Carbon Offsetting

Global Warming and Climate Change are contentious issues that have been hotly debated for many years. Some believe that mankind is responsible; others argue that our planet naturally experiences cyclical climatic changes that are non-anthropogenic. Both are probably correct to an extent.

While the planet has experienced periods of ice age followed by more temperate climates, the scientific evidence (4th Assessment Report of IPCC, 2006) presented by the Inter-Governmental Panel on Climate Change (IPCC) shows a sharp increase in greenhouse gas emissions since the Industrial Revolution (circa 1850) coupled with sharp rises in average temperatures that far exceed natural cycles in the same period.

Global warming, as the name suggests, is a global problem that requires a global solution. However, self-serving politicians with short term protectionist agendas have failed to adequately reach a consensus for the implementation of mandatory policy with which to tackle the climate change problem. Consequently, the private sector has taken up the gauntlet by addressing the problem on a voluntary basis. A company generates profits by incurring costs: while financial costs are internalised, the environmental costs have historically not been paid for by the company creating them.

Visible environmental disasters, such as oil spills or river water pollution, will be cleaned-up voluntarily or by enforcement without question. But invisible atmospheric pollution created by industry has been freely allowed to the detriment of us all.

Companies now recognise that they are accountable for all of their costs and are adopting policies of Corporate Social Responsibility. These include reducing greenhouse gas emissions by investing in cleaner technologies, using renewable power, procuring behavioural change amongst employees and so on.

However, there will always be unavoidable greenhouse gas emissions produced in the course of business and these are offset by a mechanism in which the company will pay for the abatement of an equivalent number of greenhouse gas emissions elsewhere in the global economy. In this way a company may achieve true “carbon neutrality”. Carbon offsetting is made efficient through a market mechanism in the trading of Voluntary Emission Reductions (VERs), certificates that represent one metric tonne of carbon dioxide equivalent emission abatement, which allows for investment to find the most cost effective abatement opportunities, thereby minimising the economic cost of achieving the environmental goal.

It is all about cost effectiveness: achieving the optimal quantity of emission reductions for every dollar invested. Many of the most cost effective carbon abatement opportunities exist in the developing economies of Asia, Africa and the Americas. There are other strong reasons for procuring investment in emission abatement in the emerging economies.

The “2 degree target“ set by the IPCC and adopted by the Copenhagen Accord at the 15th session of the Conference of Parties to the United Nations Framework Convention on Climate ChangeParties aims to limit the catastrophic consequences of climate change by limiting average temperature increases to no more than 2°c this century.

In order to achieve this target it is accepted that carbon concentrations in the atmosphere need to be capped at 450ppm (parts per million). This requires a reduction of over 45 Giga tons of CO₂equivalent emissions per year. However, the developed OECD countries only account for 15 Giga tons in total and so the target may only be met through a concerted effort made in both the OECD and non-OECD countries. Investment in carbon offsetting projects in the developing world furthers this objective.

It’s not a question of either developed economies or emerging economies reducing carbon emissions...it needs both!

Conclusion

1. Offsetting offers the only way to achieve total carbon neutrality and is an additional tool to supplement internal efforts.
2. To achieve the 2°target, abatement must occur both in developed and emerging economies. Your investment makes that happen.
3. Offsetting encourages emerging economies to seek out abatement opportunities and implement cleaner technology solutions.
4. Offsetting results in optimal abatement achieved for every dollar invested.
5. Quality offset projects also bring ancillary humanitarian benefits (jobs, infrastructure, water, food, schools and hospitals) to some of the poorest communities in the world.

Offsetting is very visible: lead by example and encourage others to follow suit.