We have 27 winters left to limit global warming to no more than 1.5°C, as called for in the Paris Agreement. Emissions need to be reduced by 45% by 2030 and reach net-zero by 2050. The commodities industry plays a pivotal role in meeting this crucial deadline. However, rapidly scaling the carbon offset market to meet the 2050 deadline could increase the risk of not achieving effective scientific solutions to reach net-zero.
It’s crucial for companies and governments to approach carbon offsetting in a manner consistent with net-zero emissions goals. This involves adhering to principles that emphasize the need for offsetting to be additional, permanent, and verified, as well as stressing that offsetting should be used only as a last resort after exhausting all other decarbonization efforts. Investing in high-quality offsets that support new technologies and promote sustainable development is also essential.
Achieving net-zero emissions demands a fundamental transformation of our economy and society. We must transition to clean energy sources, invest in new technologies, and reduce our overall resource consumption. Offsetting can contribute to this transition, but it cannot substitute for actual emissions reductions. Transparency and honesty about our emissions are critical, and we must take concrete steps to minimize them as much as possible. By working together and committing to a sustainable future, we can achieve net-zero emissions and protect our planet for generations to come.
The offset market must recognize the need for a transition from its current state, dominated by paying for emission reductions or nature-based removals, to a market dominated by direct air capture and geological storage. This transition will likely result in significantly higher offset prices. However, for the offset market to make a real impact, collaboration between the energy sector and governing bodies is necessary to deliver a transition plan. By 2050, any fuel still being sold and claimed as offset must be offset by direct air capture and geological storage, with the cost included in the price.
High-quality offsets are available, but different types of offsets should be utilized by different participants. Companies should adopt a balanced approach, investing in both known offsetting options and future technology. Starting with cost-effective nature-based solutions, companies can maximize the carbon removed from the atmosphere for their investment.
However, this is only a temporary solution. The future lies in actively capturing CO2 from the air while continuing to burn fossil fuels and storing it away permanently. With less than 30 years to build this industry, companies need to integrate this transition into their offsetting strategies.
The current offset market lacks differentiation, with little consideration for permanence or CO2 origin. Participants must recognize the need for transitioning towards permanent and captured-out-of-atmosphere offsets, which will remain effective in the long term. Investing in both cheaper, high-quality options and developing new technologies is necessary, but a balance must be struck. Focusing solely on cheaper options may divert attention from investing in technology development and deployment.
Government support, like that seen in the renewables industry, will be crucial in driving the necessary investment and effort towards decarbonization. The Voluntary Carbon Market Integrity Initiative emphasizes that companies should view offsetting as an addition to, not a substitute for, deep decarbonization efforts and technology investments. It’s all part of a bigger picture, and companies must find the right balance in their approach to offsetting.
Investing in technologies that enable the fossil fuel sector to achieve net-zero in 30 years is vital. However, the short to medium-term carbon market allows investment in protecting nature and low-carbon development. Ensuring that the offset market doesn’t simply consume all the easy, cheap options, particularly when investing in developing countries, is essential.
One solution is for countries to define their investment needs and benefit sharing, rather than leaving it to wealthy companies to decide. This approach may increase the price, but it ensures that investment goes towards the communities’ defined needs. Additionally, some sectors, such as aviation, can afford to take on more expensive offset options, rather than solely relying on the cheapest, lowest-quality options. CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation), the aviation industry’s offsetting initiative, is currently based on afforestation-type projects and avoided emissions, which may not be sustainable in the long term. It’s essential to strike the right balance between offsetting and deep decarbonization efforts to achieve meaningful emissions reductions.
Governments have a crucial role in driving systemic change towards a net-zero carbon economy. They must set ambitious targets, provide incentives for clean energy and low-carbon technologies, and regulate polluting industries. This will help level the playing field for businesses and create a market environment that encourages decarbonization efforts.
Moreover, we must recognize that offsetting is not a silver bullet and should not be seen as a way for businesses to continue with business as usual while purchasing carbon credits to offset their emissions. We need to strive towards reducing our carbon emissions as much as possible and invest in low-carbon technologies to transition to a net-zero carbon economy. Offsetting should only be used as a last resort after all other decarbonization efforts have been exhausted.
So lets be mindful, the carbon offset market is a useful tool in the short term to support the transition towards a net-zero carbon economy. However, we need to ensure that claims of net-zero are backed up by concrete actions towards decarbonization, and that companies are using high-quality offsets that are additional, permanent, and verified. We also need clear and transparent language that accurately reflects a company’s commitment to reducing their carbon footprint. Ultimately, we need to work towards a future where all companies are actively reducing their emissions and transitioning to a low-carbon economy, with offsetting used as a last resort. This will require government action, investment in new technologies, and a commitment from all sectors of society to tackle the urgent challenge of climate change.
