Seeking Net Zero? You Should Know Not All Carbon Offsets Are The Same
Amid calls to reduce their companies’ carbon footprints, business leaders are looking to buy carbon offsets. However, not all offsets are the same.
Amazon’s executives likely didn’t know what they were getting into when they committed to net zero carbon emissions by 2040. Reducing carbon tampers with its financial success, as everything Amazon does emits carbon, from powering its servers, to warehousing its products, to distributing those products around the world.
Net zero is particularly ambitious for a company like Amazon, given its historical compound growth rate has been a staggering 31% per year over the last 20 years. In fact, in the year following its zero-carbon commitment, the company reported a 19% increase in carbon emissions, from 51.17 million metric tons to 60.64 million. To put that in perspective, a flight from London to New York generates about one ton of CO2.
The sixth assessment from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) warned that failing to reduce emissions would result in a global temperature increase, leading to, among other things, irreversible increases in sea levels and more devastating floods in coastal cities. A significant reduction in carbon emissions could slow climate change, but it requires the world’s largest companies to be on board.
The most obvious way for a company to reduce emissions is to find operational efficiencies, especially in how much and what type of energy it uses (solar, wind, thermal). However, after companies find this low hanging fruit, they will need to completely rethink how they do business. For some, like those in oil and gas, they may even need to rethink what business they are in.
But making these changes is difficult, especially since the amount of carbon produced is directly related to the size of the company’s operations. Reducing carbon often means reducing the size of the business, which isn’t palatable to most executives or their shareholders.
So, to get to net zero, most companies like Amazon buy carbon offsets — projects that reduce the amount of carbon emitted into the atmosphere. But not all carbon offsets are the same.
Transactional carbon offsets
Transactional offsets are purchased from brokers, who mediate between the company looking to offset their carbon emissions and an organization that is proposing a carbon mitigation project, such as new solar farms or tree planting services. These brokered carbon offsets are relatively easy to find, easy to buy, and easy to report to customers and shareholders.
However, these brokered offsets are not all that they are made out to be and may not actually solve the climate crisis. Here are three reasons why:
- Companies are paying others to change, not changing themselves. Offsets don’t require a company to make any substantial changes to its own operations. The company can continue to emit carbon at the same rate and simply pay for others to do better. In the end, offsets compensate for the company’s carbon being emitted, which can give it a licence to continue to emit. Amazon, for example, pays other companies to build solar farms or plant trees to balance out its carbon footprint. This approach is particularly tempting for a company with a market cap approaching $2 trillion.
- Creative bookkeeping. Offsets are susceptible to creative bookkeeping, as they require determining what carbon emissions would have been had the emissions not been offset. Not only is the baseline a moving target, the proposed projects can also be pretty shifty. In other words, the carbon that is presumed to be offset is chocker block full with assumptions. As well, there is no assurance that the solar farm is built to specification, or the trees planted thrive after the offset is sold. These brokered offsets can involve considerable sleight of hand and leave companies exposed to reputational risks, if the offsets are found to be simply greenwashing. There are third-party agencies, like Pachama, who build their business around brokering offsets that they carefully verify.
- Doing less harm, rather than doing good. Ultimately, carbon offsets often do not actually reduce the carbon in the atmosphere, they simply prevent the addition of more carbon. To deal with the climate crisis, companies need to not just turn down the faucet in the bathtub, they need to open the drain. Although companies are investing in projects that limit emissions, they are still adding emissions by putting their business operations and growth at the centre.
Relational offsets through long-term regenerative projects
A new type of offset has appeared on the landscape. These offsets seek not only to reduce carbon, but actually regenerate the land. These are not purchased through one-off brokered transactions, but rather long-term agreements between the company looking for offsets and an agency that works in communities to restore the land, creating long-term carbon sinks. These could include reforestation of degraded native habitats or transforming industrial farming into regenerative agriculture.
These regenerative projects differ from brokered offsets in critical ways:
- They seek not to do less harm by reducing the increase in carbon emissions, but do good by removing carbon from the atmosphere.
- They involve long-term agreements that require the third-party agency to steward the project and the land. The company can then account for the credit in actual carbon sequestered, not in the fictional account of carbon not emitted.
- Finally, these regeneration projects have numerous knock-on effects, such as improving water quality, air quality, and biodiversity. They also foster positive relationships with local communities.
Amazon has one project dedicated to this type of regeneration. Its sustainability team is working with the Nature Conservancy to help support local farmers and restore degraded parts of the Amazon rainforest. The Agroforestry and Restoration Accelerator helps “ small-scale farmers restore degraded cattle pastures to native forest and agroforestry.” From a distance, it is difficult to know how effective the company’s efforts are, but it’s the type of project that will actually reverse the damage that Amazon, the company, does to ecosystems.
The Climate Crisis Requires Immediate Action
The climate crisis is underway, so it is important for companies to act and act quickly. Brokered offsets are quick and easy, so they offer a starting place for most companies. For the climate crisis to be addressed in the long term, companies need to go beyond these brokered offsets. Companies need to commit to restoring and regenerating land to its natural habitat, so that ecosystems resilience and biodiversity return. The companies that make these investments are not just looking for short-term fixes, but are demonstrating a real commitment to the climate crisis.
For more reading on this topic, read about “ 3 ways to tell a company is serious about their carbon commitments.”
Originally published at https://www.forbes.com.