Net-Zero, climate-neutral or even climate-positive. There is hardly a company that does not publicly commit to climate protection and uses CO2 certificates to finance climate protection projects. This is intended to prevent or reduce greenhouse gas emissions.
Allerdings wird diese CO2-Kompensation auch sehr kritisch gesehen, weil sie, so die Kritik, in vielen Fällen eine Form des Greenwashings sei und die Projekte ohnehin nicht hielten, was sie versprechen.
We also rely to some extent on this type of CO21 Correct at this point would be to speak of CO2 equivalents (CO2e), which refer to all greenhouse gases. To improve readability, we continue to write „CO2“ in its place. compensation. Reason enough to speak of their role for climate protection to be considered again in detail and checked for potential for misuse.
1. Background
The global economy was worth approximately $101 trillion in 2022. According to the latest projections, anthropogenic CO2 emissions are expected to have reached approximately 40.6 billion metric tons (or Gt for short) in 2022. For every dollar of economic output, humanity has thus generated a CO2 footprint of 400 g. The consequences of this CO2 impact have been extensively documented in the literature.
| 2022 | 2030 | |
| World economy in tn USD | 101,0 | 150,0 |
| Anthropogenic CO2-emissions in bn tons CO2-equivalents2 Source: Global Carbon Projekt, cited here: https://www.geomar.de/news/article/keine-anzeichen-für-einen-rückgang-der-weltweiten-co2-emissionen | 40,6 | ??? |
2. The options
Let’s take a look at the options for action that are basically available:
- Avoidance/reduction: refraining from activities that emit CO2 (don’t fly, don’t burn oil, etc.)
- Offsetting (for every CO2-emitting action, one ensures that CO2 is saved elsewhere)
- Extraction (technically or biologically capturing CO2 from the atmosphere)
- Geoengineering (e.g. by spreading lunar dust between the sun and the earth, which is supposed to reduce the incoming radiation energy on earth – no joke!)
Each of these approaches is fraught with possibilities and risks. Avoidance and extraction are primarily a matter of practical, engineering feasibility. Offsetting and geoengineering are significant in that they raise additional important ethical questions. While geoengineering is still in the conceptual stage, compensation has become a billion-dollar market in the last 10 years. Many companies are using offsets to reduce or neutralize their own footprints, and most do not hesitate to highlight these activities as positively as possible on the marketing side. Not surprisingly, the billion-dollar market of CO2 offsetting is also the subject of allegations of corruption and fraud, such as the accusation of the uselessness of issued CO2 certificates (see also the counterstatement by Verra, which is well worth reading).
3. What does „voluntary carbon compensation“ mean?
Ways pursued to enforce the necessary reduction of greenhouse gas emissions in the economy:
- A legal allocation of CO2 pollution rights (often combined with the possibility to sell unneeded rights to others, e.g. EU emissions trading, the Wester Climate Initiative between California and Quebec, etc.).
- Voluntary offsetting of one’s own activities through the purchase of certified CO2 credits from projects that are designed to a) avoid emissions (e.g., by protecting forests that would otherwise be cut down) or b) sequester CO2 in so-called „natural sinks“ and thus remove it from the atmosphere (e.g., peat bog renaturation, tree planting, etc.). This voluntary compensation is the core area of the so-called CO2 certificates.
The latter voluntary CO2 compensation is the subject of this article. This market follows a simple principle: private persons or companies can „compensate“ their CO2 emissions by financing climate protection projects according to the principle: for each ton of CO2 emission I buy a certificate for 1 ton of CO2 savings.
The standards for both pathways were set in the Kyoto Protocol in 1997 (mainly additionality, permanence, no double counting) and are verified in the voluntary certificate markets by organizations such as Verra or Gold Standard.
