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How Viable is Carbon Offsetting?

For businesses and organisations concerned about the scale of the challenge of achieving net zero, carbon offsetting can be a tempting proposition. However, it is an area that should be approached with care, as relying on it rather than fundamental improvements in your operations and supply chain can leave you vulnerable to increased costs and potential accusations of greenwashing.

Carbon offsetting does have a role to play, particularly for offsetting emissions that otherwise would be impractical or prohibitively expensive to directly address. However, it requires a good understanding of the options available, and what constitutes a ‘good’ carbon offsetting scheme.

Additional Costs

As numerous countries and sectors commit to net zero targets, the demand for carbon offsetting has steadily increased. In 2021, a report by University College London warned of a ten-fold increase in the cost of carbon offset credits by 2030, rising from between $3-5 per tonne to $30 to $50. This already huge forecast rise was followed in early 2022 by a warning from BloombergNEF that carbon offset prices could see a 50-fold increase by 2050.

Currently, the relatively low cost of carbon credits can appear a cheaper option than investing in clean energy generation, or energy efficiency. However, this is an increasingly short-sighted view, not only because the cost of offsetting carbon is set to rise, dramatically, but because it means you are missing the opportunity to make genuine, constructive change. Carbon offsetting represents a sunk cost, while investment in new technologies or changes to your operations unlocks energy savings and greater efficiency alongside reducing your carbon footprint.

Greenwashing

Greenpeace warned that the world is currently in the ‘golden age of greenwashing’ in 2021. Businesses are increasingly aware of just how important sustainability is to consumers, investors, partners and other key audiences. At the same time, these same audiences are increasingly aware of greenwashing, and well-founded accusations of it can be a disaster for your brand.

Many carbon offsetting projects get tarred with the brush of greenwashing. There are two primary reasons for this. The first is that an offsetting project needs to be in addition to what would have happened anyway, meaning switching to a green energy tariff or paying for carbon offsetting via reforesting makes no material difference if those projects are already going ahead. Reforestation is also a good example of the second issue, which is that not all projects effectively lock away emissions permanently.

Forests can be burned, killed by pests (tree deaths to pests equate to more carbon emissions than five million cars annually), or cut down to make way for new developments, long before they have captured the amount of carbon that was initially intended. Often touted as providing additional benefits such as habitats for wildlife, many reforestation projects have been accused of simply creating large areas of fast-growing evergreens, uninhabitable by most other species, as well as undermining soil quality and stability.

That is not to say that responsible, effective carbon offsetting isn’t available. As we get closer to the net zero deadline of 2050, it will provide an invaluable tool for businesses that have already overhauled their energy use, operations and supply chain and are still looking to eliminate the last traces of their net carbon footprint.

However, if you are not yet at that stage, which is the case for the majority of organisations, you a likely better off looking at more substantive, fundamental changes that can help to reduce your carbon footprint while also addressing rising energy prices and insulating you from the continuing market volatility that the energy sector is experiencing.