Climate action has become synonymous with the use of carbon offsets and similar schemes to compensate for emissions. In the race to claim “net zero” emissions or “carbon neutrality”, actual emission reductions have taken a back seat.
Now, one of the most respected bodies on corporate climate accountability, the Science Based Targets initiative (SBTi), has opened the door to a dangerous expansion of the offsets market.
The SBTi recently proposed, opens new tab a major change in its position, allowing companies to offset emissions in key parts of their value chain (Scope 3 emissions). This announcement created a strong backlash, with some staff denouncing the decision as “non-science-based” and an internal letter calling for the board members who supported the statement to resign.
As researchers for SOMO, the Centre for Research on Multinational Corporations, we believe the concern is legitimate. SBTi’s proposal, if confirmed (the SBTi board back-peddled in the face of the criticism and said that the final details will be released in July), will have major repercussions on how companies reduce (or not) emissions in their value chains. If companies, particularly big multinationals, send “business-as-usual” signals along the value chain, this will likely delay vital climate action globally.
Being able to use offsets, companies can appear to be addressing their emissions on paper while actually adding, and enabling others to add, more greenhouse gases to the atmosphere. This is because, by design, offsets do not lead to an actual reduction in emissions entering the atmosphere. At best, emissions are theoretically “cancelled out” by offsetting projects, such as forest conservation schemes, that claim to be removing, reducing or avoiding “equivalent” emissions – a zero-sum game. This might explain why, despite the more than 20 years of carbon offsets operating under various schemes, greenhouse gas emissions continue to rise as well as fossil fuel production and consumption.
A tree nursery with saplings that have dried out due to drought. Critics say offset schemes, which include reforestation projects, are difficult to quantify and do nothing to reduce emissions. REUTERS/Timm Reichert Purchase Licensing Rights, opens new tab
Mounting evidence has exposed how the offset system does not work. From “phantom credits” that do not represent emission reductions or removals, to unverifiable claims about what “would have happened” without the project, offsets’ zero-sum game is in fact an “adding emissions” game. What is worse, an increasing number of reports expose how offset projects, most of them in the global South, lead to human rights abuses, including eviction of Indigenous peoples from their land.
The offset industry is a largely unregulated web of companies that allows the continuation of the fossil-fuel based economy that is driving the climate crisis. It is driven by profit-making interests and comprises several actors, including project developers, auditors, certifiers, intermediaries, bankers, traders, speculators and shareholders.
These actors rely on each other to generate profits, in ways that create fundamental conflicts of interest. This may go a long way to explain why failures that have consistently come to light in recent years went undetected for so long.
The industry is set up in such a way that it’s nearly impossible for auditors and certifiers to meaningfully assess what is going on at the offset project site. The documentation that underpins the offset market is largely a “paper reality”, riddled with misleading, incomplete and sometimes false claims and assumptions.
Advocates of offsetting are currently focused on rebuilding trust in the industry after a slew of damning reports of failures and abuses. In this line, many actors with direct financial interests in expanding offsets celebrated the SBTi’s proposal, as it would significantly increase demand for the credits.
A man holds a nozzle with Shell’s logo at a petrol station. The oil company has been reprimanded in the Netherlands for promoting ‘CO2-neutral’ petrol with offset credits. REUTERS/May James Purchase Licensing Rights, opens new tab
In recent years, several companies have faced legal action for misleading consumers on their climate strategies. For instance, Shell has been reprimanded, opens new tab twice in the Netherlands for promoting “CO2-neutral” petrol with offset credits, and was banned from claiming that customers filling up at its petrol stations could “compensate” for their car’s emissions.
Similarly, it was ruled that the Dutch airline KLM was using misleading advertising, opens new tab based on offsets. In Germany, eight companies are being sued for allegedly making false carbon-neutral claims to their consumers and shareholders. Likewise, TotalEnergies was taken to court, opens new tab in France for allegedly using misleading advertising of its net-zero plan. These examples expose how it is not a matter of wording, but about the impossibility of companies’ guaranteeing that the carbon credits they buy actually represent an “equal” climate benefit when compared with the emissions resulting from their business.
As a result, companies are slowly moving away from making carbon-neutral claims, yet many still heavily rely on offsets. As the evidence of problems with the offset industry grows, so do the risks that companies using them will be accused of greenwashing. Increasingly, civil society groups are underlining the responsibility that corporate buyers of offsets have when a project overstates its impact or, even worse, leads to serious abuses.
A robust corporate climate strategy must have as its main pillar a detailed and transparent plan for deep emission reductions in the company’s operations and along its value chain. Drastically reducing the use of fossil fuels and other associated pollution should be at the heart of corporate targets. This is without doubt more difficult than buying permits to keep polluting, but it is the only way for real change.
The SBTi’s proposal represents a dangerous regression. As long as companies responsible for the most emissions continue to be able to buy their way out of reducing actual emissions, they will do so.
To accelerate meaningful corporate climate action, no doors can be opened for companies to avoid the serious responsibility they have in this crisis. Too many years have passed with offsets delaying real emission reductions and climate justice.