Business

The future of credible carbon offsetting: adhering to the Oxford Principles

Zeno Prast
5
Minutes
August 31, 2022

To meet the Paris Agreement’s objectives we must rapidly move toward net zero carbon dioxide (CO2) emissions. This implies substantially reducing emissions and balancing any residual emissions with removals on an ongoing basis. Many countries and “non-state actors”, such as cities, regions, companies, organisations and financial institutions have pledged to achieve net zero emissions and are including “carbon offsets” within their climate strategy. These are purchased credits representing a certified unit of emission reduction or carbon removal carried out by another actor. As the global market for these credits emerged and market players rushed to create sufficient supply, a number of quality and integrity issues arose. For parties that want to design and deliver rigorous voluntary net zero commitments, the Oxford Principles have been created by the Environmental Change Institute (ECI) of the University of Oxford.


The 4 principles for Net Zero Aligned Carbon Offsetting are as follows;

  1. Cut emissions, use high quality offsets, and regularly revise offsetting strategy
    - Reduce the need for offsets by minimising emissions
    - Use offsets with a low risk of non-additionality, reversal and unintended negative consequences
    - Be transparent about current emissions, accounting practices and targets to reach net zero
  2. Shift from carbon reduction to carbon removal
    - Reduction/avoidance of is less effective than actively removing
  3. Shift to long-term storage
    - Invest in more long-term solutions such as kelp forests or direct air carbon capture and storage
  4. Support the development of net zero aligned offsetting
    - Stimulate solutions and implement standards
    - Support development of new initiatives with a focus on nature
    - Aggregate demand and supply in a more effective ecosystem

These principles are highly scientific and might contain some jargon that is unknown to experts. So let’s take it step by step and review each of the principles;


Principle 1: making credible net zero claims

Businesses and individuals alike should first of all strive to reduce their environmental impact, by avoiding emissions where possible and reducing unavoidable emissions as much as possible. It’s nearly impossible to make credible claims about being net zero if you’re not consciously and continuously trying to minimise your environmental impact. There are numerous ways in which this can be achieved, by influencing buying decisions and behaviours, for which we’ll refer to our other blogs!

Any remaining negative impact should be offset with methods verifiable, have a low risk of non additionality, reversal, or creating negative unintended consequences. Verifying offsets ensures that the emission reduction or carbon removal actually takes place, and that all forms of double-counting, including double-claiming of the emission reduction benefit, are avoided. Forward-selling, and any time gap between the purchase of the offset and the successful execution of the emission reducing or carbon removing activity must be minimised, and mechanisms to ensure that the environmental benefits from an offset are actually delivered must be strong. Offsets should also be additional, meaning they represent an emission reduction or carbon removal relative to a counterfactual baseline that would not have taken place but for the offsetting activity. Additionality can be difficult to determine and verify, and ultimately involves some degree of subjectivity since the counterfactual world in which the offsetting activity was not performed cannot be observed directly. Lastly, high quality offsets are not just measured in terms of the impact it has on the environment but also the impact it has on local communities. Examples of impacts on local communities are loss of livelihood due to planting trees on farming soil and land disputes or loss of biodiversity due to planting trees with low diversity.

Finally it’s important that businesses are transparent about their offsetting targets, methodologies and partners so these can be validated by independent third-parties. Specifically on the topic of the disclosure of emissions the different scopes of influence come into play (scope 1,2 and 3) which can be more simply explained as direct internal, indirect internal and external. The direct internal scope is reporting emission directly made through owned or controlled sources such as company vehicles. The indirect internal scope concerns emissions that were generated by third-parties such as energy providers and postal delivery vehicles for products. The external view is reporting the potential emissions up-and downstream in the value chain, for example the consumption of your product or service.

Principle 2: moving the needle with removal instead of avoidance

Most offsets available today are emission reductions, more than 96% according to a 2022 Bloomberg study, which avoid a theoretical emission of carbon in the future. Carbon removals, on the other hand,  scrub carbon directly from the atmosphere which can counteract ongoing emissions after net zero is achieved, as well as create the possibility of net removal for those actors who choose to remove more carbon than they emit. Removal of carbon can be done by reforestation of land and sea or using chemically based alternatives that crystallise carbon into minerals. These projects actively remove carbon from the atmosphere and turn it into carbon sinks. Users of offsets must increase the portion of their offsets that come from carbon removals, rather than from emission reductions, ultimately reaching 100% carbon removals by midcentury to ensure compatibility with the Paris Agreement goals.

Principle 3: making a lasting impact
Offsets increasingly need to come from activities that store carbon permanently, with very low risk of re-release into the atmosphere. Nature-based carbon storage can provide a solution if a number of factors are addressed that ensure regeneration over time. But next to nature, emerging technology- or chemistry enabled long-lived storage methods also have major potential. This refers to methods of storage with a low risk of reversal, and can store carbon for periods of multiple centuries or millennia. This includes storing CO2 in geological reservoirs or mineralising carbon into stable forms. While robust monitoring and verification is still needed to ensure the CO2 added to these stores does not leak out, they have the potential to be more stable and secure. So in a way principle 3 brings an additional nuance to the second principle: not only should we increase the portion of carbon removals over emission reductions, we should also prioritise the portion of long-lived storage over short-lived storage.

Principle 4: working together to shape the market

The above principles are meant to stimulate the market, encouraging entrepreneurs and experts to dive into the rift and exploit the market opportunity to be among the first businesses that provide or make use of high quality offsetting projects. By being transparent about their offsetting, businesses can signal their need to the market to further stimulate these developments. The experts also look towards regulators to enforce these principles as standards and set the bar for quality in the market. Businesses are encouraged to contribute to the protection and restoration of ecosystems as these must be rapidly scaled up, beyond any carbon benefits they may provide. These nature restoration efforts should be valued and funded for the broad suite of benefits and values they create. Finally, the expert panel points to the opportunity for the aggregation of supply and demand in achieving maturity for this market.  Consolidated efforts, for example through 3rd party platforms that aggregate demand, can aid the executing project partners by providing them with a more certain source of income to ensure their long-term sustainability and positive impact.

Sources:

https://www.smithschool.ox.ac.uk/sites/default/files/2022-01/Oxford-Offsetting-Principles-2020.pdf

https://www.bloomberg.com/news/articles/2021-07-09/carbon-offset-trading-is-taking-off-before-any-rules-are-set

https://www.linkedin.com/pulse/oxford-offsetting-principles-framework-maximise-impact-business-/

Biodiversity
Oxford Principles
Offset CO2 emissions
NetZero
DACCS
BECCS
Ecosystem
Environmental Change Institute
Carbon Credits
Nature Based Solutions
Environment

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