Carbon Offset Program Guide for Business in 2023
Carbon offset programs are a popular way for businesses to reduce their carbon footprint, help protect the environment and fight climate change.
Many companies work with carbon offset providers to make them more sustainable in the short term while implementing energy efficiency improvements and better waste management to curtail overall emissions.
Recently, carbon offset providers have come under the spotlight with claims that they don't deliver the emissions savings or carbon removal they're designed to.
While some of this criticism is warranted, it's a very nuanced industry. The ecosystem system marketplace lists more than 170 credit types from nearly 100 countries - so discernment is required. There are many great carbon offset options worth investing in.
This resource is a primer on the different types of carbon offset programs available for businesses and how they can benefit your businesses and the planet as a whole. With this information, you'll be able to make a responsible and sustainable choice that helps reduce your carbon footprint.
What exactly are carbon offsets?
Many companies are now fighting climate change by taking part in a carbon offset program to reduce overall carbon emissions.
Carbon offsets can mean any activity that results in reducing carbon dioxide emissions to compensate for emissions produced elsewhere. They are a form of pollution accounting. The theory is since carbon dioxide (CO2) is a global pollutant, it doesn’t matter where it's reduced. The goal is to even out the production of emissions.
Carbon offsets are typically purchased by companies as a way of reducing their overall carbon footprint. In offsetting carbon by buying carbon credits, companies provide indirect financing projects that reduce greenhouse gas emissions all over the world.
These projects come in different forms such as investing in companies that create renewable energy such as wind energy, landfill gas capture (methane capture), planting trees, and other activities.
It’s important to understand that carbon offsetting programs are not a way of avoiding responsibility for a company's emissions. Rather, carbon offset companies help combat climate change by compensating for their emissions they put more permanent measures in place.
While many large public companies are now required by governments to measure and report on emissions, for small the medium-sized businesses it is voluntary. Starting a voluntary carbon offset program has become popular amongst small and medium-sized businesses that want to be good corporate citizens, stand behind their values and their brand, or do business with large corporations that are required to report on emissions.
Why is reducing our carbon footprint more effective than offsetting it?
Producing fewer emissions is the best and most effective way to reduce a company's carbon footprint and environmental impact. Carbon offsetting will not reduce emissions, but it can help close the gap between emissions and emission reduction goals.
The goal of any business should be to minimize its carbon footprint as much as possible, and offsetting can serve as a supplement when additional reductions are not feasible, cost-prohibitive, or will take some time.
Reducing your company’s emissions is usually more effective than offsetting them because it involves permanently reducing the number of emissions produced. This can be done by improving efficiency and process, switching to renewable energy sources, or investing in green technology that helps reduce emissions.
While costly upfront, a carbon balanced business plan can make sense economically. Many business experiences long term economic benefits from reducing their carbon footprints due to lower costs and customer growth.
Finally, some experts believe that carbon offsets do not reduce greenhouse gas emissions. This is because emissions reductions achieved through carbon offsets are not permanent and can easily be canceled out by new sources of emissions. A focus on reducing carbon emissions is no doubt, the best way to become carbon neutral.
Do carbon offsets actually work?
Yes, they can. There are some great carbon offset programs out there. The key is to find a program that has been evaluated by a reputable, independent third party and has a strong track record of delivering actual emissions reductions.
It's also important to look for programs that are transparent about how their projects are monitored and verified so you can be sure your investment is making an impact. Adhering to best practices, such as the Oxford Offsetting Principles, allows companies to produce emissions reductions that are backed by science.
Carbon offsetting also provides an extra incentive to exceed emission targets by making it more expensive NOT to emit. The price of the offset creates a financial motivation to keep searching for emissions savings within the company.
Criticism about carbon offset programs for business
While carbon offsetting is an important tool in helping to reduce greenhouse gas emissions, there has been a lot of criticism about the overall effectiveness of some carbon offset programs.
Perhaps most famously on John Oliver's popular This Week Tonight television show, he asked: Are Carbon Credits a Joke? Institutions such as Greenpeace have also come out strongly against the carbon offset space. Here are a few of the main criticisms:
Offset programs do not reduce emissions, they simply allow companies to buy their way out of responsibility.
Offsets may lead to double-counting of emission reductions or create a false market for emissions trading.
