Carbon offsets—tradable credits used to compensate for carbon dioxide emissions caused by industrial or other human activities—rose in popularity in the early 2000s in an attempt for companies to show their commitment to battling climate change.

They work like this: A company that emits carbon dioxide as part of its business (think airlines) buys carbon credits to support certified activities that do good, whether that is community development, using technology to reduce or remove damaging emissions, or even protecting ecosystems. Examples include reforestation, creating renewable energy, and waste management, often in developing countries.

All this sounds positive. However, critics have voiced doubts about the efficacy of the practice. Recently The Guardian conducted an investigation that revealed 90 percent of rainforest carbon offsets approved by the world’s biggest certifier do not represent “genuine carbon reductions.” The certifier in question is Verra, a nonprofit that sets the standards for carbon emission reductions, and it denies The Guardian’s accusations, stating that the analysis “massively miscalculates” project impacts by not calculating what would have happened if the venture had never been attempted.

Among buyers of Verra’s carbon offsets are Disney, Shell, and Gucci, all of which face damage to their reputations as supporters of pro-environmental policies since the release of The Guardian’s reporting. Still, even with the criticisms, carbon offsets remain a popular tool for organizations because they allow business activities to continue while the organization buys time to decarbonize its operations. Moreover, the credits can benefit developing nations in the form of carbon-mitigating projectc.

Clearly the tool of carbon credits has merit, but it is doomed if companies lose trust that their investments actually work. To counter this scenario, The Integrity Council for the Voluntary Carbon Market, an independent governing body for the voluntary carbon trading market, plans to issue verification processes in the near future. Other independent groups are issuing their own standards.

Nevertheless, it is likely that individual organizations will have to dig into the performance of their carbon offset choices themselves. A recent Wall Street Journal article suggests using price as a prime indicator of the quality of any given program. The WSJ compares the cost of a carbon credit to a dinner choice: A $5 seafood pasta will likely not be of the same quality as a $50 meal. The same logic works for carbon offsets.

Discussion

1. Why would an organization voluntarily commit to buying carbon offsets?
2. Why do you think protecting forests is one of the most popular carbon offset choices?
3. Why do you think carbon offsets remain controversial?

Toplensky, R. (2023, January 19.) Carbon credits: Buyer beware. WSJPro Sustainable Business Newsletter.