What carbon offset projects really are and what ClimatePartner contributes.

A classification.

Over these past years, a clear trend has become recognizable: climate protection is growing increasingly important for businesses. A steadily rising number of companies and sectors are serious about taking on the challenge of climate friendly business. Climate neutral products and services are establishing themselves on the market step by step. All in all, this is a positive development in line with our global climate protection objectives.

However, there continue to be obstinate prejudices against voluntary climate protection. The mechanism of climate neutrality – i.e. compensating unavoidable carbon emissions via carbon offset projects – often finds itself at the pillory. Climate neutrality, it is often said, is nothing more than a “ransom” paid for release from one’s own obligations – a modern form of “trading in indulgences.” Or it is merely “green-washing,” driven by unscrupulous marketing departments to cheaply polish their own company’s image.

In most cases, this perspective is not based on any founded criticism in the way carbon offset projects function. Rather, it is much more frequently based on ignorance about the mechanism of climate neutrality and its significance for meeting our climate objectives. We would like to use this as an opportunity to comprehensively shed light on the mechanism of climate neutrality and the projects used to attain it. What does climate neutral mean, and how can it be achieved? What is the difference from emissions trading? And how can carbon offset projects be used to promote development locally? And: what contribution does ClimatePartner make to this range of topics?

Isn’t local carbon reduction the only thing that counts?

In order to meet our climate objectives, it is important to drastically reduce greenhouse gas emissions worldwide. The Paris Accord has ambitious goals: containing global warming to a maximum of 2 °C (1.5 °C would be even better) and a reaching a climate neutral global economy by 2050.

In order to meet that objective, the states participating in the Paris Accord have entered the obligation of submitting national reduction plans on a regular basis. The problem here is that, as of today, we are not yet familiar with the technologies that would be necessary for sufficient carbon reduction. Therefore, according to the current plans that have been submitted, we will land well above a global warming level of 4 °C – with devastating consequences for the quality of life on our planet. Yet even if the requisite technologies were already available today, the remaining 33 years would hardly suffice to convert every fossil fuel plant and every production plant in the world to carbon-free alternatives. Moreover, some processes – such as those in the chemicals sector – will be unable to run in the future without emitting greenhouse gases.

That means carbon reduction alone will not be enough, by a long shot. Rather, a massive expansion in projects will be necessary for additional reduction in greenhouse gases, i.e. so-called carbon offset projects. That can consist of classic forestation or forest conservation projects, where the creation of additional or the preservation of existing forest areas contributes to the reduction of carbon dioxide in the atmosphere. Or it can consist of projects that reduce dependency on fossil fuels in a concrete, measurable manner – such as promoting the switch to biomass. Many carbon offset projects all over the world are launch pads for additional innovations and provide for swifter diffusion of technologies for carbon reduction. By the way: the location at which one ton of CO₂ is saved is irrelevant for the global climate. The positive effect on the climate is always the same.

Climate neutral is not CO₂-free

This brings us to the terms CO₂-free and climate neutral, which can be confused over and over again in the public discourse. They both represent different aspects to climate protection. When a product or service is CO₂-free, it means that no CO₂ emissions at all are incurred by its production and provision – and that applies for the entire supply chain, including raw materials, logistics, and packaging. Climate neutral, on the other hand, means that the CO₂ emissions of a product were calculated using common standards and then compensated in a second step via a certified carbon offset project. CO₂-free products practically do not exist. In contrast, nearly every product can be climate neutral based on this definition.

A climate neutral product has its greatest credibility when, in addition to the carbon offset, it also features a credible strategy for carbon avoidance and reduction. One example here is the Printy stamp from Trodat, where more than half of the carbon emissions have been saved compared to beforehand [check out this video].

However, in many cases, the potential for carbon reduction is restricted – over the short term, at least. To name an example, a logistics company cannot replace its entire fleet of delivery vehicles overnight, but it can optimize carbon emissions per ton-kilometer step-by-step through driver training and optimized capacity utilization. However, that company should get started today with carbon compensation and become climate neutral as soon as possible.

Finally, credible climate neutrality requires credible evidence for consumers. Climate neutrality needs to be evidenced through a recognized label. That is why ClimatePartner developed its own labeling and evidence system years ago, which companies can effortlessly implement to communicate their own climate neutrality. For each case of CO₂ compensation, an ID number is issued via which the carbon offset can be found and tracked online. This is backed by the guarantee that the corresponding CO₂ emissions have indeed been offset by ClimatePartner.

Carbon offset projects facilitate carbon neutrality

Selecting a carbon offset project that is a good fit is a central aspect to this process. That is why it is important to understand what this term precisely means, for not every environmental protection measure is simultaneously a carbon offset project as laid out in the Kyoto Protocol. Rather, the term carbon offset project describes a narrowly defined range of potential projects that have to meet clear criteria and requirements.

In order to demonstrate compliance with the criteria, projects are audited and certified according to strict criteria, such as the “Gold Standard” and the “Verified Carbon Standard” (VCS). This ensures a project’s climate-conservation-effect and confirms it on a regular basis. One of the most important requirements is that the projects do indeed represent additional climate protection measures and that the contribution to carbon reduction in the atmosphere is clearly measurable.

