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What is carbon offsetting and how does it work?

Updated: Jun 2, 2023

As a final step in an ambitious climate strategy, carbon offsetting plays a key role. The transition to a sustainable and climate-resilient economy has become a global priority. In France, this transition is guided by the National Low-Carbon Strategy (SNBC), an ambitious roadmap aiming to reduce the country's CO2eq emissions by a factor of 6 between 1990 and 2050.


In the face of the climate emergency, French companies are actively seeking tangible ways to reduce their carbon footprint. Carbon offsetting offers a promising solution by enabling companies to offset their residual emissions and actively contribute to the fight against climate change. This approach goes beyond mere tree planting; it encompasses a comprehensive strategy, encouraging companies to first reduce their emissions as much as possible and then offset the remaining emissions by investing in emission reduction projects.



What is carbon offsetting?


Carbon offsetting is a financial mechanism that aims to reduce greenhouse gas emissions by supporting projects that either reduce, avoid or remove GHGs emissions. These projects can include renewable energy generation, reforestation and forest conservation, or methane capture from landfills or livestock.


The idea behind carbon offsetting is that it allows individuals and businesses to "offset" their own emissions by supporting initiatives that reduce or remove carbon dioxide and other greenhouse gases from the atmosphere.


When the carbon offset project respects specific rules - Additionality, Measurability, Verifiability, Permanence - it can be issued a "carbon credits", which is a unit equivalent to one ton of CO2 equivalent avoided or removed. These carbon credits can then be bought and sold by companies or individuals looking to offset their own GHG emissions.


While carbon offsetting is not a substitute for reducing one's own emissions, it can be a useful tool in the fight against climate change. By supporting carbon offset projects, businesses can make a positive impact on the environment while also reducing their own carbon footprint.

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What are the differences between carbon avoidance and carbon removal projects?


In order to respond to the desire of companies to offset their carbon emissions, two types of projects exist:


Carbon avoidance projects


These projects are linked to the development of low-carbon energies and the improvement of energy efficiency. Carbon avoidance projects aim to reduce emissions by promoting the use of clean energy sources and adopting energy-efficient practices. They include initiatives such as transitioning to renewable energy, optimizing industrial processes and adopting more efficient technologies.


Carbon removal projects


Carbon removal projects cover a wide range of approaches to storing emitted carbon, including increasing natural carbon sinks through reforestation projects, which capture CO2 from the atmosphere and store it in trees and soils, and exploring technology-based solutions for capturing and storing CO2 from industrial sources. France has considerable capacity to store carbon in soils through agricultural conservation practices. Removal projects also include technology-based solutions, which are technologies being developed to capture and store CO2 from industrial sources. These projects cannot yet compete in terms of cost with nature-based removal, which already offers promising results. However, these technologies continue to evolve and may play a more significant role in the future.



Do companies have to offset their emissions?


In many cases, companies are not required by law to offset their emissions. However, some companies may choose to offset their emissions voluntarily as a way to demonstrate their commitment to sustainability and to mitigate the environmental impact of their operations.


In some cases, governments or organizations may set voluntary or mandatory targets for companies to reduce their greenhouse gas emissions. These targets may be part of a broader effort to address climate change and reduce the amount of greenhouse gases in the atmosphere. Companies that are unable to meet these targets may choose to offset their remaining emissions as a way to compensate for their impact on the environment.


In addition, some companies may be required to participate in carbon offset or emissions reduction programs as a condition of doing business in certain regions or sectors. For example, the European Union's Emissions Trading System (ETS) is a cap-and-trade program that requires companies in certain sectors to purchase carbon credits or allowances in order to cover their emissions.


Overall, whether or not a company is required to offset its emissions depends on a variety of factors, including the industry it operates in, the location of its operations, and any voluntary or mandatory targets that have been set for reducing greenhouse gas emissions.



How can companies reduce and offset their emissions?


Calculating emissions by conducting a carbon footprint assessment.

Conduct a carbon footprint to identify the main sources of emissions and establish a climate strategy to reduce them using the necessary human and financial resources. This strategy should be aligned with the goals of the Paris Climate Agreement to avoid accusations of greenwashing and protect your brand. Companies can utilize recognized methodologies and tools to assess their emissions, such as the Bilan Carbone® method, the GHG Protocol, or ISO 14064.


Develop a robust climate strategy.


Develop a robust climate strategy that includes a component for offsetting remaining emissions after reduction efforts have been made. Carbon offsetting should be part of a continuous process of tracking and seriously reducing emissions.


Prioritize reduction actions.


Before turning to offsetting, it is essential to implement emission reduction measures. This involves identifying the most effective and relevant measures for your company, based on criteria such as potential emissions reduction impact, technical and economic feasibility, and short- and long-term goals. The company should identify areas where improvements can be made, such as energy efficiency, waste management, transportation, etc., to reduce GHG emissions at the source.


Offsetting residual emissions.


Once a comprehensive emissions reduction strategy has been implemented, the company can proceed to offset its residual emissions. Residual emissions, also known as net emissions or incompressible emissions, refer to greenhouse gas emissions that persist despite the implementation of all feasible measures to reduce emissions at the source. These are emissions that cannot be immediately avoided due to technical, operational, or economic constraints, making their complete elimination challenging. The company then decides the quantity of emissions it wishes to offset.


Identify certified projects to offset residual emissions.


Identify certified projects to offset residual emissions. A company can demonstrate its commitment to carbon neutrality and support, for instance, the goal of doubling carbon sinks in France by 2050 by funding carbon offset projects that have been certified to absorb the country's so-called "incompressible" emissions of 80 MtCO2e.


Several certification bodies are now participating in the professionalization of the sector:

  • Internationally, standards such as Gold standard or Verified Carbon Standard (Verra) aim to promote high standards in verification, certification and carbon offsetting.

  • In Europe, Riverse certifies Greentech projects specializing in low-carbon materials, low-carbon energy, recycling and repackaging, and carbon capture technologies.

  • In France, the Low Carbon Label (Label bas-carbone), an innovative and transparent framework supported by the Ministry of Ecological Transition, allows the financing of local projects to reduce greenhouse gas emissions by granting carbon credits to project leaders. These credits can be sold to companies, local authorities or even individuals so that they can offset their residual emissions.

Once the offset projects have been selected, the company can purchase carbon credits corresponding to the amount of emissions it intends to offset.

Communicating climate commitments without engaging in greenwashing.


This step is crucial and must be carefully considered and well-supported. Indeed, a company that chooses to communicate about its carbon offset commitments without taking real measures or reductions in its emissions beforehand may be accused of greenwashing. It is important for companies to communicate transparently and with specific data regarding the calculation of their emissions, as well as their reduction and offset strategies.


In conclusion


Carbon offsetting can be an effective way to address the greenhouse gas emissions of organizations as part of a broader effort to combat climate change. It is important to consider carbon offsetting as part of a comprehensive climate strategy that aims to reduce emissions and align with the goals of the Paris Climate Agreement. By conducting a carbon footprint, developing a robust climate strategy, and identifying certified offset projects, individuals and organizations can make a meaningful contribution to mitigating the impact of their emissions on the environment.


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