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Carbon offsets get greener

We believe that a company’s transition to net zero should rely on real direct emission reductions and not offsets. We have written about the Science-Based Targets Initiative, which views offsets as a tool of last resort. However, not all companies can immediately reduce their emissions to zero, and we acknowledge that offsets will be one part of the solution for the not too distant future.

To date, one of the most serious problems with respect to offsets and carbon trading is that they have been done under a hodgepodge of voluntary and disparate frameworks. One of the successes coming out of Glasgow and the “Glasgow Package” is that there are now agreed-upon rules for a global carbon trading market, thus operationalizing Article 6 of the Paris Agreement. What is worth celebrating is that the rules will put an end to double counting. The Glasgow rulebook makes it clear that a party (country or company) that creates a CO2 offset credit must remove this emission reduction from its overall emission budget if another party uses it to reach its emissions goal. While entities are allowed to carry forward weaker credits that predate this agreement, credits that have allowed many companies to greenwash their emissions, the new set of agreed upon rules is welcome.

One of the positive impacts of a regulated and robust carbon trading system is the potential to drive investment and innovation in developing economies. Done properly, carbon pricing could make it easier for companies globally to increase their investment in projects in developing nations. For this reason, many developing nations championed the rules at COP26 Glasgow.

On a related note, of the many speeches made at COP26, we highly recommend watching Prime Minister Mia Mottley of Barbados who captured the moral imperative of climate finance in her speech to world leaders at COP26 in Glasgow.

[Image below is of two swans swimming in a man made pond in front of a water treatment plant in the background]


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