Carbon offsets are used by companies seeking “net zero,” but concerns remain.

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While companies see skyrocketing carbon offsets, some say the informal market patchwork lacks consistent standards and oversight, making it difficult to measure emissions reduction effectiveness. I am

The basic concept behind offsets is that activities such as tree planting and peatland restoration reduce carbon in the atmosphere. Dozens of private companies and nonprofits develop such projects, assess carbon reduction levels and issue credits equivalent to one metric ton of emissions. These credits are certified by a third party who makes sure the project exists and meets certain criteria.

companies like microsoft Ltd.

Royal Dutch Shell plc either purchases these credits directly from the project developer or intermediary, or accrues them in exchange for funding the project. Companies can use these credits to reduce net carbon emissions, an increasingly demanding indicator for consumers and investors. Many companies are looking for offsets to achieve their commitment to achieve “net zero” carbon emissions.

Swiss start-ups are helping companies offset their emissions by building giant vacuum cleaners to remove carbon dioxide from the air. The WSJ will tour the facility to see how to trap the gas it sells for soda to customers like Coca-Cola. Overall: Clement Berg

The carbon offset market is projected to more than double in value this year to more than $1 billion, according to data provider Ecosystem Marketplace. He said the most active offset buyers this year are in the energy sector, followed by consumer goods, finance and insurance.

Critics, including some companies, environmentalists and other groups, say the range of approaches to generate project quality differences and offsets is complex and sometimes confusing. Prices vary widely, ranging from just a few dollars for credits related to activities such as grassland conservation, to thousands of dollars for recovering carbon from the atmosphere and storing it in reefs.

These factors make it more difficult for executives, investors and consumers to assess the effectiveness of projects that generate offset credits.

Thomas Lingard, Director of Sustainability at Unilever plc, said: “It is so confusing to people that it may not be the desired state for a world that is rapidly responding to the climate crisis.”

According to Lingard, for now, Unilever is refraining from using offsets. Offsets can be distracting because they provide a complete reduction in emissions. However, Unilever hopes to eventually turn to carbon credits to address irreversible emissions.

Unlike regulated and mandated carbon markets such as Europe and California, where allowances for carbon emissions are allocated to high-emission industries such as steel, companies voluntarily purchase carbon offsets. ..

“Our focus is on a number of markets that are here right now,” said Rachel Kayte, co-chair of the voluntary Carbon Markets Integrity Initiative. Shown here in 2017.

F. Carter Smith / Bloomberg News

David Antonioli, CEO of Vera, a non-profit organization that certifies offset projects, said:

Several groups are working to develop standards and guidance for companies buying voluntary offsets, gaining momentum ahead of the United Nations climate talks in Glasgow, Scotland. At a summit called COP26, the government seeks to agree on a framework for the global carbon market.

The Task Force on Voluntary Carbon Market Expansion, a private sector initiative launched by Mark Carney, the UN special envoy for climate change, is working to expand the use of offsets that meet global standards.

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Another group, the UK-funded Voluntary Carbon Market Integrity Initiative, is developing guidance for buyers. “If a regulator decides how to regulate offsets, that is an act that can ultimately help the regulator,” said Rachel Kayte, co-chair of VCMI. “But our focus right now is on many of the markets here, because they are in the race.”

Companies take different approaches to purchasing and using offsets.

Microsoft reported that the offset verification methodology was inconsistent, and last year it developed its own due diligence process and called for a proposal, a fundable project, for carbon removal. According to the company, few projects meet the criteria, but this year they paid for removing 1.3 million tonnes of carbon from the atmosphere, mainly through forestry projects.

“The market needs clear definitions and standards,” Microsoft said in its 2021 Greenhouse Gas Reduction Report.

Shell usually funds project developers, such as tree-planting groups in the United States and protecting peatlands in Indonesia. Third parties will investigate how much carbon these projects remove from the atmosphere and prove how much credit Shell will receive in return for its investment. Shell has also acquired the Australian developer of the Offset project. The company says these credits can be used to offset its emissions or to sell to other emitters.

In its report this month, Shell said it was still learning about the complexity of the voluntary carbon market and withdrew from projects that could not agree on standards.

to shelter SA,

Meanwhile, carbon offsets are used to enhance environmental certification for individual brands such as Nespresso. Nespresso says it will be carbon neutral by 2022. We are working with environmental protection group Pur Projet to design and implement a project to generate carbon credits. A farm that buys coffee.

Nespresso factory in Switzerland. Nestle pays coffee growers to plant trees.

Stephen Wermuth/Bloomberg News

Nestlé’s responsible sourcing manager, Benjaminware, pays coffee growers a premium for planting trees between coffee trees in the supply chain and on the land around farms. “This is a huge opportunity for food and agro-based businesses,” he said.

However, Mr Ware said Nestle’s total net zero pledge is offset-independent. “Carbon credits may not be a strategy to reduce global warming, or we will keep our business afloat,” he said.

Elsewhere, Evian owner Danone SA

We have invested millions of dollars in offset projects, including working on the restoration of mangrove forests in Senegal. The fund monitors the project and manages the credit in line with the investors. Dannon says that offsets, along with complete reductions and other actions, are one aspect of the plan to reach net zero emissions by 2050. A spokesman said.

The Science-Based Goals Initiative, a partnership between the United Nations Global Compact and other nonprofits, is working with companies to determine how offsets fit into our climate change efforts. Companies want to reduce emissions by 90% to 95% and use only offsets for the rest.

At this time, it’s not always clear how the offsets fit into the company’s plans to reduce emissions.

“There is little information from companies,” said Stephen Donofrio, director of the Ecosystem Marketplace. “It’s very inconsistent and incomplete.”

Earlier this year, a tree farm in Koila, Mississippi.

The Wall Street Journal’s Laurie Doyle

where climate meets money

write in Sarah MacFarlane ([email protected])

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Carbon offsets are used by companies seeking “net zero,” but concerns remain.

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