It’s Time We Admit That Carbon Offsetting Isn’t Working

We acted too late to now take the easy road out of the climate crisis. There is simply not enough time to rely on decarbonizing our global economy.

Countries signed up to the 2015 Paris agreement pledged to curb the global temperature rise to well below 2 degrees Celsius above pre-industrial levels. Scientists have asserted that surpassing this 1.5 degree Celsius threshold may well lead to drastic climate disruptions that could exacerbate hunger, conflict and drought worldwide. According to an Intergovernmental Panel on Climate Change (IPCC) report, if warming trends continue in the same way they have done for the past 30 years, the 1.5 degree Celsius limit will be reached by 2034. If we want global temperatures to remain below this Limit, and prevent the worst impacts of climate change, the world will need to reach net-zero emissions by removing and storing more carbon dioxide from the air than we put into the atmosphere. Effective decarbonizing, and carbon removal projects, require extensive research and funding—financial investments that many governments are reluctant to foster.

Businesses have a duty to fight the climate crisis, and give back to the Earth what they take. First and foremost, they must reduce their own emissions. Many companies have the means to and should do more. However, how companies can contribute to reaching global net-zero in the most effective and sustainable way is a question hotly debated by scientists, world leaders and climate advocates.

To date, the approach most popularly adopted by companies worldwide is “carbon offsetting.” This involves purchasing carbon credits to compensate for their own greenhouse gas emissions, essentially balancing the books without necessarily reducing their emissions or taking action to become more sustainable themselves. Companies can buy carbon credits which largely go toward climate projects dedicated to protecting forests and building renewable energy. Increasingly, there is an interest to invest in new carbon removal projects such as direct air capture, and ocean-based carbon removal, but the supply of these solutions are miniscule so far.

But do carbon credits actually offset the emissions released globally? Many scientists believe the system to be flawed. Making a carbon offset claim does not guarantee results. When a carbon credit is bought, there is no guarantee that a ton of carbon is avoided or removed from the atmosphere.

A 2021 report from nonprofit Compensate concluded that up to 90 percent of current schemes fail to provide meaningful action. What’s more, there is always a risk that companies choose to offset emissions instead of changing their behaviour, especially if carbon credits are cheap. The focus on compensation often leads to companies racing to purchase carbon credits as cheaply as possible to fulfill a carbon neutrality claim, which often amounts to greenwashing.

Offsetting is not necessarily wrong if done with high-quality carbon removal projects, but it is not the most effective approach to reaching global net-zero. Solely focusing on buying carbon credits also excludes alternative impactful solutions such as supporting grassroot organizations, new carbon removal solutions that are not yet certified and projects that are rallying for climate policy change by influencing governments.

An oil and gas processing plant is seen.
CHANDAN KHANNA/AFP via Getty Images

A common and dangerous misconception exists that corporate net-zero is the same as global net-zero. This is far from the truth. A company is never truly carbon neutral, it simply contributes to global neutrality. The point of setting net-zero targets is not for each company to achieve net-zero, but to contribute what it can to global net-zero. Some companies have much greater financial capabilities to contribute than others, so settling for a balancing of the books should not be sufficient for those who can contribute more. There is no reason why they should stop at simply offsetting their own emissions. What is fair and feasible for each business or group differs. Ensuring company leaders understand this principle, and change this narrative to readjust climate efforts, is essential if we want to make a positive impact on the climate.

So if carbon offsetting is flawed, what else can be done? One efficient and sustainable approach companies can take to contribute to global net-zero is by implementing an internal carbon tax. By pricing their carbon emissions, as well as creating an incentive to decarbonize, companies can use these funds to support climate projects across the globe. Projects supported can utilize the carbon credit system, but instead of offsetting these, companies are contributing to climate action. Ensuring that projects supported are impactful, efficient and sustainable is key. Buy-now, pay-later platform Klarna recently implemented such a tax and contributed over $1 million to a fully-vetted portfolio of impactful climate projects, without making offsetting claims.

Collective action is vital if we want to see our natural world continue to thrive. Companies who are committed to reaching net-zero need to support climate policies that advance an equitable, comprehensive and coordinated global transition. The climate crisis is more urgent than ever, and the increased involvement of individuals and groups worldwide to address it is a positive step that should be welcomed with open arms. To make the most of these efforts, it is crucial we change the flawed system regarding corporate responsibility. Action is needed now.

Nina Siemiatkowski is the CEO and founder of Milkywirean environmental giving platform that allows businesses and individuals to explore and donate to locally-rooted impact projects across the globe.

The views expressed in this article are the writer’s own.

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