Offset carbon may promote greenwashing. Carbon offset programs can be improved by being more transparent and accountable. This means that people can check that the offsets are real, and that emissions reductions are not being counted twice.
That offsets are unjust. Businesses deplete natural resources by purchasing land from poorer countries for offsets and continue polluting the environment without being held accountable. Nature-based offsetting projects can have negative consequences for economies and local communities that lose land or resources.
The best carbon offset programs are an excellent way to finance new emission reduction projects and help move towards a low-carbon future. However, offsetting should be only part of an integrated strategy that also includes actions to reduce your company's annual greenhouse gas emissions.
What are the biggest limitations of carbon offset?
The biggest limitation of carbon offsets is that they're generally not permanent. Carbon emissions reductions achieved through carbon offsets can be canceled out by new sources of emissions elsewhere, so they don't provide long-term solutions to climate change.
In addition, they don't address the root causes of climate change. While they can be used as a way to mitigate emissions from sources that aren’t always within our control or are harder to reduce, they should be seen as a complement to other climate solutions and not as a primary means of reducing emissions.
There are 9 key limits for carbon offsetting. They are :
Carbon offsets must be real and verifiable
Carbon offset programs must have a clear emissions reduction target
Carbon offsets must be additional (not replacing existing reductions)
Carbon offsets should provide long-term benefits
Carbon offset projects should be permanent, not reversible
Carbon offset projects should not endanger or exploit people
Carbon offsets must be financially sustainable
Carbon offset projects must measure and monitor results
Carbon offsets should be complemented by other efforts to reduce emissions
By understanding the limitations of carbon offsets and ensuring we can ensure that we are investing in programs that offer real emission reductions and make sure our business is taking meaningful action to reduce its carbon footprint. With best practices in mind, carbon offsets can be a useful part of a company’s sustainability strategy.
What are the best carbon offset programs by type?
When it comes to the best carbon offset programs, there are many different models and approaches. Ecosystem Marketplace, a leading source of information on carbon markets, has data on more than 170 credit types from nearly 100 countries.
Which carbon offset program should you choose? Here are the most popular programs types in 2023:
- Renewable Energy Certificates (REC): These enable businesses to purchase renewable energy from certified sources, such as wind power, solar and hydro
- Forest Carbon Offsetting: This type of offsetting involves investing in forest preservation projects to avoid deforestation, which is one of the major sources of global emissions
- Waste Management Offsetting: Environmental programs focused on waste management involve reducing landfill emissions or landfill gas and methane capture through advanced technologies or improving recycling practices
- Carbon Capture and Sequestration: This involves capturing carbon from the atmosphere and storing it in underground geological formations to prevent it from entering the atmosphere
- Renewable Natural Gas (RNG): RNG is produced by decomposing organic waste, such as food scraps or agricultural residues, in anaerobic digesters and capturing the methane that is released during this process.
- Renewable Fuels: This type of offsetting involves investing in clean energy and renewable fuels, such as biofuels or biogas, which produce fewer emissions than traditional fossil fuels
What are carbon credits and how are they different from carbon offsets?
It's common for "carbon credits" and "carbon offsets" to be used as synonyms, but they refer to two unique items that achieve different objectives.
Before you buy either one, you should first understand the contrast between them and know which one will help you better reach your goals.
Carbon offset: The removal of greenhouse gas emissions from the atmosphere.
Carbon credit: A reduction in greenhouse gas emissions released into the atmosphere.
Usually, carbon credits are established by governments. By placing a cap on carbon pollution (a set number of tons that a company can produce), governments restrict how much companies can pollute. A credit corresponds to each ton of CO2 emitted.
What should your company buy?
It all comes down to what you need. If you're a corporation, the answer is probably "both." But it just depends on your business goals. As for small or medium-sized businesses and consumers, carbon credits will be tough to buy, as they are only available on the compliance market. But everyone can do their part by buying carbon offsets.
How much do carbon offsets cost?
Carbon offsets are available for purchase at a wide range of prices, anywhere from $1 to over $100 per ton.
The price of a carbon offset is impacted by many variables including the type of project being funded, how many credits are available, and demand from buyers. Carbon offsets are typically bought and sold through a voluntary market, often resulting in significant price variances.
