The environmental impact of carbon emissions will be the same regardless of where the emissions take place. In other words, carbon emitted in one part of the world can be cancelled out if the same amount is removed elsewhere, with carbon offsetting being one way of achieving this. Hardly an untested avenue, many companies – including those in the fashion and luxury space – are meeting their emissions reduction targets by way of carbon offsets, or more specifically, by purchasing carbon credits awarded to projects that either emit fewer emissions at source, such as cleaner energy production, or that remove them from the atmosphere, such as via forestry initiatives. Each credit corresponds to one metric ton of reduced or removed carbon emissions.

The first day of the UN climate summit, COP27, in Egypt this week saw intense discussions over the trade of carbon offsets. The U.S., for one, views offsets as a promising way of directing investment towards clean energy projects in developing countries, many scientists and environmentalists are skeptical of companies offsetting their emissions instead of actually reducing them. This has prompted some firms, from EasyJet to Copenhagen-based fashion brand Ganni, to focus their efforts on reducing their emissions directly. (“We stopped compensating for our carbon footprint. We put aside that money and saved it up for investments in bringing down the carbon footprint of our supply chain, making actual reductions along our supply chain,” Ganni founder Nicolaj Reffstrup told Vogue early this year.)

The skepticism around carbon offsetting is not unfounded. Yet, we also found ways to improve offsetting.

Relying on Carbon Offsets

At their core, carbon credits are cheap: one ton of carbon dioxide costs just £3 ($3.41) to offset on average. And companies are also not required to disclose how offsets are being used to meet their net zero targets, which means that they have little incentive to reduce their emissions as they can claim to be “net zero” while relying entirely on offsetting. The reality is that offsetting often fails to reduce carbon emissions in a meaningful way. Global carbon credit standards exist to ensure that credits are traceable and meet a minimum verifiable level. However, an emissions reduction may occur whether or not it is paid for with credits. An area of rainforest, for example, will remove carbon from the atmosphere whether or not it has been sold as part of a carbon offsetting scheme.

At the same time, projects may not remove emissions permanently. A fire that destroys a forest, for example, will damage the integrity of the credits sold by forestry projects. Not a hypothetical concern, six forest projects tied in the carbon offsetting market in California have released up to 6.8 million tons of carbon dioxide since 2015 because of fires.

Seeds of Hope

If used correctly, carbon offsetting can be an important component of the policy mix as we transition to net zero, and a rise in the price of credits would allow offsetting to make a greater contribution to global climate priorities, such as restoring nature. Moreover, international accounting mechanisms were agreed at COP26 that encourage countries that sell offsets not to count these emissions savings towards their own climate targets. Within their borders, countries would have to deliver both their domestic targets and any offsetting projects sold to overseas buyers. This could help raise overall climate ambition in some countries. But national climate targets for countries selling offsets need to be ambitious and the sale of offsets must be monitored to ensure the delivery of offsetting projects.

We also found that the purchase of carbon credits could raise £400 million in funding each year for emerging climate technologies in the UK, alone. One such technology is direct air capture, which involves pulling carbon dioxide from the atmosphere and storing it underground. Purchasing credits in long-term carbon removal projects, such as this one, represent an attractive option for industries that cannot easily curb their emissions, such as the aviation industry.

Carbon Offsets Can Work

Since 2018, the global market for offsets has grown five-fold and is set to continue growing, but further steps must be taken to ensure that carbon offsets are used correctly. Guidance about how companies should be using carbon offsetting must be improved. A company should only be able to claim that they are net zero when they have minimized their own emissions and are using offsetting to compensate for the rest. The UK government is developing its own regulations for businesses through a net zero transition plan. The plan will require organizations to disclose the steps they are taking to transition towards net zero. This involves setting out how offsetting contributes to these targets, enabling an independent assessment of how far organizations are reducing their emissions. 

Efforts to improve UK and international standards for carbon offsetting projects should also be accelerated; standards are being developed in the UK for carbon credits associated with restoring kelp beds off our coasts, improving carbon storage in our soils, and planting hedgerows. They will support climate and biodiversity goals while providing a financial incentive for farmers. And for non-UK projects, a set of standards could be internationally agreed, possibly based on the Integrity Council for the Voluntary Carbon Market’s Core Carbon Principles. With a trusted set of standards, businesses can be confident that they are investing in high-quality offsetting projects. 

Carbon offsetting should support attempts to reduce an organization’s emission, not provide an alternative. By improving guidance on the use of offsetting, businesses can be encouraged to reduce their emissions directly, and through financing climate change mitigation and nature restoration, carbon offsetting can play an important role in the transition to net zero.

Piers Forster is a Professor of Physical Climate Change and the Director of the Priestley International Centre for Climate at the University of Leeds. (This article was initially published by The Conversation.)