What role does carbon offsetting play in reaching net zero?

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How do we reach net zero?

In this blog we’ll explore the critical role that ‘net zero aligned’ carbon offsetting plays in reaching net zero by 2050, and ideally much earlier for a habitable planet. We’ll start by naming some of the key frameworks and principles underpinning net-zero scenarios and pathways in order to understand where and how carbon offsetting fits in.

A “carbon law” pathway was first proposed in 2017 in A Roadmap for Rapid Decarbonisation, offering an exponential pathway of halving emissions each decade between 2020 and 2050. It is consistent with the Paris Agreement targets and the limited remaining global carbon budget.

This “carbon law” decadal roadmap of emissions reductions also includes immediate scaling of carbon removal through both biosphere carbon sinks of land and water, and human CO2 removal through direct air capture and transforming land-use emissions from carbon sources to human carbon sinks. Note that the emphasis here is on carbon removal, which is different to carbon avoidance or reduction activities. Carbon reduction will happen through transition to renewables, energy storage, bio-circular and bio-compatible supply chains.

Two complementary approaches to net zero — reduce and remove emissions

The Grattan Institute’s recent report, Towards Net Zero, defines net zero as “balancing sources of emissions going into the atmosphere with sinks that take them out, with the aim of staying within a carbon budget and limiting global temperature rise”. This is in keeping with the Paris Agreement Article 4 on ‘climate neutrality’ by 2050, “to achieve a balance between anthropogenic emissions by sources and removals by sinks of GHGs in the second half of the century.”

These definitions help to communicate the ‘net’ in net zero, which has never been about eradicating all emissions, but instead seeking a balance between sources and sinks. This balance requires dramatic reductions in sources, such as moving to a low-energy economy and ending deforestation — along with a dramatic increase in sinks, such as changes in farming and land use, and afforestation.

Carbon offsetting plays two critical roles here:

1. It enables the rapid scaling of reduction and removal of GHG through providing the finance mechanisms to support these projects and the market signal to exponentially grow them.
2. It supports carbon removal projects that are absolutely essential to balancing out unavoidable emissions, along with the significant amount of emissions currently in our atmosphere that are already creating a warming effect.

Carbon offsetting is not a distraction from decarbonisation, but rather a ‘both/and’ premise¹, especially in the near future, as industries wrestle with the complexity of reducing their scope 3 emissions from their vast supply chains, and the financing and infrastructure for decarbonisation is further developed. See our first blog on what makes carbon offsetting credible to read about how businesses can effectively use offsetting not to avoid emissions reduction activities, but to responsibly account for their existing and unavoidable emissions alongside their rapid decarbonisation journey.

Nine years left to halve global emissions

The Carbon Law pathway has gained significant traction and now underpins several key frameworks supporting industry and business decarbonisation at scale, including the Science-Based Targets Initiative (SBTi), which calls for credible carbon offsets and removals that Earthbanc focuses on as part of its recommended strategies, and the Exponential Roadmap Initiative. The most important aspect of the Carbon Law is its exponential framework. Halving our current rate of emissions by 2030 will require the most ambitious, disruptive, innovative, nonlinear and rapid change ever experienced by humanity. Carbon offsetting under Article 6, Carbon Markets agreed at COP 26 in Glasgow, will exponentially remove carbon and buy precious time to decarbonise.

The Exponential Playbook framework supports sectors and businesses with their decarbonisation journey by providing sectoral emissions reduction roadmaps for energy, industry, buildings, transport, food consumption, nature-based sources, and nature-based sinks². The United Nations Environment’s Emissions Gap report estimates that enough current market-ready solutions exist to halve our emissions by 2030³. The Exponential Playbook outlines 30 solutions, along with how much each sector-specific solution can contribute toward halving that sector’s emissions.

Two of the sectors outlined in the Exponential Playbook include land use, as the IPCC Climate Change and Land Report states that around 23% of global human emissions are currently generated from the AFOLU sector (Agriculture, Forestry and Other Land Use). All scenarios outlined in the report that limit climate change to 1.5°C include substantial land use change mitigation methods⁴.

Nature-based Solutions — 30% of 2030 emissions target

Nature-based solutions (NbS)—that decrease sources and increase sinks of GHG emissions—are now widely cited as offering cost-effective globally significant climate mitigation that can provide 30% of our immediate 2030 goal of halving current global emissions⁵. “In contrast with many engineered solutions, NbS have the potential to tackle both climate mitigation and adaptation challenges at relatively low-cost while delivering multiple additional benefits for people and nature.”⁶

The voluntary carbon markets have delivered about 1 billion tonnes of carbon removals via the VERRA and Gold Standard carbon registries from 2003 to 2020. In 2021 at COP 26 it was agreed that carbon markets will deliver five gigatonnes of nature-based solutions carbon every year. This unprecedented ramp up in NbS carbon buying is causing a supply shock, and carbon prices have jumped between 30–300% in the NbS carbon segment, according to Earthbanc’s observations⁷.

