Using cheap carbon offsets to meet net zero targets could curb companies’ efforts to cut emissions and slow the delivery of climate goals, Britain’s climate change advisers said on Thursday.
Many U.K. listed companies such as Shell have set net zero emission targets, saying they would buy or generate carbon credits to offset residual greenhouse gases.
Offset credits are measurable emission reductions from certified climate action projects such as planting trees or switching to less polluting fuels. This type of emission allowances currently trade in an unregulated, voluntary market with many different standards and approaches.
The current low price of many offsets, which can be purchased from exchanges for less than US$4 a tonne of carbon dioxide, are providing a cheap approach for companies to meet net zero goals which could reduce the incentive for them to directly cut emissions, according to a report by Britain's Committee on Climate Change (CCC).
“Offsets can mask insufficient efforts from firms to cut their own emissions, they often deliver less than claimed and they may push out other environmental objectives in the rush to capture carbon,” the report said.
The CCC suggests the government require businesses to reveal how much their targets rely on offsets as well as the type and quantity of credits they are using.
While the carbon credit market can help finance emission reduction projects and play a role in company efforts to meet climate targets, Britain should use its influence to advocate for strengthened global standards for carbon credits, the CCC said.
More work is also needed to avoid double counting, meaning emission once counted in the host country where the emission reduction has taken place and then again by the company using the credit to meet its own target, the CCC added.