Exploring Carbon Contribution and Neutrality: The Net Zero Initiative
Carbon contribution, also known as carbon offsetting, involves setting up projects to reduce, capture, and sequester carbon, thereby creating carbon sinks to aid in the fight against global warming. Voluntary carbon contribution is a complex subject, occasionally criticized, yet it remains a potent tool to finance carbon neutrality strategies.
One initiative promoting carbon contribution is the Net Zero Initiative, developed by Carbone 4 in 2018. It provides a framework that "offers organizations a way to describe and organize their climate action in order to maximize their contribution to global carbon neutrality.
Drawing on our knowledge of the voluntary carbon credit market, we wish to share more with you. While we are convinced of its necessity for the environmental transition to achieve carbon neutrality, we are also aware of the questions and doubts it raises.
Therefore, we wanted to share some of the lessons we have learned while working on carbon contribution over the past months. In this article dedicated to carbon neutrality, you will learn:
- The differences between carbon quotas and voluntary carbon credits, and why the latter are essential for environmental transition
- The reasons behind the bad press (justified) of carbon offsetting, linked to greenwashing
- What lies behind a virtuous mechanism of carbon contribution
I. The Difference Between Regulated Carbon Quotas and Voluntary Carbon Credits in the carbon contribution framework
The EU-ETS Market (Emissions Trading Scheme), a regulated carbon offsetting strategy
Carbon quotas (EU-ETS) were established in 2005 by the European Union to regulate greenhouse gas (GHG) emissions from industrial facilities over 20MW, representing about 50% of the EU's emissions, and thus combat climate change. Specifically, a GHG emission cap is imposed on the affected facilities, and companies trade carbon quotas based on their actual emission levels relative to this threshold: those emitting less than the cap sell quotas to those exceeding it, with one quota corresponding to one tonne of CO2e, with the carbon offset market mechanism setting a price based on supply and demand fluctuations.
The Voluntary Carbon Credit Market, a thriving carbon offsetting mechanism
Voluntary carbon contribution applies to "unavoidable" greenhouse gas (GHG) emissions: those you cannot avoid. It should only be considered after efforts to reduce greenhouse gas emissions "at source" and with a desire to "further contribute" to efforts to combat climate change.
If this carbon offset mechanism is implemented virtuously, as a complement (not a replacement) to reduction actions that must be implemented first and foremost within the company, it is a tremendous catalyst for environmental transition: it enables the financing of the development of GHG reduction and sequestration solutions required to combat global warming.
This carbon contribution lever is necessary to fill part of the gaping hole in investments needed for the environmental transition ($3,500 billion required annually on a global scale according to BCG, which is six times the current investments).
Companies purchasing these voluntary carbon credits generally do so with the aim of acting on their environmental footprint and communicating about it. This should be the fourth step in a corporate environmental strategy, following
- 1) measuring their footprint (scopes 1 to 3),
- 2) setting emission reduction targets in line with a +1.5°C trajectory, and
- 3) reducing GHG emissions across all elements where possible.
II. The Downfall of Carbon Offsetting: Challenges and Misuse"
The problem with carbon offsetting is that it has often been misused, applied to projects that are sometimes poorly verified and have lesser impact. In 2020 in France, nearly three-quarters of the carbon credits purchased were for forestry projects, and more than 90% came from projects in Africa, South America, and Asia (even though the challenge of decarbonization primarily concerns the most developed economies), with an average carbon credit price of €4.5.
What is concerning about this?
1) Planting trees for offsetting will not save us
For various reasons, forestry projects cannot be the miracle solution to the problem our society is facing:
- Firstly, the issue of timing: when you take a plane today, the greenhouse gas emissions occur at that moment. However, a tree that you plant to compensate will only potentially sequester CO2 several years down the line. If you ever planted an apple seed during a biology class as a child, you likely understand what I mean. Adding the notion of short and long carbon cycles further complicates matters!
