Where you buy your carbon credits counts. The offsetting industry, while accelerating fast, is still experiencing significant growing pains. The sector lacks the proper guidelines and structures needed to make sure its work is creating a measurably positive impact on the climate. Although new initiatives such as the Taskforce on Scaling the Voluntary Carbon Market are making important progress, work remains to be done.
This is evidenced by the widespread lack of transparency when it comes to offsetting projects. Companies and consumers looking to offset emissions often have no choice but to trust the vague descriptions on providers’ websites.
We screened over 100 international offsetting projects focused on nature-based solutions and found that 90% of them fell short of critical sustainability criteria. This is worrying—and it means there are millions of largely meaningless carbon credits out there on the market.
The industry has to reexamine its ways of working, and consumers and companies that rely on offsetting would do well to become more vigilant with prescreening initiatives.
Here are four questions you can use to fact-check any offsetting project.
If this offsetting project didn’t exist, would it matter?
The most common problem with the offsetting industry is that a large number of projects are not additional, i.e. they do not remove any more CO2 from the atmosphere than would be the case if these projects did not exist.
With offsetting, it’s important to look at the globality of a project—the various ways in which it plugs into other offsetting efforts, both on an international and local level. What does the project add to these initiatives, if anything?
Additionality separates environmental projects from offsetting projects. While both are great for the climate, only the projects that tackle additionality can be used for offsetting.
There are two critical levels to additionality: financial and policy-level considerations. Financial additionality means that the project would not have happened without carbon credit revenue. In other words, the offsetters’ investment is critical in making the offsets happen. Reforestation and restoration of degraded mangrove lands is a great example of this, helping to shift the local economy away from charcoal production and back onto more sustainable income sources.
One such project now employs over 300 locals from low-income families, including former charcoal producers—and has doubled family incomes in the area. Meanwhile, a private ranch owned by a billionaire that prides itself on conservation is likely to keep protecting its forests even without the support of outsiders.
Policy-level additionality means that the project goes above and beyond national or international climate policies. If a project only enacts what is already required by existing policies, then it does not result in any additional removal of carbon dioxide from the atmosphere. An example might be protecting forests that are already protected by a national policy. Companies and consumers would do well to invest elsewhere.
Are the numbers inflated?
Many offsetting projects also have shady baselines. In other words, their project developers influence how “impactful” these projects appear.
Baseline emissions refer to the CO2 emissions that would be released in the absence of the project. For example, if the forest was not protected, how much of it would be cut down? These baselines can be artificially inflated, for instance by predicting 100% deforestation. The reality is often not as clear cut.
Red flags include situations where there hasn’t been historical deforestation in the region or project area, projects that base their calculations only on national or regional averages, or an instance wherein the project developer and land owner are the same entity, meaning the deforestation threat is created by the land owner themself.
Projects based on unrealistic and often intentionally exaggerated predictions are likely to have little climate impact. In fact, buying such credits could actually add carbon into the atmosphere, as emissions will not be counterbalanced with real, additional offsets. Again, companies and consumers should avoid investing in these types of initiatives.
Is anyone else trying to claim credit for this carbon reduction?
Double counting refers to a situation in which two parties claim the same carbon removal or avoidance. As absurd as it sounds, this happens quite often.
Commonly, the two claiming parties are an organization offsetting its own emissions and the project’s host country trying to reach its nationally determined contribution under the Paris Agreement. The work being done by the organization then disincentivizes the nation from implementing further emissions reductions to meet the target.
Recognizing double counting is a question of climate integrity. Consumers and companies should look for offsetters that acknowledge this duality and make subsequent adjustments; that could mean for example not purchasing carbon credits from the developed countries that do not deduct those credits from their national greenhouse gas inventories and climate targets.
Does the project support local communities and biodiversity?
Offsetting is ultimately only as good as its end impact. Carbon projects that are worth their salt do not cause community conflicts, land tenure issues, forceful evictions, human rights violations, or simply worsened health and well-being due to restricted access to a forest or nature area. Worthwhile offsetting projects are also good to biodiversity, working to prevent poaching and illegal logging, while reforesting habitats, and bringing wildlife back to previously degraded areas.
Violations happen disappointingly often. Real sustainability is about carrying responsibility; Offsetters should recognize possibilities for deterioration of the livelihoods of local people and mitigate any possible negative impacts to communities and wildlife. The best offsetting projects tackle the underlying socioeconomic drivers of emissions and contribute to the UN’s Sustainable Development Goals. Whether it is creating more sustainable income sources, better access to credit for local workers, or returning a large part of the carbon credit revenues back to the local community as direct cash payments, offsetters should consider the people whose livelihoods these offsetting projects affect.
If there are no details on such considerations in the project’s documentation, it’s best for companies and consumers to steer clear of the initiative.
Elina Kajosaari is the CEO of Compensate