Carbon offsetting or insetting? What’s the way to go for companies?

Nina van Rijn

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4 minutes

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Opinion

While carbon offsetting is an important instrument, we need absolute emission reductions by corporates in order to meet the Paris agreement. We need carbon insetting.

April 20, 2022
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It's up to you whether this is good or bad news, but Volkskrant - a prominent Dutch newspaper - wrote on the 13th of April that global warming can still be kept within the two degrees limit that was agreed upon in Paris, but only if all countries keep to the promises they made in Glasgow.

Of course this is not going to work without the private sector involved. Well, luckily they are increasingly involved. Whether it's from an intrinsic motivation to do good for our planet, or from a marketing goal, we see more and more companies working towards becoming carbon-neutral by voluntarily offsetting their carbon emissions.

But is this the way to go? Or should carbon insetting take over the leading role?

What's carbon offsetting?

Carbon offsetting means that companies invest in environmental projects outside of their own value chain, in order to balance out the carbon emissions from their operations. Think of investing in a new solar plant, or in reforestation projects of a third party.

Sounds good right? Well, yes, in theory it is. But in practise carbon offsetting has a few problems:

Problem 1: Double-counting

Imagine that Company A pays Company B to plant trees. Both company A and B count the emissions reduction caused by this in their books: ‘Hey, I paid someone to plant trees, so I extracted 1000 kg of CO2 from the air’, and ‘Hey I planted trees, so I extracted 1000 kg of CO2 from the air’. Now the emission reduction has been counted double: a reduction of 2000 kg was recorded, whereas it should have been 1000.

Problem 2: Additionality

If a company purchases certificates for renewable energy from an existing plant, proving the clean energy production is truly theirs, the investment didn't actually cause any emission reductions. It just means a shift, on paper, of who receives the clean portion of a country’s energy production, and who receives the polluting part.

Also, if a company invests in a renewable energy project that was going to happen anyways, even without your investment, there are also no actual emission reductions.

In both examples, the emission reduction was not ‘additional’.

Problem 3: You're still emitting

Offsetting means compensating greenhouse gases that a company has already emitted. For example: they emit 100 kg of CO2, and they make sure that 100k kg of CO2 are reduced elsewhere. This means the company is still emitting. Its greenhouse gases are still accumulating in the atmosphere.

This means offsetting is just not enough. It can be good, but it's not enough. It won't limit our global warming to two degrees Celsius.

We need carbon insetting

Companies need to start decarbonizing their value chains. Insetting is the implementation of nature-based solutions into the own value chain. Think of producing renewable energy, reforestation, regenerative agriculture and agroforestry.

Companies should evaluate their own supply chain and determine where the major greenhouse gas hotspots are. Then they should eliminate as much of these emissions as possible. In that case companies move from carbon neutral to net-zero. Both terms sound nice, but it is widely accepted and scientifically proven that net zero is the real way forward.

Offsetting cannot be considered as a substitute for reducing direct emissions by corporates. Therefore the Science Based Targets initiative does not see offsetting as a credible strategy towards achieving net zero or towards achieving our international climate goals. Offsetting should only be used for that part of a company's greenhouse gas emissions that can absolutely not be eliminated.

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