4. Is voluntary CO2-Kompensation meaningful?
An action is ethically meaningful if it meets four criteria: first, it must have a legitimate purpose; second, it must be suitable for achieving that purpose; third, it must be necessary; and fourth, it must appear reasonable in relation to other actions.
a. Legitimate purpose
In our assessment, there is no doubt about the legitimate purpose of voluntary carbon offsetting.
b. Suitability
It might look more difficult with the suitability, where it depends on the individual project. There are a number of climate protection projects that make scientific and social sense without doubt: Renaturation of peatlands, establishment of mixed forests, expansion of renewable energies at the expense of fossil fuel consumption, even the replacement of coal stoves with gas stoves in developing countries – all measures that are, firstly, technically relatively simple and, secondly, reduce society’s CO2 emissions. These measures cost money, and CO2 certificates are an easy way to provide that money.
But there is also a category of projects whose usefulness cannot be proven so easily: the avoidance of planned measures that are harmful to the climate. How appropriate is it for rainforest that has not been cleared in Brazil to become a CO2 compensation project? If the Brazilian government announces the complete slash-and-burn clearing of the Amazon basin and then at the last minute does not go through with it, can it then issue CO2 certificates for 70 gigatons annually, which Western companies can then use to make themselves „climate neutral“? And since that represents more than the total annual CO2 emissions, has the whole world then become climate positive? I’ll stop at this point, you get the point. Climate change allowances must be counted as an improvement over the status-quo, not over a potentially worse state in the future. It’s a matter of logic.
So it depends on the specific project.
c. Necessity
Wonderful, at this point the author can abstain from any discussion of the billion dollar market, its exponential development and the price elasticity of demand with a clear conscience. The market is too small for that. In 2022, about 280 million tons of CO2 were offset on the voluntary market3 see also https://app.powerbi.com/view?r=eyJrIjoiNGI5ZDY1ZWUtZGU0NS00MWRmLWFkNjQtMTUyYTMxMTVjYWQyIiwidCI6IjUzYTRjNzZkLWI2MjUtNGFhNi1hMTAzLWQ0M2MyYzIxYTMxMiIsImMiOjl9&pageName=ReportSection68c2510fa4171bdf82a9. That’s not even 1% of total emissions, and even though an entire industry is already rushing to trade CO2 certificates in joyful anticipation of exponential growth, and the first companies are already offering carbon futures, it is not foreseeable that the voluntary market will play more than a supporting role in the decarbonization of the world – there are currently not enough good projects for which certificates can be issued.
What does that say about the need for the appropriate projects? We think it would be cynical not to fund (and thus not implement) good and purposeful projects simply because they are only a small part of the climate change effort. The opposite would be equally conclusive, namely to expand the number and scope of appropriate projects.
d. Adequacy
Here, the most common accusation is that voluntary carbon offsets are moral sales of indulgences. This accusation implies that the positive effects of a legitimate, necessary and appropriate measure would be devalued by serving the promotional aggrandizement of the actor or financier.
In other words, is it permissible to use an otherwise sensible project to make one’s own CO2 footprint look good? Here are a few basic thoughts:
- An otherwise sensible measure can remain sensible even if the actor is an unsympathetic puke.
- Lies and advertising slogans can usually be recognized from a great distance – if you only want to. Anyone who sells products in plastic packaging and at the same time markets circular economy as the central theme of their entrepreneurial existence without providing their own starting points for improvement is more likely to suffer from dissociative personality disorder than to take the subject seriously.
And yet an uneasy feeling remains. Do companies pollute the environment more if, on the other hand, they can relieve some of their guilty conscience via certificates? Analogous question: do people buy bigger cars if they have become cheaper? Probably yes! The human mind knows so many variations and tricks of self-deception, that one may assume some creativity in climate compensation as well.
The appropriateness depends on the classification of the compensation in the entrepreneurial context.
5. The bottom line
Humanity must reduce its carbon footprint to virtually zero. The key measure to achieve this is the decarbonization of energy, construction, transport and food. Voluntary offsetting, as well as extraction, currently play a rather minor role on a global level in quantitative terms.
For companies and private individuals, it is certainly true that the avoidance of CO2 emissions must be given the highest priority. Only those who declare avoidance to be the main objective of their core business and underpin it with appropriate measures are seriously concerned with climate protection.
