Insight Focus
- Report says carbon offsets “misrepresent climate impact”.
- A new category of carbon removal credit may help answer criticism.
- The research comes from the Columbia Center on Sustainable Investment.
A report by the Columbia Center on Sustainable Investment has warned that carbon offsets “distort and misrepresent climate exposure, alignment, and impact”, and should not be used by companies to claim net zero status.
The report, entitled “Finance for Zero: Redefining Financial-Sector Action to Achieve Global Climate Goals”, also criticises financial institutions for their continued financial support for carbon-intensive investments.
“The financial system is woefully misaligned with the world’s climate goals,” the report asserts. “Six times the current annual level of investment in non-fossil fuel investments is needed between 2023 and 2030 to stay on a 1.5ºC warming pathway.”
“Current climate-related pledges, alliances, frameworks, and tools at times confuse or conflate risk mitigation with climate action, relying on targets and metrics that may not be fit for purpose.”
The report also claims that these existing ‘bottom-up’ systems either overstate or misrepresent their impact on the climate.
“Overall, existing commitments and strategies are not sufficiently aligned with the actions needed from financial sector actors to achieve climate goals.”
The report also singles out carbon offsets for particular criticism, saying “the most dubious and discredited form of offset is the avoided emissions offset, which involves calculating non-emitted carbon against a counterfactual baseline.”
Hitherto, the majority of carbon credits have represented emissions reduced in comparison with a business-as-usual baseline, rather than a net removal of CO2 from the atmosphere.
There is now a growing constituency of stakeholders that are researching and developing ways to capture and permanently store carbon out of the atmosphere, and a new category of carbon “removal” credit is emerging.
Removal technologies include direct air capture, enhanced weathering and ocean fertilisation, though a raft of nature-based approaches are proving popular as well, including planting new forests, restoring mangrove swamps, encouraging undersea plant growth and improved farming practices.
This new class of carbon removals, the study says, should be combined with a renewed focus on slashing existing emissions from industrial production and processes.
“The only form of offset that can effectively cancel an emission source is one that removes emissions with long-term storage,” the Columbia study reports. “Thus, the only acceptable use of offsets in getting to net-zero emissions is for high-integrity, rights-respecting, removal-based offsets, and only for non-abatable, residual emissions.”
This puts the onus firmly on corporates to focus their climate action on internal abatement, cutting CO2 emissions wherever possible. Any unavoidable and unabatable emissions can then be compensated using carbon offsets or removals.
The study cites last year’s UN High-Level Expert Group’s report, which concluded that “high-integrity carbon credits in voluntary markets should be used for beyond-value-chain mitigation but cannot be counted toward a [private sector company’s] interim emissions reductions.”
