Carbon Offset Emissions

Understanding Carbon Offsetting

Carbon offsetting refers to the process by which an organisation compensates for its own emissions by purchasing carbon credits that either avoid emissions (through initiatives such as renewable energy deployment) reduce emissions (through energy efficiency improvements for example) or remove greenhouse gases from the atmosphere (such as through afforestation/reforestation projects or removal technologies).

This mechanism can be used for three possible outcomes:

1. Partially compensate for an organisation’s emissions
2. Fully compensate for an organisation’s emissions (if other criteria are met this might qualify as reaching carbon neutrality by some standards)
3. Compensate for an organisation’s unavoidable emissions (also called residual or hard-to-abate emissions) that cannot be eliminated through internal reduction efforts alone (if other criteria are met this might qualify as counterbalancing / neutralisation and would allow for achieving net zero emissions by ISO and SBTi definitions).

These uses should not be treated interchangeably. Their validity and effectiveness depend on broader context: reduction targets, timing, standards followed, and how claims are communicated.

If the purchase of carbon credits is not used for compensation of own emissions, but rather contribution to mitigation outside of the organisation’s boundaries to support a societal effort, this would qualify as “Beyond Value Chain Mitigation” and wouldn’t be called offsetting.

These different applications all have different roles to play in an organisation’s climate strategy – some are useful while others are harmful.

For instance, a common misuse of carbon offsetting is greenwashing: making erroneous claims about the true impact of an organisation or product on the environment e.g. equating offsets with true reductions. By definition, a carbon credit (representing 1t of CO2 equivalent) used for offsetting is always purchased from a project outside of the value chain – it originates outside of the buyer’s boundaries and shouldn’t be equated with reductions happening inside its boundaries. One of the core reasons is that all companies globally must make internal reductions, and if offsets are confused with reductions, there is both a blind spot on actual reductions and an incentive not to reduce emissions, which is often more expensive than offsetting.

A somewhat debated use of carbon offsetting is for reaching carbon neutrality status. Many experts argue that carbon neutrality can follow strict standards (to ensure integrity and transparency of claims, accuracy of data, and legitimate impact) and can be a part of an organisation’s toolbox. According to this view, high-quality offsetting can play an important role by supporting certified projects focused on biodiversity conservation, renewable energy generation, energy efficiency, that might struggle to find funding for development if not for carbon credit sales.

Others argue against carbon neutrality, due to lack of available evidence of true net positive impact of offsets, and due to the fact that carbon neutrality might be considered too nuanced of a concept to be clearly understood by stakeholders as different from true reductions – in such cases, while greenwashing might not be intentional, the lack of understanding of carbon neutrality status on the organisation’s stakeholders’ part could lead to similar outcomes if they erroneously equate carbon neutrality with net zero emissions or equate offsets with true reductions.

With that said, offsetting offers businesses a practical means of compensating for unavoidable emissions (also known as residual or hard-to-abate emissions, which are greenhouse gas emissions that remain after all technically and economically feasible mitigation efforts have been implemented) by financing projects that deliver an equivalent reduction or removal of carbon dioxide elsewhere. These efforts contribute to the broader global objective of climate change mitigation – and form a core part of what a net zero strategy should look like. However, due to this application being very targeted (namely at unavoidable emissions), some experts such as the Science-Based Targets initiative call this process “neutralisation” rather than offsetting, as long as other criteria are met (mainly related to timing and quality)

It should be obvious by now that offsetting is a contentious issue in the climate space – and perhaps less obvious is the fact that the core of the debate lies in the use of offsetting for achieving net zero emissions vs. other applications. We advise following the Oxford Offsetting Principles, which solve this tension between applications, and reconcile offsetting with achieving net zero emissions.

In any case, we can distinguish different roles for offsetting: contributing to net zero or to carbon neutrality.

Towards Net Zero Emissions

In line with global climate targets, such as those set out in the Paris Agreement, businesses aiming to achieve net zero must first reduce emissions by at least 90 percent from a defined baseline by 2050, or earlier. Any remaining residual emissions, which cannot be eliminated for technical or scientific reasons, may only be offset using carbon removal credits, rather than avoidance-based credits. To repeat: reductions must come first!

While the ideal scenario is to eliminate all greenhouse gas emissions through reductions only, this is not always feasible. For example, in the electromechanical industry, certain emissions may be unavoidable due to the nature of industrial processes. Activities such as the operation of test bays, use of specialist machinery, metal treatment, or emissions from supply chain logistics can result in carbon output that is difficult to eliminate entirely – this may be the case due to suppliers or customers still lagging (e.g. machinery manufactured or transported to operation site using fossil fuels) or material near-impossibilities (e.g. the national grid reaching 0g CO2/kWh which is unlikely due to often requiring some amount of gas for grid stability and flexibility) .

In such instances, offsetting must be carried out according to strict standards, such as those provided by the Science Based Targets initiative – and to repeat, terminology might be different with these standards that tend to call this process “neutralisation” or “counterbalancing”, mainly for this process (a scientifically established and sound but also very restricted application of carbon credits) not to be confused with other applications which might be contentious (carbon neutrality) or harmful (greenwashing).

