From Greenwashing to Genuine Change: The Truth About Carbon Offsetting

9 mins

Riddled with hidden flaws and complexities, the billion-dollar carbon offset market may not be the climate solution we’ve been led to believe

From airlines to confectioners and fashion brands, rock stars to presidents, international events and even entire countries, efforts to curb climate change are often underpinned by buying carbon offsets. 

The idea is simple enough: these people, places and companies voluntarily pay someone else to remove a certain quantity of greenhouse gases from the atmosphere. That payment – known as ‘carbon credits’, sold at a price per metric ton of carbon dioxide reduced – might help, for example, finance a wind farm or restore a tropical forest. Then, crucially, that payment counts towards the ‘carbon balance’ of whoever makes it. They ‘offset’ their own emissions. 

In other words, carbon offsets are an accounting system. And its global market is huge – estimated to be somewhere between $40bn and $120bn, and to more than double to $250bn by 2050.

An Unregulated Market

But this is also an unregulated market, one that often lacks transparency or independent, rigorous assessment of its performance. At least yet. It’s one which, some studies suggest, offsets more often than not fail to deliver the emissions reductions they promise. While certain criteria for what might be considered an effective accounting system of such offsets have been identified, they are not always met. 

What’s called ‘additionality’ is one of these criteria – the need to bring some new cut in emissions to the table. Offsets might otherwise be purchased for a reduction of emissions that would have happened anyway. Sure, they may help reductions happen – by funding the building of a wind farm, for example – but they don’t add to the sum total of them. Remarkably, studies have indicated that this is the case for three-quarters of offsetting schemes. 

carbon offset idea with shelf balancing on the planet and industries on ether side

Another is the permanence of the reductions in emissions promised by a project on which carbon credits are spent: they might pay for the planting of a forest, for instance, but forests can burn down and the carbon they hold be released back into the air. There’s also been limited success in containing what the carbon offset industry calls ‘leakage’: it’s no good if offsetting helps, say, protect a forest in one region but then leads to increased deforestation in the next. 

The vast majority of offsetting is about the immediate problem of reducing emissions too – that’s preventing future emissions from happening by, for example, protecting those forests. Very little of it is about supporting projects that directly remove carbon dioxide already in the atmosphere – by, for example, planting forests – though this may change as technology-based carbon removal methods become a reality. 

Let’s also not forget that, as with dodgy practices in more everyday accountancy – the likes of ‘double accounting’ – so in carbon offsetting too. One reason why the negotiations at the COP25 climate conference in 2019 stalled was because Brazil wanted to count rainforest preservation towards its own targets and sell the offsets to other countries. Businesses in China have been found to dial up their carbon emissions so they can be paid – through carbon offsetting programmes – to then dial them down again. 

A Rising Tide of Skepticism

Small wonder then that there’s reasonable skepticism about carbon offsetting. As Derik Broekhoff, senior scientist with the Stockholm Environment Institute, has it, ‘some consumers have a vague sense of unease about it all.’ After all, we’re now in a situation where a company can make a claim to ‘carbon neutrality’ while actually having greater emissions than their competitors. All they’ve done is buy carbon credits to compensate.

In the UK at least, adverts that claim products are carbon neutral as a result of using offsets are now being banned unless their manufacturer can claim those offsets actually work. And good luck with that.

Some have likened the situation today to the Wild West, with little regulatory oversight, opaque schemes, big claims and a mishmash of brokers administering the purchase of offsets – for a fee, of course.

Small wonder too that plenty of organisations that were quick to get on the carbon offset bandwagon have since jumped off it, among them a number of airlines – these now see spending money on research and development towards greener air travel, rather than offsetting, as money better spent. In the UK at least, adverts that claim products are carbon neutral as a result of using offsets are now being banned unless their manufacturer can claim those offsets actually work. And good luck with that.

AI image over a forest for carbon offsetting

‘Companies are grappling with questions about the quality of carbon credits, and the fact that there’s an inherent uncertainty in what they’re buying,’ says Broekhoff. ‘Maybe companies [and other buyers] need to adjust what they say about them, and the claims that are made – to think more about reducing their own emissions first and then using credits only to compensate for what they can’t do. And right now there’s a sense that the market is moving more towards that idea of mitigation rather than off-setting.’