The project certifiers have a special duty of care, and the critical monitoring of these certifications by the press and the scientific community is particularly welcome from this point of view.
From a moral point of view, however, voluntary CO2 compensation is also susceptible to pitfalls of all kinds. Not as profound as the question of whether it is legitimate to advertise that every product sold saves a child’s life in Sudan (see also The Purpose Pitfall). But it does require a critical customer eye to determine whether the advertising is in proportion to the company’s actual environmental focus.
Many marketing slogans are rather silly. Here, in descending order of their potential seriousness:
- „XY has offset 130 to CO2 in projects a,b,c in 2021. This corresponds to 100% of their CO2 footprint in Scope 3. A reduction of the footprint by 10% is planned for 2022. The associated measures can be found in our sustainability report, which is publicly available…“ – the most honest form
- „CO2-neutral manufactured in Scope 3“ – concrete, with binding scope.
- „Net Zero by 2030“ – a concrete goal, but just a goal
- „Climate conscious“ – good to know, unclear in meaning
- „climate-neutral“ – rather irrelevant target wording, as no content statement
- „climate responsible“ – linguistically absolutely correct, mostly just not in the intended sense
- „climate positive“ – man is good, just the people are bad – famous Austrian actor Helmut Qualtinger said about that
6. How we handle this as a company
We are clearly committed to giving absolute priority to the avoidance of CO2 emissions over all other measures. We have already achieved 85% of this (we have been able to reduce our footprint per kg of end product from 2 kg of CO2 per kg of end product to approximately 300 g/kg over the last 10 years). For the next years we have a detailed plan how to further reduce to 100 g/kg. We compensate for the emissions that cannot yet be avoided through our Fellow B Corporation Climate Neutral Group from the Netherlands, which also selects and guarantees that only meaningful projects in the above meaning are financed.
In addition, we are working on CO2 extraction in research projects in which bio-based raw materials for our production are to be obtained from atmospheric CO2. If these projects are successful, we can be considered not only net-zero (i.e. after offsetting), but gross-zero (i.e. without offsetting)-and that is our gold standard.
We also certainly do not participate in any geoengineering projects until we have a robust impact assessment. All attempts by humans to influence ecosystems in their favor have had to contend with massive side effects, in many cases significantly worsening the condition. Humans are simply not good managers in complex systems.4 see also Elizabeth Colbert: Under a White Sky, Vintage, 2022
Clean Energy Wire magazine has published a guide that can be used to gauge the seriousness of a company’s climate change efforts (How to unpick a company net zero target in 7 steps). We have assessed ourselves in the seven categories:
| Requirement | Situation PNZ |
|---|---|
| Does the company publish complete data on its emissions? | Yes, we publish our annual emissions data in our sustainability report. Not only on CO2, but also on waste, wastewater, etc. |
| Does the company’s net zero target cover all of its emissions? | We measure our emissions in Scope 1-3, i.e. including the supply chain. |
| Does the company have concrete plans to quickly reduce its own emissions, without relying on carbon offsets? | As described above, we have a plan to 100 g/kg, which we will achieve in the next 5 years. This then corresponds to a reduction of 95% in the last 10 years. |
| Does the company have interim targets which show it intends to act fast? | We have substantiated the projects and measures that bring about the above reduction and have provided a timetable. However, we do not have a Gantt chart for this, we should perhaps still make. |
| Is the company’s net zero target in line with the Paris Climate Agreement? | We are reducing our CO2 emissions toward the 1.5° target and have had this validated by the UN’s Science Based Targets Initiative. |
| Does the company have a plan to exit oil, coal, and fossil gas? | Yes, of course. |
| Does the company promote renewables in its energy procurement? | We have been purchasing 100% green electricity for many years. |
We believe that CO2 offsetting is a useful tool in our climate protection efforts, but we also see the danger that CO2 certificates can be used as a moral fig leaf for doing nothing.
And sometimes we get annoyed by all too brazen greenwashing advertising claims from companies that seem to have very little to do with climate protection. Some things you just have to put up with.