Publication Injecting integrity: aligning the use of offsets in company transition plans with science
Executive Summary
Offsetting practices to date have contributed to our failure to achieve global greenhouse gas emissions reductions.
The voluntary carbon market has been plagued with unresolved integrity challenges, including a lack of real, additional emissions reductions.
Integrity issues have persisted globally across nature-based, household and industrial crediting methodologies that primarily seek to avoid the generation of CO2 emissions (avoidance credits), rather than to remove CO2 from the atmosphere (removal credits).
The use of offsets to meet emissions reduction targets can also lead to mitigation deterrence among purchasers, with companies choosing lower cost offsets over the prioritisation of direct emissions reductions. It also decreases the imperative for companies to engage with policymakers to ensure that the policy settings required to achieve real, direct emissions reductions are in place.
This situation must change. There is no net zero without real, gross emissions reductions.[1]
Injecting integrity with a science-informed approach
The following principles, informed by the best available climate science, should be followed to ensure integrity when using offsets in company transition plans:
No use of nature-based solutions to offset fossil CO2 emissions - Crediting methods for biological carbon avoidance or removal activities, such as those involving the plantation or protection of vegetation, are not a permanent form of CO2 storage. These methods cannot be used to neutralise or offset CO2 emissions generated through the consumption or production of coal, oil or gas.
No use of avoidance credits[2] as offsets - Due to unresolved integrity issues and the persistent challenge of mitigation deterrence, the use of avoidance credits created through household or industrial crediting methods to offset fossil CO2 emissions is not currently credible in a company transition plan.
Limited use of permanent carbon dioxide removal (CDR) credits - Permanent CDR is required to achieve net zero in line with the Paris Agreement, but only when accompanied by rapid gross emissions reductions. Permanent CDR credits can be used to offset residual fossil carbon emissions. However, due to constraints in supply, along with a need to ensure that sufficient 'preventative' CDR capacity remains in case of a worse-than-anticipated climate response, reliance upon CDR credits must be minimised and never be deployed for fossil CO2 emissions that can be prevented in the first place.
A role for Beyond Value Chain Mitigation (BVCM) - Companies may choose to continue investing in nature-based solutions as a form of Beyond Value Chain Mitigation, however such investments should be tracked and disclosed separately to the meeting of emission reduction and CO2 removal targets. These are distinct and non-fungible accounting schemes that should not be compared with one another.
A new model
Company climate transition plans should set separate emissions reduction and removal targets as follows:
Short-, medium- and long-term reduction targets informed by Paris-aligned sectoral pathways that solely reflect a corporation s path for direct reductions of Scope 1, 2 and 3 emissions. Where direct emissions reductions are currently uncommercial, companies should engage with governments on the policy settings required to ensure that direct emissions reductions can be expedited and residual emissions minimised.
Short-, medium- and long-term permanent carbon removal[3] targets that apply only to the lowest possible residual CO2 emissions.[4] Such targets should be set at one tonne of removal per tonne of residual emissions. Considering the nascent state of the permanent CDR industry, companies should disclose a CDR strategy that details how they will ensure sufficient supply of quality credits in the net zero year. This should include details on which permanent removal methods will contribute to meeting this target.
The relationship between reduction and removal targets is expected to be dynamic. As further opportunities for direct decarbonisation in a company's value chain expand, reduction targets can be strengthened, and corresponding adjustments can be made to removal targets due to lower residual emissions.
The following paper synthesises the scientific literature that underpins the above position.
The principles discussed are equally relevant to government mitigation policy as to voluntary corporate mitigation efforts.
This position will be reviewed against the best available science as research evolves.
Table 1: Comparison of standard and recommended approach to voluntary emissions reduction target setting
Figure 1. Comparison of standard and recommended approaches to voluntary emissions reduction target setting.
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Gross emissions reductions refer to the decrease in total emissions before accounting for any CO2 removals. ↩︎
Sometimes referred to as 'reduction credits'. ↩︎
Carbon removals do not address non-CO2 greenhouse gases such as methane, nor locally polluting aerosols such as sulphur. In addition, the science studying the effect of removals on temperature is evolving and should be monitored for developments that might necessitate changes to this position. ↩︎
Residual emissions represent an expected failure to achieve absolute decarbonisation (real zero or zero carbon emissions) within a timeframe aligned to global climate goals. They are a dynamic quantity influenced by innovation and governance as decarbonisation technologies and regulatory frameworks develop. Lower residual emissions will intuitively imply lower removals necessary to offset these. Companies must apply the best available science in their definition of residual emissions in lieu of expected future regulatory guidance and supervision. ↩︎
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