Of course, companies looking to reduce their GHG emissions would want to buy credits from a high-quality carbon offset program. However, low-quality offsets that do not legitimately reduce carbon can be bought for a few dollars per ton. These bring down the prices of other, high-quality offsets. This is one of the reasons carbon offset prices don't accurately show the cost of removing a ton of atmospheric carbon.
Although the price is a primary concern for many companies, it should not be the only factor when choosing which carbon credits to buy. It's better instead to consider, what makes a high high-quality. It's not necessarily cost.
If a business only looks at price when choosing a carbon offset project, cheaper offset projects could be given preferential treatment. For example, industrial gas destruction projects are some of the cheapest but most cost-effective projects in the offset market.
How to choose carbon offset projects that actually make a difference?
To make sure your offsets help the planet, as well as lowers your ESG score, make sure to select projects that are verified by one of the top standards agencies. Standards give transparency on the worst and the best carbon offset programs.
Carbon standards certify the credibility and quality of carbon credits. A reputable program puts projects through a rigorous assessment process to generate offsets that adhere to specific conditions, such as being calculated accurately, permanent, not previously claimed by another entity, and not having caused any social or environmental harm.
By holding projects accountable in this way, standards guarantee that the reductions or removals they claim occur. Because the voluntary carbon market is not regulated by any government agencies, standards are essential.
Here are four leading carbon standards registries to look for:
Climate Action Reserve (CAR)
CAR provides offset schemes aimed at safeguarding environmental integrity in projects that reduce emissions of greenhouse gases. Its goal is to enhance financial sustainability in the voluntary carbon offset markets. CAR achieves this by developing the Climate Reserve Tonnes (CRT) and quantifying them through project protocol. This standard provides a clear and effective way for emissions reduction.
CAR identifies carbon offset providers that are permanent. Achieving these goals also involves calculating their carbon dioxide emission reductions in real time and auditing them. Similar to the Gold standard, the CAR focuses its attention on socioeconomic advantages.
CAR mainly carries out projects in the USA, however, a certificate from CAR has been issued for projects in Canada and Mexico. All CAR-approved projects receive unique serial number credits and carbon offset credits. This allows the tracking of projects efficiently. Moreover, it assures customers that a “retired” credit can no longer be used to sell and resell.
CAR has been recognized by many as North America's leading carbon offsets. In 2021, CAR achieved a reduction from 87.8 billion tonnes in emissions to 86.6 billion.
Verra: The verified carbon standard
Verra is a leading voluntary carbon offset provider in the North American carbon market. Probably you already know of its logo. Your carbon footprint can be reduced when you book flights.
To be eligible for approval, the project must meet four criteria: The project must produce verified emissions reductions; it must be economically viable without a subsidy; it should avoid double-counting of offsets; and finally, it should have no negative environmental impacts.
The VCS program accounted for 928 million tonnes of emissions and lowered or reduced CO2. The VCS program allows certified project developers to convert emissions reductions into Carbon Credits.
The program is focused solely on aspects of greenhouse gas reduction but does not emphasize the need for environmental benefit. It is funded by the carbon offset market participants such as project developers, offset purchasers, verification firms, and project consultants.
Gold Standard aims to offset projects which offer long-term social, economic, and environmental gains. It focuses primarily on the UN's Sustainable Development Goals (SDG) and was designed by the World Wildlife Fund, HELEO International, and SouthSouthNorth.
It has also a reputation among investors as an arduous carbon credit scheme. The methodologies are compliant with the GHG Protocol and reductions count toward Science Based Targets.
To receive approval from Gold Standard, carbon offset projects need to be assessed to make sure local populations benefit. They should also contribute to at least three out of fifteen UN SDGs for certification.
American Carbon Registry (ACR)
ACR pioneered voluntary emission and carbon markets. It regulates the offset credit market in California and has both private and regulated carbon markets.
The ACR certifies projects around the globe. The ACR certifies projects that result in a permanent reduction of agricultural sector emissions. These projects incentivize farmers to adopt more efficient land management practices through increased productivity, capeable of reducing their GHG footprints.
The ACR also certifies offset projects in forestry, including reforestation of deforested land, and agro-forestry. The ACR requires that each project's results demonstrate a permanent reduction in emissions and carbon dioxide equivalent.
The program also offers a "Retired Credit Program" which assures customers that a “retired” credit can no longer be used to sell and resell.