Carbon Neutrality

Achieving carbon neutrality, while debated, can be done right according to some experts and standard setting institutions. The main benefit is that it ensures some level of action is taken to support the transition outside the value chain – the difference with Beyond Value Chain Mitigation (BVCM) being that carbon neutrality implies use of offsets, while BVCM doesn’t. If an organisation decides to go down the carbon neutrality route, it requires a structured and transparent approach, which could include:

• A comprehensive and verified carbon footprint assessment across Scope 1 emissions (direct), Scope 2 emissions (indirect from purchased electricity), and all material Scope 3 categories (other indirect emissions), aligned with internationally recognised methodologies such as the Greenhouse Gas Protocol
• Quantifiable emissions reductions across business operations, energy use, supply chain, logistics, and transport
• A clearly defined carbon reduction strategy, including science-based, time-bound targets that demonstrate a commitment to long-term decarbonisation
• The purchase and retirement of high-quality, independently verified carbon credits that match the quantity of residual emissions in tonnes of carbon dioxide equivalent (CO₂e)

If your organisation is making public environmental claims, it is essential to ensure they are accurate (e.g. no double-counting), transparent, and supported by independent verification to maintain trust and avoid any risk of greenwashing.

The Limits of Carbon Offsetting in a Broader Climate Strategy

Carbon offsetting is useful to speed up removal and avoidance projects, but they are a limited tool: avoided emissions are hard to measure accurately, revegetation is limited due to available land, and removal technologies aren't scalable enough to achieve anything beyond 10% removal – and even that will be extremely hard to achieve. Because of this, carbon offsets can't replace reductions and shouldn't be treated as if they can. The more emissions your organisation is able to reduce at the source, the fewer offsets will be required, making your climate strategy more effective, cost-efficient, and credible.

The internationally recognised carbon neutrality standard, ISO 14068-1:2023, places strong emphasis on emissions reductions being prioritised before offsetting. Without meaningful reduction, achieving net zero is not possible.

Offsetting without prior efforts to reduce emissions is increasingly associated with greenwashing, a practice that can undermine, rather than enhance, your organisation’s environmental integrity and reputation. In essence, offsetting without reductions is ineffective - and treating offsets and reductions as equivalent is therefore erroneous. Because of this, equating offsets with reductions can be seen as deliberately misleading, which it unfortunately often is.

To use offsetting in your climate strategy, we advise using guidelines such as Oxford Offsetting Principles and ISO Net Zero Guidelines, which reconcile offsetting and achieving net zero emissions.

What Types of Carbon Offset Projects Are Available?

There are a wide variety of carbon offsetting projects available globally. When implemented correctly, these projects can contribute to mitigating climate change and offer valuable co-benefits to local communities, such as economic development, improved health outcomes, and biodiversity protection.

Although there are voluntary standards in place, carbon offsetting is not governed by a single regulatory authority. Therefore, it is strongly recommended that businesses invest only in schemes certified to the highest quality standards, such as the Verified Carbon Standard (VCS) and Gold Standard Voluntary Emission Reductions (VERs).

In the UK, the Environment Agency recognises only two accredited carbon offsetting standards: the Woodland Carbon Code and the Peatland Code. Verified Woodland Carbon Units, for example, can support claims of carbon neutrality when used in alignment with best practice guidance, however companies can use international standards like Gold Standard and VCS for voluntary action projects

Examples of eligible carbon offset project types include:

• Reforestation and afforestation initiatives.
• Renewable energy installations in underserved communities.
• Conservation and biodiversity enhancement projects.
• Energy efficiency interventions, such as building insulation or the promotion of electric vehicles.
• Waste reduction and recycling programmes.

Other projects that are typically used or sought include:

• Soil carbon sequestration
• Regenerative agriculture (a combination of soil carbon sequestration and revegetation)
• Engineered biomass-based removals (e.g. biochar, bioenergy with carbon capture and storage, ocean seaweed cultivation, wood sinking and burying)
• Engineered chemical-based removals (e.g. enhanced rock weathering, ocean alkalinity enhancement, direct air capture)

Choosing the Right Offset Scheme for Your Business

Investing in sustainability projects to offset carbon emissions should not be seen as a substitute for direct emissions reductions. Rather, it should complement your reduction efforts as part of a wider climate action plan.

Carbon offsetting should be used as a supplementary measure to address residual emissions that cannot currently be avoided. Prioritising prevention and minimisation of emissions remains the most important action businesses can take.

As the UK progresses towards its target of net zero emissions by 2050, and a 68 percent reduction by 2030, businesses have a critical role to play. By focusing on reducing your carbon footprint and supporting verified carbon offset projects, businesses can demonstrate environmental leadership and contribute meaningfully to national and global climate objectives.

Carbon Footprint has curated many Gold Standard Verified Emission Reductions (VERs) and Verified Carbon Standard (VCS) certified credits to choose from: Carbon Footprint Ltd - Management System - Current Carbon Offset Projects.

Principles for voluntary carbon and nature market integrity - GOV.UK