sulphur hexafluoride.
Greenhouse gas (GHG) removal - withdrawal of a GHG from the atmosphere by GHG sinks.
Greenhouse gas (GHG) sink - a process that removes a GHG from the atmosphere.
Mitigation - in the context of climate change, a human intervention to reduce the sources or enhance the sinks of greenhouse gases. Examples include using fossil fuels more efficiently for industrial processes or electricity generation, switching to solar energy or wind power, improving the insulation of buildings, and expanding forests and other "sinks" to remove greater amounts of carbon dioxide from the atmosphere.
Mitigation hierarchy - the concept of prioritising mitigation efforts firstly to avoiding/eliminating the emissions, or if this is not currently feasible then reducing the emissions as much as possible, and as a last resort compensating or neutralising the emissions (via the use of removals or the carbon credits).
Buotte, P. C., Law, B. E., Ripple, W. J., and Berner, L. T.. 2020. Carbon sequestration and biodiversity co-benefits of preserving forests in the western United States. Ecological Applications 30(2):e02039. 10.1002/eap.2039
Carbon Credit Quality Initiative website, accessed February 2022 https://carboncreditquality.org/index.htm
International Reference Center on Community Water Supply website, published September 2016, accessed February 2022 https://www.ircwash.org/blog/carbon-finance-unlocking-investments-safe-water
National Ocean Service website What is Blue Carbon? Updated November 2021, accessed February 2022 https://oceanservice.noaa.gov/facts/bluecarbon.html
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Science Based Targets website How it works, accessed February 2022 https://sciencebasedtargets.org/how-it-works
Toitū website Carbon Credits 101 published December 2018, accessed February 2022 https://www.toitu.co.nz/news-and-events/news/carbon-credits/carbon-credits-101