How to fix the carbon offset market

How to fix the carbon offset market

6 May 2022

In his article, Thomas Hales argues that, like any unregulated marketplace, carbon offsetting overall is falling short. While, in theory, properly designed, rigorous offsets could be just one useful tool  to achieve net zero, most of the current offset market is not appropriate for this purpose.


The Net Zero Tracker consortium that Hale co-leads shows that 91 per cent of country targets and 48 per cent of listed company targets fail to specify if offsets will be used in their net zero plans. Similarly, of the companies with a net zero target that say they will offset to some degree, 66 per cent fail to specify conditions on the use of offset credits, leaving the door open to junk credits. Many current offsets are generated from avoided emissions, such as increasing energy efficiency, replacing fossil fuels with renewables, or halting deforestation. But this does not remove or reduce existing emission removals.


Some offsetting schemes, like the LEAF Coalition, make sophisticated and reasonable assumptions about how long carbon stored in trees or soils can be expected to endure, and have rigorous verification mechanisms. But many do not. For offsetting schemes to work, companies need to be transparent about what offsets they are using, and pick only quality products. Separating internal reductions targets from external offsets helps clarify net zero pathways. Also, offsets cannot substitute for or delay science-aligned emissions reductions and it is critical that companies invest in nature or in future removals technologies.


Hale concludes that junk credits and greenwashing undermine the trust and legitimacy companies will need if they are successfully to navigate the net zero transition. Strong governance is not just a public good, but also a crucial enabling condition for companies to achieve their goals.

Photo by Dave Hoefler on Unsplash