- Secondly, the issue of space: to offset our excess CO2 emissions, we would need to plant trees on agricultural lands that make up nearly a quarter of the world's emerged lands, essentially reforesting almost all of the cultivated land globally. While the phrase "nothing is impossible" may be a French adage, the practicality of this solution is indeed questionable.
2) Compensating at low cost, not reducing
Beyond trees, the primary critique currently leveled at carbon offsetting, quite pertinently, is that many companies use it very inappropriately.
- As a substitute for reduction efforts: In the budget battles of companies, it is tempting to opt for the purchase of very inexpensive carbon credits (€4.5 per voluntary carbon credit on average in 2020 in France, while the real price of a ton of carbon should be closer to €250 according to the national low-carbon strategy) rather than tackling the thorny and more costly problem of transforming their production chain to actually reduce their own emissions.
- Without any link to its activity and thus its environmental footprint: In most cases, a company's activities have no connection to tree planting. This raises the question for any company: if I buy forest carbon credits, am I really having an impact where I should be? We have our opinion; we'll let you form your own.
- To divert attention through deceptive communication about its environmental impact, rightly pointed out by researcher Alain Karsenty.
3) A Lack of Transparency Leading to Scandals and Distrust for offsetting
To address the pitfalls of carbon offsetting, and before finally showing you the light at the end of the tunnel, discussing the topic of transparency seems important. Today, numerous intermediaries position themselves in the carbon offsetting chain between a low-carbon project and the individual or company buying the carbon credit: labels, agents, verifiers, brokers, and finally verifiers of labels and verifiers.The consequence of this forest of intermediaries? Firstly, a significant loss of value remunerated to the low-carbon project holder, and a terrible opacity between the two extremes of the chain that has led to numerous frauds and scandals, especially. This ultimately and rightfully leads to a loss of trust in this mechanism of voluntary carbon credits.
III. Moving Away from the Pitfalls of Greenwashing: Restoring the Role Carbon Contribution Deserves
This is the model we are building with Riverse, based on strong principles. Our client companies only purchase carbon credits in addition to a carbon assessment and reduction actions, to have an impact on the residual emissions they do not yet control. How do we ensure this? By relying on reference methodologies in these areas, such as ISO standards, Science Based Targets, or Carbon Assessment.
Contribution in Projects Linked to Activity, in All Key Sectors
We believe carbon contribution truly makes sense when it is linked to the company’s activity, aiming to indirectly reduce its scope 3 emissions in a logic of insetting rather than offsetting. If your business involves, for example, the transport of goods, we will propose projects aimed at decarbonizing maritime freight. We select solutions that impact the seven key sectors of the national low-carbon strategy, and our job is to guide you towards those that are most relevant to you.
Communicating Honestly on Contribution
We provide our clients with comprehensive communication modules on their entire environmental strategy, to honestly engage their ecosystem around their actions.
Transparency on Contribution
From our certification methodologies to our carbon credit transaction registry, everything we do is carried out in a completely transparent manner, to restore trust in this market.
Contribution to the Real Cost of Transition
Our carbon credits are priced to reflect the necessary efforts for deploying transition solutions, with the full amount being paid to our project carriers to maximize their impact. For purchasing companies, this establishes a fair carbon cost on their activities, thereby preparing them for the world of tomorrow. We earn our revenue through an additional commission on the sale price, which is clearly communicated.
Adhering to the Six Common Principles of All Carbon Credits
Credits certified by Riverse are measurable, verified by third-party external auditors, additional, unique, incorporate the risk of non-permanence, and include co-benefits, as recommended by ADEME and other international reference standards.
We will soon detail in a new article the ins and outs of our project selection and our carbon credit certification methodology, but wanted to touch on the subject here to emphasize the mission we have set for ourselves with Riverse: to bring together companies and low-carbon project carriers, to accelerate the financing and deployment of solutions with strong social and environmental impact to make our society sustainably strong.
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