Are Carbon Offsets Effective?

Many supply chain companies are setting net-zero emissions goals for 2050 or sooner to lessen the transportation industry's greenhouse gas (GHG) emissions.

How will companies get to net-zero?

Implementing aggressive emission-reduction strategies and adopting green technologies are great tactics, but they also require large investments, especially in the fossil fuel-reliant industry of freight transportation. A common alternative is to voluntarily purchase inexpensive carbon offsets, hoping that they will compensate for their company's emissions instead.

How Do Carbon Offsets Work?

A carbon credit is an asset designed to represent a reduction in 1 metric ton of CO2 equivalent (CO2e), and a carbon offset is one way of using a carbon credit, Gilles Dufrasne, policy officer at climate policy advocacy association Carbon Market Watch, told FreightWaves. 

Carbon offsets can be associated with several different projects such as planting trees, preventing deforestation, investing in renewable energy, providing cleaner-burning stoves for cooking and destroying super-potent GHGs.

Here's the idea: If a U.S. company has a goal to get to net-zero emissions but has a small portion of unavoidable emissions or simply doesn't want to change its operations, it could pay someone in another country to plant trees to counteract the company's impact on the climate.

Because the transition to low-carbon alternatives can be slower and more difficult for freight companies, investing in carbon offsets can buy some time for companies to adapt. However, there is debate about whether carbon offsets are truly effective in the fight against climate change or if they are merely greenwashing tools used for marketing to create a green image. 

"I think the benefits of carbon offsets are very theoretical," Dufrasne said. Proving that carbon emissions are truly being absorbed by these offsetting projects is very difficult. He added that carbon-offset projects are underperforming, and it leads companies to falsely believe their emissions are compensated for.

"While carbon offsets have gained increasing popularity in the corporate world, especially among big firms, many activists and concerned citizens have voiced concerns over how they can be used by polluters as a free pass for inaction and therefore weaken present-day drivers for change and reduce innovation towards a lower-carbon future," said a 2020 study entitled Carbon Offsetting with Eco-Conscious Consumers.

Factors To Think About When Considering Using Carbon Credits To Offset Emissions

Carbon offsets are designed to reduce emissions and positively impact the environment. However, they can also lead to unintended consequences or be improperly counted, which can result in stagnant or even higher emissions.

Counting: The double counting of carbon offsets is fairly common. If a company in the U.S. pays a company in South Africa to plant 1,000 trees, both the South African and U.S. companies might tell the public they are responsible for the emissions absorption. In this case, those 1,000 trees mistakenly could be counted as 2,000, skewing carbon sequestration data. 

Leakage: Paying to protect a forest from deforestation is one example of a carbon offset. But how can this prevent people from cutting trees down a mile away instead? Dufrasne said that more rigorous accounting and monitoring methods for carbon offsets would be needed to prevent double counting and leakage issues.

Timeline: Tree planting is one of the biggest carbon-offsetting tools used today, and it can also provide increased habitat for wildlife, improve biodiversity and restore deforested areas. However, ecological disasters or unmonitored deforestation could cause a company's forest of trees to die before their expected date, releasing the CO2 they sequestered throughout their lives back into the atmosphere.

"When you plant a tree to compensate for it, what you're really doing is not canceling your impact, it's postponing your impact," Dufrasne said. 

Some other carbon-offsetting strategies are more permanent, such as preventing more carbon from being emitted through renewable energy investments or destroying potent GHGs such as hydrofluorocarbons, nitrous oxide and methane.

Extra action: To truly offset emissions, a carbon project must result in emissions reduction that would not have occurred without a carbon-offset purchase. Proving this "additionality" can be especially difficult when it comes to renewable energy investments. Prices for batteries, solar panels and wind turbines continue to drop, while the benefits include cleaner air and fewer GHG emissions.

Consumer impacts: When consumers buy products from a company that advertises having net-zero emissions due to carbon offsets, they might buy more because any guilt or environmental hesitation they had due to the product's carbon footprint goes away, a 2020 study entitled The behavioral response to a corporate carbon offset program: A field experiment on adverse effects and mitigation strategies said.

This can mislead consumers and actually cause an increase in GHG emissions. However, the study said that increased consumption was avoided when consumers were shown the amount of emissions and resources required for each product they considered purchasing.

Auditing: Third-party companies that sell carbon offsets should communicate their offsetting projects and how they verify their certificates transparently to customers.

"The whole idea rests on trust" that each metric ton of CO2 purchased in offsets will counteract each ton of CO2 a company emits, Dufrasne said.

For companies that want to invest in more credible and reliable carbon offsets, ensure that the organization chosen is transparent and thorough in its carbon accounting. Verra, Climate Action Reserve and Gold Standard are among the most prominent third-party carbon-offset project organizations.

"We need to see companies and countries address their own emissions," using carbon offsets only to complement rigorous emission-reduction strategies, Dufrasne said.

Click here for more FreightWaves articles by Alyssa Sporrer.

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