Investment Institute

Carbon offsets: A necessary tool, but only under close scrutiny and precise conditions

  • 14 September 2021 (10 min read)

Key highlights

  • To meet the Paris Agreement net zero goals, both emissions reductions and carbon offsetting will play a critical role in delivering a manageable transition.
  • Reaching net zero will require a vast amount of innovation, policy measures, technological deployment, infrastructure and international co-operation, all of which will take time. An IEA report has set out more than 400 milestones, spanning all sectors and technologies, to mark the path to net zero
  • If strategies tackling emissions reduction need to be implemented right now, in the short term, and until new technologies are massively deployed, carbon offsetting will prove unavoidable, especially in the hard-to-abate sectors.
  • Carbon offsetting has faced accusations that it amounts to ‘greenwashing’ by allowing, even incentivising, companies to avoid actually reducing their emissions. It has been rightly criticised when used by highly polluting companies with no clear strategy or plan to reduce their emissions or cut production of profitable polluting product lines
  • This paper gives an overview of the main areas where scrutiny should apply, to ensure that carbon reduction by offsetting is verified, enforced, permanent and additional.
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