The Complete Guide to Carbon Offsetting - Part 2.

Cutting Through The Jargon

The first part of our series looked at exactly what carbon offsetting is and why it is so useful. Part two looks more closely at the detail of what’s involved and how to start making sense of it all.

You could fill a library with the acronyms and impenetrable bureaucratic terminology that permeate the world of carbon offsetting. Many of these are rather niche, or hyper-technical. We have pulled together a list of the most frequently used, need-to-known expressions – it’s by no means exhaustive as technologies develop all the time, along with new tools, reporting mechanisms and initiatives - however we’ve tried to include the most relevant to business needs as they stand today.

carbon credit

A carbon credit is a financial unit of measurement. Each carbon credit represents the removal of one tonne of carbon dioxide equivalent (tCO2e) from the atmosphere - roughly the monthly energy consumption of an average American household. A Carbon Credit is an instrument that represents ownership of one metric tonne of carbon dioxide equivalent that can be traded, sold or retired.

A carbon offset occurs when an individual, company or organisation directly (for example planting trees in their own garden, or installing solar panels on their own property) or indirectly (by funding projects in other locations) removes greenhouse gases from the atmosphere or prevents a certain quantity of greenhouse gases from being released.

carbon Negative

Carbon negative means that you emit less than zero carbon dioxide and carbon dioxide equivalent (CO2e) greenhouse gases. However, since it is impossible to emit a negative amount of carbon (or any other physical substance), being carbon negative refers to your net emissions. To be carbon negative means offsetting more carbon than you contribute to the environment - through carbon capture, sequestration, or avoidance.

carbon Neutral

To be carbon neutral, a business needs to offset the carbon they directly emit into the atmosphere and look at the energy they are using, and the emissions associated with this power generation. (see Scopes 1 and 2)

Carbon compliance/ complaince carbon offsetting

The regulations set out in the Kyoto Protocol (agreed in 1997 and enforced in 2005) commit industrialized countries and economies to limit and reduce greenhouse gas (GHG) emissions in accordance with agreed individual targets. (Note that the policies are voluntary in their scope). To ensure that a company or government remains within the confines of their targets, they can buy and trade Certified Emission Reduction (CER) credits issued for offsets created by emission reduction projects. CER credits are verified by the United Nations and each one is equivalent to one tonne of CO2. With the UK government mandating reporting in line with TCFD standards (Task Force on Climate-Related Financial Disclosures), and the EU’s ‘fit for 55’, we expect the market for Compliance Credits to expand dramatically in the coming years.

fit for 55

Announced in 2021, this is the EU’s package of revised climate and energy laws to ensure a 55% net emissions reduction by 2030 that EU leaders signed off on in 2020.

ghg emissions

Greenhouse gas emissions

net zero

This takes carbon neutral a step further and is much harder to achieve– net-zero considers emissions generated by the entire value chain across scopes 1, 2 and 3 which includes all suppliers and customers. When companies or organisations say they’re “net zero”, it means they’ve cut their direct emissions down as much as they possibly can and for what’s left, they offset it by taking steps to permanently remove carbon from the atmosphere using a carbon offsetting scheme.

retired

Carbon credits are finite so once a carbon credit has been bought (and remember that buying a carbon credit is essentially the same as using it), it is immediately “retired” for companies on a public registry ie. that tonne of carbon dioxide is no longer available to buy by another third party.

sbts

Science Based Targets are internal reduction targets to show a company how much and how quickly they need to reduce their greenhouse gas (GHG) emissions. Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement – limiting global warming to well-below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C. We believe SBTs will become increasingly common as companies of all sizes seek to formalise and legitimise their carbon plans – both for regulatory and reputational reasons.

scope 1 emissions

The emissions released into the atmosphere as a direct result of an activity, or series of activities, carried out by a business. These are often referred to as direct emissions such as heating an office or transporting goods by vehicle to a customer by company vehicles.

scope 2 emissions

The energy your business purchases - in other words - the emissions created in the production of energy that is eventually used by the company. (This can be zero if you are purchasing 100% renewable energy.)

scope 3 emissions

Scope 3 covers a much wider remit and includes transportation and distribution (by third party couriers), waste generated, leased assets, business travel, employee commuting and purchased goods and services through the supply chain, water consumption, and IT equipment and services. It covers all your indirect emissions and can be a very extensive network.

secr

Streamlined Energy and Carbon Reporting is the reporting of carbon emissions and energy use within the Director’s and Strategic Reports – it is mandatory for all large UK companies (all listed companies and large asset owners) for years starting on or after 1 April 2019.

sequestration

Carbon sequestration is the process of capturing, securing and storing carbon dioxide from the atmosphere. The idea is to stabilize carbon in solid or dissolved forms so that it doesn’t cause the atmosphere to warm. Sequestration can either be done biologically (in vegetation such as grasslands or forests, as well as in soils and oceans) or geologically (storing carbon dioxide in underground geologic formations, or rocks.) Technological Carbon Sequestration is a relatively new branch of carbon capture using innovative technologies and even now looking at ways excess carbon be used as a resource.

tcfd

Taskforce on Climate-related Financial Disclosures was established by the Financial Stability Board in 2020, the TCFD develops recommendations for more effective climate-related disclosures that could promote more informed investment, credit, and insurance underwriting decisions. The disclosures are designed to help mainstream investors decide just how exposed a company might be to climate related risk, whether they are taking the appropriate steps to mitigate this risk and whether those risks are worth the potential financial rewards for investing in that company.

tsvcm

Taskforce on Scaling Voluntary Carbon Markets - a private sector-led initiative working to scale an effective and efficient voluntary carbon market to help meet the goals of the Paris Agreement. Their stated aim is to “bring all parts of the value chain to work intensively together and to provide recommended actions for the most pressing pain-points facing voluntary carbon markets”.

vcmi

Voluntary Carbon Markets Integrity Initiative. As we noted to begin with, voluntary carbon schemes have proliferated in recent years and have become a huge market. The VCMI initiative aims to bring credibility and integrity to this new but essential market. Through consultations with governments, businesses, NGOs, Indigenous Peoples, civil society actors, and climate change experts, VCMI works to bring full transparency to the process along with equity for those directly involved and global rigorous standardisation for how the process is implemented.

voluntary credits/ voluntary carbon offsetting

The voluntary carbon market (VCM) was created for those that choose to offset their emissions for personal reasons. The voluntary carbon market is unregulated and a number of different standards and verifications have been created to ensure that offsets that are purchased actually go to the right cause. This market is mostly made up of private individuals, small businesses, educational institutions and non-governmental organisations that want to make a difference to their own environmental impact and carbon footprint.

zero carbon

If something is “zero carbon”, that means that it doesn’t emit any carbon at all in the first place. Some eco-friendly houses are zero carbon, for example, because they have their own renewable power sources, such as solar panels, and so don’t rely on fossil fuels to run.

Part One of our Carbon Offsetting series was an introduction to what carbon offsetting is and how the science works. The final part will be a deep dive into what carbon offsetting best practice looks like and how you can play your part.

We have so much more on this subject - how to reduce your carbon footprint whilst working from home, why clean energy is so important for everybody or our guide to switching to a sustainable energy supplier.