Halving our current emissions requires us to consider the global picture in terms of where in the world we can remove carbon more rapidly and efficiently, and then to build the supporting infrastructure and finance mechanisms necessary. Studies show that NbS can be delivered more cost effectively and with greater emissions removal in certain regions globally, such as the tropics. Half of all tropical countries have the potential to remove 50% of their national emissions through cost-effective NbS and over a quarter of all tropical countries have the potential to remove 75% of their emissions.

Carbon offsetting and voluntary carbon markets are designed to provide financial incentives for both carbon reduction and removal projects by bringing them to market, where market signal can drive demand, which in turn drives supply. Voluntary carbon markets can and will grow exponentially, providing a mechanism to enable NbS to deliver their 30% emissions removal potential, but only if they are underpinned by net zero aligned offsetting principles.

Net zero aligned carbon offsetting

The Oxford Principles for Net Zero Aligned Carbon Offsetting was published in September 2020 by Oxford University, as they recognised that current best practice standards, while reducing some of the risks associated with offsetting, are not yet sufficient to support carbon offsetting to fulfil its role in reaching net zero. They outline four principles that factor both short-term and long-term needs and approaches:

1. Cut emissions, use high quality offsets, and regularly revise offsetting strategy as best practice evolves
2. Shift to carbon removal offsetting
3. Shift to long-lived storage
4. Support the development of net zero aligned offsetting

The Principles highlight the need for ‘high quality’ offsets and define these as “offsets that are verifiable and correctly accounted for and have a low risk of non-additionality, reversal, and creating negative unintended consequences for people and the environment.” Earthbanc has developed the world’s first continuously audited and rated carbon marketplace in order to scale the supply of high quality offsets. Regular auditing of original project verification claims is the only way to confirm ongoing additionality and permanence of both carbon reduction and removal over the life of the project.

They also highlight the imperative to shift to carbon removal offsetting over reduction over time, emphasising the need for carbon removal with short-lived storage being more predominant over the next 15 years (biological carbon sequestration, i.e. NbS such as afforestation, soil carbon enhancement). Then, as the technology develops and costs reduce, they suggest a shift over the longer term to long-lived storage of carbon such as bioenergy with carbon capture and storage (BECCS), and direct air capture with geological storage (DACCS). The Oxford Principles again reinforce the critical role nature-based solutions play in reaching net-zero targets.

Source: The Oxford Principles for Net Zero Aligned Carbon Offsetting

Finally, the Principles point out that the market for the high quality offsets needed to meet Principles 2 and 3 requires early-adopters to help create demand and increase supply in order to mature. See our second blog on stakeholder benefits and risks in carbon offsetting for an outline of the categorisation of high quality offsets as higher-risk, making it even more important that businesses adopt high quality offsets over lower-risk to help develop the market for net zero aligned carbon offsets.

Under Principle 4 of supporting the development of net zero aligned carbon offsetting the Oxford Principles call for “supporting the restoration and protection of a wide range of natural and semi-natural ecosystems in their own right” — again highlighting the critical role of nature-based solutions in addressing both the causes and impacts of climate change whilst supporting the ecosystem services that human wellbeing depends on, and protecting biodiversity. Earthbanc’s proprietary AI-enabled satellite MRV technology is designed to support the scaling of NbS through carbon offsets by increasing the types of NbS projects that can be accurately verified, audited and brought to market.

Summary and what’s next

In our third blog we’ve explained the role of carbon offsetting in reaching net zero, not as an either/or scenario, but as a critical ‘both/and’ alongside rapid decarbonisation activities. We’ve outlined some of the key frameworks and guiding principles of both net zero and net zero aligned offsetting.

In our next blog we’ll outline current carbon monitoring, reporting and verification standards and practices and some of the challenges that need to be addressed in order to create exponential growth in high quality credible offsets. Follow us on Medium and stay tuned!

Read more about Earthbanc here.

Footnotes

¹ Anderson CM. et al.2019 Natural climate solutions are not enough. Science 363, 933–934. (doi:10.1126/science.aaw2741)

² Exponential Roadmap Initiative. Meeting the 1.5 C Climate Ambition. (2019).

³ UNEP. The Emissions Gap Report 2018. United Nations Environment Programme, Nairobi. (2018).

⁴ IPCC. 2019 Climate and land (https://www.ipcc.ch/report/srccl/)

⁵ Seddon N. et al. 2020 Understanding the value and limits of nature-based solutions to climate change and other global challenges. Royal Society Publishing (doi.org/10.1098/rstb.2019.0120)

⁶ Ibid.

⁷ Bronson WG. et al. 20120 National mitigation potential from natural climate solutions in the tropics. Royal Society Publishing (doi.org/10.1098/rstb.2019.0126)