Carbon offsets: A tonne for a tonne

The expression ‘carbon offsetting’ can mean so many different things. With the increasing scrutiny around carbon neutral claims, I’ve been reflecting on the range of offsets I’ve used over the years to try to work out what credible offsetting options are and how much they cost.

Scope 1

Offsetting Fuel Use

Nature-based removals

Both personally and professionally, I’ve used nature-based removals for vehicle use; paying someone to plant native trees to extract carbon out of the atmosphere and store it in woody vegetation. In this case, the organisation calculates the number of tonnes emitted based on fuel or vehicle use and then works out how many trees are required to remove that amount of carbon. In addition to capturing carbon, where a diversity of trees is planted on degraded land, they play a role in progressively restoring native habitat, so not only offsetting the carbon use but also help offset some of the ecological impact that climate change causes.

Obviously, it takes time for the trees to grow and remove the carbon, so this is a delayed removal process. Which means that this type of offsets may not qualify under some carbon neutral programs. There is also the risk that something happens to the trees and the carbon is lost. However, organisations such as Greenfleet actively manage their forests, replacing lost trees or replanting at new sites if the forests are deemed not viable, with ongoing independent assurance. Further, to ensure the carbon is captured indefinitely they only plant on land that has a clear path to being protected, ideally 100+ years, either purchasing the land and/or working with land holders or government to have a conservation covenant in place or government protection overlay, e.g., within a state park. Although there is a delay in the removal, I always felt good supporting revegetation projects. Not all nature-based offsets have this same level of assurance and protection in place. For example, in some programs the trees can be cut down after 25 years.

Last time I checked Greenfleet — which is a not for profit — offered this service in Australia at A$18 a tonne, with the cost of securing land a major cost driver. Monash University has been offsetting its fleet through Greenfleet for over 20 years, with the early planting now maturing into fully grown forests, supporting all sorts of biodiversity including incredibly cute baby koalas.

Scope 2

Offsetting Electricity

Renewable Energy Certificates

Another mechanism I’ve used both personally and professionally is purchasing and retiring renewable energy certificates either through a retailer, broker or directly from a generator to ‘offset’ grid electricity consumption. In this case for every MWh of electricity extracted from the grid, 1 MWh of renewable energy gets put into the grid, which supports the transition to a renewable powered grid, ultimately avoiding the generation of the emissions in the first place.

However, it's worth noting that in Australia not all renewable energy certificates are equal. Large Generation Certificates (LGC) that are created based on actual generation put into the grid feels pretty one-for-one. Small-scale certificates such as the ones generated for home solar installations are created based on forward projects when solar PV or hot water systems are installed and therefore are not as clearly a one for one match of consumption to generation.

In Victoria, a MWh of grid electricity creates just under a tonne of carbon, which has been steadily declining thanks to renewables. At a current LGC price of just under A$50, this puts the cost of offsetting a tonne of carbon from electricity use at around A$50.

Monash University is part of a corporate Power Purchasing Agreement (PPA) run by Telstra that used the group's long-term energy purchasing power to underwrite the development of a new wind farm. This involved a level of energy market risk. However, through leveraging its purchasing power it was able to support the construction of new renewable energy generation and dramatically reduced the cost of securing LGCs to ‘offset’ Monash’s electricity consumption.

Scope 3

Offsetting Flights and Supply Chain

Enabling or paying someone to stop emitting or to protect existing carbon sinks.

I’ve used these offsets when booking flights, clicking on that little ‘offset my flights’ button at the end of the booking process. Although convenient and often relatively cheap, this offset space typically requires some research to work through the range of options and certification levels.

Some examples of offsets in this category include paying to protect existing forests, providing solar lights to remote villages, changing farming practices and supporting renewable energy projects around the world. All of which are great things to do as long as they are actually delivered and followed through. Which is where purchasing certified offsets through programs such as Verified Carbon Standard and Gold Standard can increase peace of mind and reduce reputational risk. However, as much as sponsoring someone else to not emit a tonne of carbon is a good thing and can deliver immediate emissions reductions, it does not deal with the emissions that taking the flight has actually put into the atmosphere.

The role of offsets in a credible Net Zero action plan

Obviously, wherever possible, a great Net Zero plan should start with directly eliminating emissions through energy efficiency to reduce consumption and/or generating clean energy at the point of use to reduce grid electricity consumption, e.g., rooftop solar. Then, for carbon-based gas and fuel use (Scope 1), having a clear plan to progressively eliminate these emissions through electrification.

Then for the remaining electricity consumption (Scope 2), renewable energy certificates are a direct and effective way to ‘offset’ emissions, as they actually support the elimination of emissions from the electricity grid. Ideally the LGCs are sourced from the grid that the electricity is being drawn from and generation time occurs as close as possible to when consumption occurs. For example, Google is working towards aligning renewable generation and server consumption in real time.

For Scope 1 emissions that can’t be immediately eliminated, companies should be committed to minimise the social and environmental impact of those emissions and be progressively removing them from the atmosphere. For me, the most credible path to address the immediate and long-term impact of a tonne of released carbon is to purchase both:

1. Certified social and nature-based emission avoidance offsets, i.e., offsets that immediately reduce the creation of emissions as well as deliver social and environmental benefits; and

2. Nature-based removal offsets that progressively remove the carbon from the atmosphere and support habitat regeneration.

Purchasing both an immediate carbon avoidance offset and a carbon removal offset helps to cover off on environmental and social impacts of emitting through supporting other people and communities to avoid current and future emissions and invests in the removal of the emissions over time. This recognises that we only have one atmosphere and that the collective global economy needs to get to zero emissions to protect it. Certified carbon offsets range from around A$20-40 a tonne which when ‘stapled’ to a carbon removal offset at around A$20 a tonne gives a similar credible carbon price of between A$40-60 per tonne.

For supply chain emissions associated with goods and services (Scope 3), e.g., materials, food, etc., the approach should be to work with and support suppliers to help them eliminate their Scope 1 and 2 emissions through efficiency, electrification, renewables and/or adopting regenerative land practices. Then for emissions that can’t be immediately eliminated, offsetting through the same back-to-back combination of certified social, environmental and carbon offsets and carbon removal offsets.

It might not be financially viable for businesses to immediately start offsetting all of their emissions. However, for credibility and good governance, it is critical to start factoring this cost into operating and capital decision making, communicate with their customers and suppliers about how they plan to either eliminate or offset their emissions and, when budgets allow or other drivers require, progressively implement the plan to credibly reach Net Zero as fast as possible.