One illustrative way to shed light on this mechanism is using the example of domestic forests. Germany has around 11.4 million hectares of forest – corresponding to around one-third of the country’s total area. These forests do of course have a climate-preserving effect that is ongoing, yet it is not additional because these forests have already been in existence for hundreds of years (and moreover have been reduced heavily over the past centuries). Only additional forestation can fulfill the requirements for a carbon offset project – and only if a series of further prerequisites are met. Furthermore, under certain circumstances, the conservation of forest areas can meet the criteria for a carbon offset project, such as when forest areas are under the acute threat of illegal logging.

In addition to evidence for additionality, the respective project standards also govern the financing of carbon offset projects with a stark difference from how classic donations work. The financing of carbon offset projects almost always takes place retrospectively. That means funds are directed toward projects that have already been implemented, thereby purchasing CO₂ savings that have already been realized. In order to receive recognition as a carbon offset project, it is essential for the projects to be reliant upon additional income from selling the volume of CO₂ saved. Otherwise, the project could be executed anyway and the criterion of additionality would not be met as laid out above. For the time until a project’s CO₂ volume has been completely sold, financial institutes or investors handle the project’s interim financing.

This means that each ton of CO₂ companies offset using certified carbon offset projects has already been reduced in the past. This is the only option for ensuring that no money is collected for projects that can never be realized due to insufficient volume. Simultaneously, companies can be certain that they are making a direct contribution to climate protection, for none of the numerous carbon offset projects that have been created over the past decades could have been realized if companies or private individuals hadn’t purchased the CO₂ volumes and used them for their own carbon offset.

Carbon offset projects promote innovation and development

Virtually all carbon offset projects have massive positive effects on local development. It is with good reason that the Kyoto Protocol also uses the term Clean Development Mechanism.

The United Nations’ Sustainable Development Goals (SDGs) provide a globally recognized standard to measure the positive effects. These 17 objectives encompass issues such as fighting poverty and hunger, promoting education, and the global spread of clean and affordable energy. Each carbon offset project contributes to several of these objectives. In order to render this effect visible, ClimatePartner identifies the contribution individual projects make to the various SDGs. Companies can use that information to decide which goals they want to support along with climate protection. For some projects, the additional contribution is so great that they are in essence actually development projects with a climate-conserving effect – instead of the other way around.

ClimatePartner collaborates very closely with project developers to have carbon offset projects developed and secure their continued existence. To name an example, one of our projects promotes the implementation of modern gas stoves in India, which run on biogas instead of the wood-burning ovens currently in widespread use. This reduces carbon emissions, and additionally significantly improves the health of the people who would otherwise be exposed to smoke and soot for many hours each day.

We even go a step further with the new Fairtrade Carbon Credits, which are available to select companies in the Fairtrade Association. Here, the project partners on site receive an additional premium enabling small farmers to adapt to climate change – with measures such as diversification in agricultural crops and conversion to species that are more resistant to climate fluctuations. That secures the positive effects of carbon offset projects over the long-term.

Most carbon offset projects are domiciled in developing and emerging market countries, and not locally in Germany or in other industrialized countries. However, many of the people responsible for CSR have an affinity for projects in their own region as they hope to attain a higher level of visibility and a more direct relationship to their own business activity. That is comprehensible, fundamentally speaking. However, regionality should never be the first criterion, especially when it comes to climate protection, for climate change is ultimately a global problem that can only be resolved through global approaches. Moreover, the Clean Development Mechanism is of course designed to help the regions where there is currently little to no climate protection – and usually where the effects of climate change are most dramatic. In order to unite these two approaches – regional and global climate protection – ClimatePartner also offers pre-made project bundles combining regional and international projects accordingly.

Climate protection as a service

The term climate neutrality embodies a process that starts with the initiation, planning, certification, and preparation of suitable projects and ends with the discontinuation of carbon emissions and creation of transparent evidence for outside parties. That means climate neutrality consists of much more than merely offsetting carbon emissions. It is a complex service that companies can either perform themselves or outsource.

However, only in the most seldom of cases does it make sense to perform everything inhouse, even for large corporations. The initiation of carbon offset projects is associated with high startup costs and a tedious certification process. Doing so at all only makes sense above a certain minimum volume. Even under good conditions, one must count on several years passing until a project’s certification has been completed and the project can be used for compensating one’s own carbon emissions.

That is why it makes more sense in nearly every case to purchase this service from an external provider. That is where ClimatePartner has its specialization: We have spent years building close relationships with project developers all over the world, and have been involved in the planning phase of many projects right from the start. Our portfolio of carbon offset projects reflects that diversity: Thanks to our wide range of regions, technologies, and project standards, we have a carbon offset solution ready for many companies. When that is not the case, we can procure or develop projects individually for companies based on their own criteria. Our clients also don’t have to worry about certificate validation or communication of climate neutrality, for that is a part of the service we provide for our clients.

An analysis by Dr. Christian Reisinger