To find the trusted and best carbon offset providers, choose which guidelines best fit your needs and then choose a verified, then choose a verified carbon standard.
How do I purchase carbon offsets for my business?
When purchasing offsets for your company's carbon offset program, do your research. Be sure to choose a program that meets the nine key standards outlined above. Make sure you read up on the program and determine if it has been verified by an independent third party such as one of the carbon standards organizations above.
Then you'll need to calculate your emissions through a carbon footprint assessment. Numerous online platforms offer a carbon footprint calculator - from free online carbon calculators to complete sustainability management systems that track and report carbon emissions across the entire value chain.
Once you’ve calculated your carbon footprint, you'll need to carefully research and choose the right carbon reduction projects for your business. Generally speaking, when you purchase carbon offsets the more you buy, the lower the price per ton.
Pick projects that align with your industry, mission, and values. Or projects that have a positive impact on your communities be that local, customer, or anywhere in your supply chain.
Finally, make sure to monitor the performance of your offset provider over time so you can be sure your investment is going towards real emissions reductions.
Where should you go to buy carbon offset for your business?
Here is a short list of three high-quality providers. A report with the best 20+ companies in 2023 is coming out soon however, here are three excellent companies you might consider:
Cool Effect
Cool Effect's mission is to help cool the earth by supporting verified carbon-reducing projects across the globe through crowdfunding. Cool Effect began its journey in 1998 with a small clean-burning cooking stove project in Honduras and has grown into a community with 500,000 users worldwide. The goal of this program is to provide businesses and people with the power to join together to reduce emissions of CO2. “Carbon Made Right”.
Cool Effect offers a Business Carbon Offset calculation software that can offset your business carbon footprint by reducing energy usage. It reflects employee numbers so that you can choose between 3 different methods of calculation: monthly utility bills or monthly utility usage.
Alternatively, you can use Cool Effects to offset company travel or offer your employees a really meaningful perk by offsetting their personal carbon footprint.
Every carbon credit on the Cool Effect platform has been certified by a reputable source, such as The Gold Standard, Verra or the Climate Action Reserve.
This is the perfect place to buy offsets if you are a small to medium-sized business or you just want them to make your travel sustainable.
Native Energy
Native Energy strives to help businesses impact the communities and ecosystems that matter to them through climate solutions. This way, by investing in carbon offsets, you can support your company's values and make a positive impact on the environment.
Native Energy's approach employs forward-purchased offsets. They commit to delivering emission reductions to the buyer at a pre-defined time. This allows new validated projects to be launched quickly.
For the past 20 years, Native has helped companies meet their environmental sustainability goals by developing over 80 climate action projects. These projects have provided measurable benefits for people and the planet. Each of these projects is validated and verified by one of the top standards.
Native works with some of the world's most sustainable brands, usually larger companies, to build out customer programs.
Fenix
Fenix is a more recent addition to the carbon offset market that empowers carbon offset companies to create more projects with higher impact. To achieve this, they give developers the tools, capital, and market access fairly and transparently.
They only accept listings from internationally recognized certifiers. Pick from projects to fit your business objectives by browsing their marketplace. Review comprehensive project details including all supporting documentation. View each project on the public registry to get a better idea of what it entails.
Fenix's prices are set by the developer, with a 10% fee on each side--and no price markups. All contracts are autogenerated instantly and funds are held in a secure escrow. You are then able to take delivery or retire your credits so they cant be resold.
By investing in carbon offsets, businesses can have a positive impact on their local communities and ecosystems. Cool Effect, Native Energy and Fenix are just some of the companies that do this successfully. Each offers its own approach to validating projects, pricing, and delivering credits so businesses can find the best option to meet their sustainability goals.
Conclusion
A carbon offset program is a powerful tool that can help us reduce carbon emissions and fight against climate change. To ensure the validity and efficacy of carbon offset projects, the best carbon offset programs investigate the different standards and certifications offered by organizations like CAR, VERRA, Gold Standard, and the American Carbon Registry (ACR).
Remember that a carbon offset program should never replace reduction efforts; instead, they should be used as a supplement to reducing our personal and organizational footprints on the environment. By using these programs in conjunction with energy efficiency initiatives, renewable energy sources, and other mitigation strategies, we can all make a difference in global warming one step at a time.
