MANAGEMENT
The Effectiveness of Carbon Offsets in the Context of SBTi
January 5, 2022
Article Highlights
Learn definition of SBTi net zero science based target, carbon neutrality, offets, abatement, neutrality offsets, and compensation offsets.
Organizations should focus on a mitigation hierarchy where eliminating sources of GHG emissions within the value chain is performed over compensation and/or neutralization measures.
To address the effectiveness of carbon offsets, it is important to first define offsets, carbon neutrality, SBTi net zero science based targets, abatement, compensation, and neutralization. We can then address the effectiveness of carbon offsets in the context of the SBTi.
Offsets
One carbon offset equals the third-party verified GHG emission avoidance, reduction, or removal equivalent to one metric ton of CO2 equivalent (CO2e).
For example, you achieve an offset of emissions by setting up a project where the baseline emissions are more than the project emissions. A project that goes beyond “business-as-usual” is deemed to be “additional” to business-as-usual.
An offset cannot be claimed if the project is legally required to be carried out. As such, cannot be additional if required by law.
Carbon neutrality
Carbon neutrality is the balancing out of your organization's carbon emissions with the reduction of carbon emissions you fund monetarily somewhere else in the world. It is recommended that your organization have a carbon reduction plan but it is not necessary.
SBTi
The Science Based Target Initiative (SBTi) has one goal - reduce greenhouse gas emissions.
SBTi motivates companies to set net-zero science-based targets that are in line with limiting warming to 1.5°C.
The SBTi Net-Zero Standard has a “mitigation hierarchy” at its heart.
The organization should have near and long term targets to address their internal value chain GHG emissions ahead of any actions or investments to mitigate GHG emissions that are outside the organization’s value chain.
As such, the SBTi Net-Zero Standard outlines that an organization should reduce GHG emissions internally before looking at actions or investments to reduce GHG emissions outside of the organization’s value chain.
Abatement: Measures an organization takes to prevent, reduce or eliminate sources of GHG emissions.
Neutralization offsetting: Permanently remove an equivalent amount of atmospheric carbon dioxide. For example, growing forests to take carbon out of the atmosphere.
Compensation offsetting: Offsetting that helps society avoid or reduce GHG emissions outside of the organization’s value chain. An example of a compensation project is a landfill gas project. The landfill gas project emits fewer emissions to the atmosphere but does not help get to net-zero because there are GHG emissions still being released to the atmosphere.
Companies cannot purchase compensation offsets as a replacement to internal reductions in GHG emissions in their value chain but purchasing carbon credits while also reducing emissions in the value chain is seen as critical for achieving GHG emissions reductions globally.
Effectiveness of Offsets in the Context of SBTi
Compensation offsetting and neutralization offsetting measures both play a critical role in accelerating GHG emissions reductions globally.
They both also help achieve SBTi’s goal of GHG emissions in line with limiting warming to 1.5°C. That said, compensation and neutralization measures do not replace an organization’s need to reduce value chain GHG emissions.
Organizations should focus on a mitigation hierarchy where eliminating sources of GHG emissions within the value chain is performed over compensation and/or neutralization measures. Land-based strategies should focus on preserving and enhancing terrestrial carbon stocks
Offsetting can play two effective roles in SBTi:
In the transition to net zero: An organization can use both neutralization and compensation.
At net-zero: An organization can use neutralization for offsetting the remaining residual GHG emissions in its value chain.
As such, the organization gets to net-zero by doing two things that incorporates the use of offsetting to effectively address SBTi:
First, it focuses on reducing carbon emissions in its own value chain. This requires serious strategy and planning.
Second, the remaining emissions that are considered infeasible to eliminate from the organization’s value chain can be done by offsetting with neutralization measures.
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