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Carbon Double Accounting

Carbon double accounting

Carbon double accounting

Carbon Offsetting: The scam you didn’t know about

There are two ways in which companies can reduce their carbon emissions in order to combat climate change: one is to apply measures inside their own value chain, and the other is to apply measures outside the value chain, to compensate for the emissions that remain within the company’s  own processes. The latter is what we are delving into today, which is commonly known as “carbon offsetting”. Each tonne of CO2 emissions that are reduced or removed from the atmosphere via an offsetting project such as planting trees, creates one carbon credit. Companies, individuals and governmental bodies can purchase these credits to offset the carbon that they produce.

Two types of carbon offsets can be differentiated: mandatory and voluntary carbon markets. Mandatory markets relate to requirements that governments set that oblige certain organizations to offset their carbon once they reach a threshold of emissions. Each country has its own cap, set by governmental bodies such as the European Union’s Emissions Trading Scheme, of how much carbon they can emit. Therefore, when large organizations begin to emit more carbon than is sustainable for that country, they’re obliged to offset the rest. Voluntary offsetting has no obligations and is based on a company’s or individual’s own good will. However, it is still widely considered as a crucial process, in order to reduce overall CO2 emissions.

What goes wrong and how does it happen?

In theory, carbon offsetting is a realistic, achievable solution to countering emissions, however gaps between theory and practise, as well as loose regulation, has left room for what is referred to as “double counting”. Double counting is ‘where two parties claim the same carbon removal or emission reduction’. Most commonly, double counting occurs between an organization offsetting its emissions, and the host country of a project, trying to reach its climate target/ stay within its emissions cap. This is highly problematic as the said company, could be claiming to be carbon neutral through the offsetting that they’re investing in. However, if the project being invested in, is also being counted by the country who’s hosting it, then the company hasn’t done anything to contribute and therefore not carbon neutral at all.

The conversation at Cop26

The carbon market was rightly so, debated at Cop26. The focus was around Article 6 of the Paris agreement, which introduced the provision of carbon markets to fulfil the so called Nationally Determined Contributions. As these are non-binding contributions of single nations, focus was mainly around the mandatory market. One of the resolutions of this discussion, at Cop26, was the launch of a new crediting mechanism, which requires all countries wishing to trade carbon, to do so through the UN-certified global carbon market. Article 6 of the Paris Agreement has now been revised to include clear accounting guidelines for compliance. This way, emission trading is much more regulated and will hopefully mitigate double counting in mandatory markets.

The problem remains in voluntary offsetting where regulations still aren’t in place, and the market is growing at such a fast pace, which makes it even more difficult to oversee. It’s an easy way for businesses to claim their sustainability, so no wonder the market is growing so fast. However, the inaccurate, unregulated structure of it, is accounting for a worrying amount of worldwide greenwashing.

Optimists say that the decisions made at Cop26 will accelerate transparency and support quality in the voluntary market too. Not only this, but as the market grows, so does investment, which, in turn should lead to higher quality projects that can be held accountable for positive climate change. Pessimists say that carbon offsetting is just a distraction from the real solutions to climate change, which are about applying measures inside one’s own value chain, as mentioned at the beginning of this article. Essentially this means, not letting the carbon get into the atmosphere in the first place, but sadly this is not as easy in practise as it is in writing.

At eco-shaper, we drive action on climate change and streamline carbon footprinting. For example, we can help calculate emissions across the entire ecosystem that companies work across and produce automated reporting based on outcomes. It’s like Xero, for sustainability. Contact us to be part of our research group on