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 | 23-04-2021

What is wrong with "Carbon Neutral"?

What a brilliant idea it was: companies calculate their carbon emissions and voluntarily offset emissions they cannot reduce on a transparent market. How could anyone oppose this noble concept? Well, the issue is, that it not only sounds too good to be true. Behind the scenes, some aspects of the deals are far from perfect.




An Article by Frank Sprenger


Carbon Strategies: A Great Start

More and more companies are taking climate change seriously. Be it for their conscience or competitive considerations, corporate carbon strategies are more than a fashion. In some industries they are literally about economic survival: energy and automotive. Others mainly hope for advantages at the point of sale, e.g. food, fashion, and printing. Serious companies assess their Corporate Carbon Footprints (CCF) and Product Carbon Footprints according to international standards, create roadmaps to reduce their footprint and implement them transparently.

Offsetting Inevitable Emissions

In the first years of this millennium, a brilliant idea was developed: what if voluntary markets were created on which companies could invest in projects anywhere on the planet that reduce CO2-emissions and at the same time contribute to sustainable development. The first time I heard it, must have been from Ingo Puhl of 500 ppm around 2002. Boy, was I impressed. Hardly anyone believed, however, that such a market could be created reliably, let alone somebody to buy these credits. Yet, it was done. What an achievement.

Doubts on Impact and Size

It took long years for these markets to gain some significance. Pioneers - endowed with stamina and conviction - created small markets with rigorous transparency and consistency. Everyone remembers atmosfair. And of course, it was a great achievement to make consumers aware of their footprint - say of their flight - and pay money to "offset" their emissions. Early on, doubts were cast regarding the actual effects of these offsets. Soon, transparent labels like the "Gold Standard" were established, verifying the projects and its reductions. However, until today, one crucial issue remains contested: the so-called "additionality". Would those projects really not have taken place without the foreign investment? These systematic doubts remain until today, especially in the widely used field of planting trees.

Another doubt is cast on the amount of emissions to be offset. Of course, the smaller the footprint calculated, the fewer emissions to be reduced, the smaller the amount of emissions to be offset to reach zero. Consequently, a transparent calculation of a corporation's emissions according to international standards is key. And to be sure, these calculations need to be assessed or at least verified by independent experts. Not talking about still ongoing scientific debates of the actual footprint. In air travel, for example, companies usually just calculate the direct effects of burning kerosene, estimated at around 2.5 % of global warming. Scientists urge, however, to also take so-called radiative forcing into account, adding up to 3,5% of global warming. A significant difference.

Corporate Roadmaps

More and more companies take their stakeholders' expectations seriously and develop long-term roadmaps with implementation plans. Listening to the financial logic, those reduction measures with lowest price per ton are preferred. The reduction of own emissions is usually technologically demanding and expensive. Followed by generation of own renewable energy and buying renewable energy. Now guess, how offsetting fares in this calculation: usually by far cheapest. No wonder companies who believe they owe the world a "Zero target" flock to compensation. While it is cheap.

Obviously, cheaply available compensation solutions push more expensive reduction measures aside easily. Unless, responsible companies develop quota - like Audi: for each ton of compensated emissions, the company must have implemented a certain quota of more sophisticated measures before. This is not common practice, as of today. That can lead - if companies listen to the compensation whisperers - to awkward situations in board rooms: not rarely have economically viable reduction measures been declined with a board member citing that the company is "carbon neutral" already, or that offsetting is a lot cheaper per ton. Imagine the frustration of a well-prepared sustainability manager - and the impact on global climate.

Consumer Confusion?

What is worse, the label "Carbon Neutral" on consumer products can lead to consumer behavior with negative effects on global climate. While consumers should, of course, reward companies with sound strategies and products with a lower footprint, the "Carbon Neutral" label does not necessarily do the trick. In a simple world, where on a market shelf there is only one product with that label, fine. It is usually the better choice. However, soon there will be more than one. And in the absence of actual CO2 emissions BEFORE compensation the climate-conscious consumer cannot take an educated decision. Logitech is showing how to do it: they produce the actual CO2 emissions plus a "neutral" label.

In addition, "Carbon Neutral" will leave an uninformed consumer with the impression as if his consumption had no adverse effect on global climate. While this is hardly true, all the other unwanted side-effects of that product have, of course, not been accounted for. Plus, in the ever-increasing marketing game, one day a clever "Carbon Salesman" will come up with a brilliant idea: "What if you bought just one tiny little fraction of an offsetting project more?". The product could be labelled "Carbon Positive or Negative" (whichever you prefer). Implying: the more you consume, the better for the climate. Absurd.

Conflict of Interest

Another tricky issue is the "clever" behavior of some "one-stop-players" out there. While serious players have understood that calculating a company's or a product's emissions and providing offsetting projects at the same time constitutes a potentially serious conflict of interest, some players do not seem to mind or even see the conflict. How interested are you to assess the true scope of your customer's emissions when you run the danger of scaring them away with large bills?

Adding to the problem is a frequent blatant lack of qualifications of "sustainability consultants". If you are looking for a complete, shocking waste of time on a rainy Sunday afternoon, just give it a try: check the profiles of recently appointed "sustainability or climate experts" on LinkedIn. You'll be surprised...

Mark ups

Finally, some providers' business models have little to do with sound climate consulting or seriously reducing footprints. They are little disguised dealers of cheap credits with hefty mark-ups. A fact that some of them even do not bother to cover in their balance sheets. There are honest players out there who have stringent maximum mark-up policies, but not all of them. And so far, they have not spoken up. But they will, soon.

Cleaning up a Worthwhile Cause

Voluntarily offsetting emissions that cannot be reduced is a fantastic benefit to global climate, if done correctly and transparently. However, these markets must be freed from players who - amidst their being drunken from success - seem to have gotten the initial intention slightly out of sight. In the interest of preserving and growing a global offsetting market that can benefit global climate goals and local communities, and in the interest of honest and serious market players, the light of transparency must be shed on shady activities and practices.

Would we have the Catholic Church's Sale of Indulgences financing worthwhile charitable projects still today, hadn't greed taken over? Who knows, but for voluntary carbon offsetting, it is not yet too late.