The EU has vowed to be carbon neutral by 2050. In order to reach this goal, the EU has developed a strategy in 7 parts to tackle climate change; said strategy relies on a mix of solutions to reduce EU emissions as well as the development of less polluting alternatives to our current ways of producing and consuming.
However, while the reduction of emissions will be the most crucial aspect in reaching carbon neutrality by 2050, it may be impossible to purely emit absolutely no GHG emission. As such, the seventh pillar of the EU’s strategy deals with what to do with the remaining emissions. One solution could be the use of carbon capture technologies, which consist in separating and storing CO2 emissions produced before their release. Yet, another solution might reside in carbon offset assets.
What are Carbon Offset Assets?
Carbon offsetting acts as a way to counterbalance GHG emissions by partaking in activities that will reduce total GHG emissions. The offsetting can take two shapes; either the avoidance of emissions, which are activities that aim at reducing emissions, or the removal of emissions, which consist in removing emissions from the atmosphere through natural or mechanical techniques.
Carbon offsetting relies on the idea that it is the aggregate level of greenhouse gas emission that matters. As such, where the emission and reduction processes take place does not matter, and as long as they equate to an equivalent volume of greenhouse gas, the two operations are considered to offset each other.
Carbon Offset Assets in particular are assets that represent an investment in activities and projects leading to emission offset. Such projects can be the development of renewable energy production infrastructures or reforestation for instance.
A powerful tool in the fight against climate change
Carbon Offset Assets are convenient because they allow parties to offset emissions that cannot be avoided, thereby helping parties reach their environmental target. Paired with the right trading platform, carbon offset assets allow agents to financially support projects that otherwise they would not have funded. It may also allow projects to find the financial resources needed and have a larger reach, thereby introducing greener solutions to areas that might not have benefited from it otherwise.
A need for credibility
Carbon Offset Assets, as their name indicates, are mostly traded in the hope of offsetting GHG emissions, and thus reaching some sort of GHG emission level target. As such, it is important to develop tools that allow to quantify the volume of emissions avoided and or reduced through the implementation of the activity financed by the asset.
Several standards have been issued in order to certify the reliability of a carbon offset asset. These registries cover a large span of activities, ranging from energy efficiency to forestry and agricultural projects. In issuing certifications, these registries allow to build greater credibility in the source of offset as well as quantify the actual net impact on greenhouse gas emissions. Such a task may be complicated, as it is difficult to estimate how much “saving” and “reduction” in emission a project can represent, especially in the case of natural carbon capture. Moreover, enforcing regulation around carbon offset assets requires a strong and reliable authority.
An innovative solution with its limits
Carbon offset assets represent several advantages, and appear to have a double effect on the environment; on the one hand, it allows parties to reach their environmental targets, and contribute to the overall reduction of GHG emissions. On the other hand, carbon offset assets lead to the implementation of green projects that may have repercussions not only on the environment, but also on local economies. For instance, projects supporting the development of new renewable energy production infrastructure may lead to the creation of several jobs in the area concerned.
While these advantages seem appealing, these assets also represent several disadvantages that one cannot ignore when developing a long-term strategy. In particular, the growing demand for carbon offset assets may lead to an increase in price. There is only a limited number of projects that can be implemented and that can qualify for a carbon offset certification, and as such there is only a limited amount of carbon that can be offset. As the climate crisis becomes more urgent, more companies will attempt to offset their emissions using carbon offset assets. The growing demand coupled with the limited availability may lead to an unsustainable increase in price. In all, carbon offset assets are not sufficient in the fight against climate change; reducing emissions and developing more efficient and less polluting ways to produce should be the foundation of any strategy aiming at tackling GHG emission reduction.
Yet, there is another potential criticism of carbon offset assets that may threaten their validity as a powerful tool. As said above, one of the main pillars of carbon offset asset is the irrelevance of the location where greenhouse gas has been produced and reduced. As such, a company located in Europe can offset its emission – thereby reaching a zero-net balance – by financing carbon offset activities in Africa for instance. In a way, carbon offset assets offer the opportunity for polluters to outsource their efforts in becoming greener. If projects financed through these assets are mostly located in developing countries, this will maintain the existing imbalance between developed and developing countries. Moreover, this may prevent buyers from reflecting on their true impact, and grant them an easy solution where they can buy their way out of actively trying to reduce their own carbon footprint. Perhaps one could wonder if this money would be better spent in research and development of more energy efficient ways to produce, which would contribute to reducing emissions in the first place.