Improving Carbon Offsets

This isn’t to say there aren’t solid proposals for ways to improve how carbon offsetting works. For example, while big brands wishing to be seen to do good may favour directing their offset payments towards easy-to-understand and emotionally resonant projects – like saving forests – instead they could focus on the hard-to-understand and less pretty projects – like those involving the destruction of waste methane or nitrous oxide from industrial processes. These would be much, much more effective in mitigating climate change. They’re also easy to track, permanent and provable. 

There is also a drive to scale up the whole idea of carbon offsetting, so it’s less about a fiddly arrangement of individuals or individual companies offsetting with individual emissions reduction projects, and more about the jurisdiction of them being across entire regions or nations – thus making the whole system simpler and sturdier. 

Others have spoken of replacing offsetting with the new idea of ‘insetting’ – that’s companies, the likes of Burberry, investing in carbon reduction projects not run by remote third parties but along their own supply chains. But that seems to be something companies should be doing anyway, and insetting looks to be fraught with the same problems of monitoring and transparency as offsetting. 

The overarching problem with it is that it allows those buying carbon credits to seemingly get away with continuing to pollute…. rich companies can just spend away their emissions sins.  

‘Where the carbon offset market is necessarily going is to make sure there is integrity both on the supply side – and there’s a lot of technical detail in that, from tracking to third party verification – and also on the demand side, so that companies using carbon credits are claiming to do so credibly too,’ argues Sarah Leugers, CEO of the Geneva-based Gold Standard, co-founded by the WWF and other NGOs in 2003 to monitor carbon emission reduction schemes.

Critically, argues Leugers, ‘while bad actors and greenwashing cast a shadow over those companies trying to do right’, it’s important to remember that those organisations buying carbon credits are under no obligation to do so at all. ‘So at least they are imposing a price on themselves for what they emit. So this is better than nothing,’ she insists. Broekhoff agrees – but only just. ‘This willingness to pay [still] needs to be grounded in defensible claims,’ he says. 

Getting Away With It?

Indeed, that willingness may offer limited comfort when, as some argue, carbon offsetting is fundamentally and morally problematic in the way it commodifies nature. Others argue that the overarching problem with it is that it allows those buying carbon credits to seemingly get away with continuing to pollute without taking direct responsibility for their own emissions. That’s especially the case if carbon offsets are priced too cheaply – rich companies can just spend away their emissions sins. 

Reforestation in Malaysia

As Broekhoff points out, we’re now in a situation where a company can make a claim to ‘carbon neutrality’ while actually having greater emissions than their competitors. All it has done is buy enough carbon credits to compensate. ‘The system as it is provides the perverse inventive for companies to just work out whatever their emissions will cost them in credits and just buy those off,’ he notes.

The counter argument? That emissions are a global, not local, problem so any assistance in bringing levels down anywhere is a positive. And if you don’t have much money, it makes sense to reduce those emissions wherever you get biggest bang for buck. That may be on the other side of the world and not under your own roof.

Furthermore – and assuming that we want to continue to fly or make things with steel – carbon offsetting allows industries to act on carbon emissions now while over the longer term seeking to develop the financing infrastructure and/or technology that will allow them to bring down their own emissions. When there’s no cleaner alternative, carbon offsets may be the only way to dial down the impact of emissions. 

Leugers also wants us to keep in mind one more thing: these are early days. The market for carbon offsetting is still a maturing one, not a mature one. It’s still working through its issues, albeit, it can seem, slowly and confusedly. 

‘I think there’s a need for society at large to recognise the complexity of these kinds of mechanisms and to embrace the spirit of continuous improvement,’ she says. ‘Carbon offsetting is a great idea but only part of a broader planetary strategy [on climate change].’

Indeed, while carbon offsetting may not be an effective long-term instrument – after all, there just aren’t enough carbon sinks to offset all of our carbon emissions – it will, she reckons, be an important one in the medium term. That means for several decades yet. What’s needed is that regulatory framework to make the whole system function that much better – and, for us consumers trying to make better choices, to do so convincingly too.

Newsletter signup

SIGN UP TO OUR NEWSLETTER

AND GET OUR LATEST ARTICLES DELIVERED TO YOUR INBOX EACH WEEK!


THE ETHICALIST. INTELLIGENT CONTENT FOR SUSTAINABLE LIFESTYLES