Our online webinar with Shopify put the spotlight on the buyer and supplier perspective about why companies should purchase carbon removal today.
The IEA and the IPCC consistently highlight the need for immediate action to address the climate crisis within the next decade. Existing climate policies are projected to lead to a global temperature increase of at least 2.7°C by 2100, far exceeding the Paris Agreement target of 1.5°C. That’s why it’s crucial that we move toward net zero carbon dioxide (CO₂) emissions by mid-century, and corporate net zero strategies are important tools in this effort.
So, how can you ensure your net zero strategy is contributing to real, impactful change? As informed by the experts, businesses will need to utilize a portfolio of measures to ensure net zero goals are being met. According to the SBTi framework, a credible, science-based net zero strategy must combine both emissions reductions and the active removal of unavoidable CO₂ emissions — via carbon removal offsets.
But there’s still more to do, and with such rapid change, it can be difficult for businesses to understand the options available to them or how best to make a difference. For example, what’s the difference between conventional avoidance carbon offsets vs. carbon removal offsets?
In this article, we’ll explain carbon offsets in simple, straightforward terms so you can build your net zero strategy effectively.
Carbon offset definition
Before we tackle the difference between carbon avoidance offsets vs. carbon removal offsets, let’s go back to the basics. Any business in operation releases some quantity of greenhouse gas into the atmosphere. These emissions are described as covering three scopes, which you can remember using the phrase: burn, buy, beyond. Scope 1, “burn”, covers direct greenhouse gas emissions such as those released from the burning of fossil fuels. Scope 2, “buy”, covers indirect greenhouse gas emissions such as those from the purchase of electricity or heat. Scope 3, “beyond”, covers those greenhouse gas emissions that are often beyond an entity’s control — for example, sourcing and transporting of goods, employee commuting, or disposal of company produce.
As part of a credible net-zero strategy, a business will need to invest in carbon offsets (on top of reductions) in order to reduce their impact across these three scopes and do their part to help mitigate climate change. Carbon offsets facilitate this in two ways, either by removing carbon from the atmosphere, i.e., carbon removal offsets, or by the avoidance of emissions to begin with, i.e., conventional avoidance carbon offsets. Keep reading, and we’ll go into these two types of carbon offsetting in more depth.
Conventional avoidance carbon offsets
Perhaps the more well-known of the two options, conventional avoidance carbon offsets counteract further CO₂ from being released into the atmosphere. To do this, a business might pay another entity to choose operational practices with a lower carbon footprint or to avoid an activity altogether that would result in increased emissions. This could include the preservation of forests to keep naturally sequestered carbon from being re-released into the atmosphere. Alternatively, it might involve incentivizing farmers to practice regenerative agricultural techniques that help store carbon dioxide in the soil. Both of these choices act as avoidance carbon offsets and award a business with something called “carbon credits”, which can then be used to counteract their greenhouse gas emissions. Every carbon credit amounts to one ton of carbon avoided, which is collected so a company can keep their carbon balance sheet neutral as they emit via business activities — while 1 ton is emitted, 1 ton is avoided.
But while there’s some merit here, conventional avoidance carbon offsets do face certain criticisms when used alone within net-zero strategies. Because the purchase of carbon credits effectively functions as a license to emit, the difficulty with measuring how much CO₂ has actually been avoided has come under some scrutiny. With many avoidance offsets, you’re measuring a hypothetical situation which never actually occurred — i.e., would the forest definitely have been cut down without the company’s intervention? Alternatively, how much carbon dioxide would actually have been released if a forest were logged? The answers can only ever be guesses or estimations, which begs the question of whether a company purchasing avoidance carbon credits has truly neutralized their emissions or not. As Jonathan Goldberg, CEO of Carbon Direct, puts it, “The carbon avoidance in these offsets are counterfactual math. Maybe someone else can figure it out, but I can’t” (Source).
Luckily, the market is evolving all the time with increased guidance from entities such as The Voluntary Carbon Markets Integrity Initiative (VCMI). Additionally, at the end of 2021, The Taskforce on Scaling Voluntary Markets (TSVM) proposed adding new criteria to registered carbon credits that would help bring more transparency to the market, allowing buyers a clearer view of the impact of their chosen projects. Early participation in voluntary carbon offsets is essential to developing this further and growing the market in turn.
Carbon removal offsets
So, now we’ve ascertained that carbon avoidance offsets involve avoided emissions, what are carbon removal offsets, and how are they any different? Well, rather than compensating for further carbon dioxide emissions, carbon removal offsets deal with decreasing the overall concentration of CO₂ already in the atmosphere. They can be used for two purposes:
To remove historic emissions
To remove unavoidable emissions and help companies reach net zero
According to the Science Based Targets initiative (SBTi), we must reduce our CO₂ emissions by at least 90% before 2050, but there will still be around 10% of unavoidable emissions remaining. The IPCC has emphasized that carbon removal is essential to neutralize these unavoidable emissions and keep global warming below 1.5°C. We need to extract billions of tons of CO₂ from the atmosphere before 2050 and beyond — even if we reach net zero by 2050, we’ll still need to remove 3-12 Gt of CO₂ every year moving forward. That’s why we need businesses to invest in high-quality carbon removal to help scale new technologies. There are several carbon removal solutions currently on the market, including afforestation, bioenergy with carbon capture and storage (BECCS), enhanced weathering, and direct air capture and storage (DAC+S) — which is what we do here at Climeworks.
Direct air capture is a carbon removal technology which captures carbon dioxide from the atmosphere using special filters. The CO₂ is then heated, combined with water, and injected underground. It’s an attractive carbon removal solution because of its permanence, as the captured CO₂ is geologically stored for over 10,000 years, but it’s also fully measurable and verifiable. We can track exactly how much CO₂ is extracted from the atmosphere, and we’ve designed the first DAC+S methodology with Carbfix to third-party verify our carbon removal services.
To find out more about our technology to fight global warming, visit our carbon removal solution page.
Which one should you choose?
Now we’ve taken a look at both avoidance and removal offsets, which should you invest in? Ultimately, carbon removal offsets are the best way to strengthen your business’s net zero strategy. That’s because avoided emissions are insufficient to reach net zero in the long run, while carbon removals scrub carbon directly from the atmosphere. But the important thing to remember is that if you’ve started avoidance offsets, there’s no need to change your portfolio overnight. You can gradually phase out avoidance offsets while investing in CDR; evolving your portfolio towards 100% removals as outlined in The Oxford offsetting principles. Additionally, new research by Forest Trends’ Ecosystem Marketplace suggests that companies who purchase voluntary carbon credits of any kind are more likely to report lower gross emissions year-on-year, investing more in emissions reductions compared to companies not engaged in carbon markets. So clearly, there is potential for positive impact when offsetting of any kind is included in a portfolio of solutions. It’s about creating a robust net zero strategy with a holistic approach, using all the tools available to us to do our part in mitigating climate change. As Katharine Hayhoe, Chief Scientist at The Nature Conservancy, writes:
“We have to turn off the hose (reduce emissions), make the drain bigger (carbon removal), and learn how to swim (resilience): and the faster we turn off the hose, the better off we'll all be.”