What is offsetting?
Carbon offsets come from projects that reduce the amount of greenhouse gases entering the atmosphere. They must lead to real reductions or sequestration of carbon which needs to be measured and quantified. To ensure the validity of the projects they must meet rigorous conditions.
Offsetting by corporate organisations has historically come under intense scrutiny. Aspects such as carbon saving additionality, permanence, and verification are commonly sighted as challenges.
With over 300 local authorities declaring a climate emergency and many setting Net Zero targets, local authorities are now considering carbon offsets for the first time as a means to achieve their goals. While avoiding and reducing emissions remains the priority, the ability to achieve Net Zero by 2030 will be extremely difficult without a form of offsetting due to the scale of technology and investment required. However, traditional offsetting options may present even greater challenges for local authorities than for the corporate market.
What is insetting?
Insetting is an alternative to traditional offsetting, where instead of offsetting using an emissions reduction activity outside of the organisation’s scope, the organisation targets emissions that are within its value chain. For example, for a local authority, these would be emissions within its borough boundaries.
Additionality: Offsets must be additional, meaning that the carbon removal would have not taken place in a business as usual scenario and would have not been achieved without the offsetting activity.
Leakage: The emissions reductions a project claims must be real and not result in a leakage, where emissions are moved elsewhere. If this is deemed to occur then the additionality of the project may be reduced or compromised.
Permanence: The project must maintain the reductions achieved over time. The risk of stored carbon being released back into the atmosphere, through forest fires, for example, must be acknowledged and accounted for. It is advised for offsets to come with a guarantee that the emission reductions are maintained over time.
Verification: Carbon offset impact should be measured and corroborated with risk-based evidence. Historically, independent, qualified, third parties have supported this task. Verification provides assurance that the emission reductions have been achieved and credits are accurately sold. Several organisations offer verified carbon offsets of various qualities.
The challenges of traditional offsetting for local authorities
Through our work with numerous local authorities using our SCATTER tool and developing robust Net Zero strategies and action plans, we observed some common challenges and concerns that the public sector faces when using traditional offsets.
These challenges include:
- Increasing public scrutiny: The public is becoming better educated on climate change matters, partly due to the mainstreaming of the climate emergency via school strikes and increased media coverage. This means that issues around offset quality (including additionality, permanence, and verification) are receiving greater scrutiny by the public than ever before. Combined with the fact that it will be funded by taxpayers’ money, councils’ offsetting activity is likely to attract significant public attention. Taxpayers will want transparency about how their money is invested and to ensure it provides local benefit, such as an increase in jobs and improved health within the borough. This is difficult to achieve using existing certified offsetting schemes as they commonly relate to projects outside of the local authority and/or outside of the UK.
- Difficulty in retaining co-benefits locally: Many businesses select offsetting schemes based on the relevance to their global supply chains, consumer markets or alignment with other unique social values and causes. While councils still have extended supply chains, their purpose has an inherently local focus, so it is much harder for them to justify diverting socio-economic co-benefits internationally relative to corporates.
- Currently, certified offsets do not offer a financial return on investment: Most conventional offsetting schemes require an annual investment with no direct financial payback. This contrasts with ‘direct’ emissions reduction measures applied within an organisation that can offer a financial return through reduced energy or fuel costs. While insetting projects are further removed than direct, internal projects, they still have the potential to better connect the investor to the beneficiary. This offers an opportunity for the investor to share the financial, reputational, and carbon-saving benefits.
- Limited supply and impact of UK certified options: Current options for certified UK schemes are nature-based, for example, the Peatland Code and Woodland Carbon Code. While these are tremendously positive activities that offer a raft of co-benefits in addition to carbon removal, they are becoming more expensive as demand for UK projects increases. It is important to recognise the scale of the carbon reduction challenge still required across other emissions sectors, such as transport, energy, and buildings. Therefore, even with radical investment in nature-based solutions, there may not be enough projects and savings on offer within the borough boundary, and even across the UK, to bridge the ‘gap’ to zero. Therefore, other types of emissions saving projects may still be required.
A new solution for local authorities
To overcome the challenges listed above, Anthesis is embarking on a new initiative alongside 12 local authorities to design an alternative to traditional offsetting for UK local authorities. We’re calling this ‘Authority-based Insetting’.
Authority-Based Insetting (ABI) aims to provide insetting options for local authorities within their borough boundaries. It is a mechanism to:
- Stimulate greater investment in carbon-saving projects locally (outside of the council’s direct control, but within their borough boundary)
- Better quantify and report the associated carbon impacts in a robust and consistent manner, setting the standard for UK local authorities on this topic
Many corporates have found that by investing in insetting projects within their value chains, they have directly benefited from various forms of return on their investment. ABI aims to help councils unlock similar returns, benefiting the communities they serve socially and economically while accelerating their borough’s progress towards Net Zero.
Anthesis is working alongside local authorities, and engaging industry leaders in green investment and offsetting, emissions standards experts, NGOs, and academics to develop an Authority-Based Insetting framework. The project will deliver the insetting framework and guidance for local authorities in Q4 2021.