From compensation to contribution: Is compensation a licence to pollute?

In a three-part series of articles ”From compensation to contribution”, we discuss the procurement of climate units and their role in companies’ climate work, even in a partly challenging market situation.

Is compensation a licence to pollute?

”Offsetting is a free ticket to keep on emitting”


”Less bad is still bad”

Not a week goes by without criticism of climate units produced in different parts of the world and by different methods. Often the criticism is justified. The marketed solution does not produce anywhere near the promised amount of carbon sequestration, or the quality is sub-standard. The use of CCS (carbon capture and storage) units is also criticised as a promise to continue producing emissions. It is believed that companies that use carbon credits to offset their emissions will not change their operations in a more sustainable direction, i.e. less bad is still bad.

According to a recent study by Sylvera, a UK-based analytics specialist, this may not be the case. While some projects that produce climate units may be flawed, high quality climate units are essential tools to contain the rising temperature to 1.5°C.

Use of climate units provides an incentive to reduce emissions

Sylvera studied the activities of more than 100 large companies in different business segments. The goal was to find out whether the use of climate units (Scope 1 and 2) slowed down the reduction of CO2e emissions. Of the companies included, half used units, half did not.

The result was surprising. Companies that used climate units to mitigate their emissions, reduced their own CO2e emissions by half more than those that did not. In other words, when a price was put on offsetting emissions through the use of CCS, it acted as an incentive to change business more actively towards zero emissions. Non-manufacturing segments, such as the financial sector, were the fastest to change. The slowest moving sectors were the manufacturing sectors, where changes to the process require investment.

When looking at emissions reductions, it is always important to remember the starting point and the industry in question. There are sectors where, through their own processes and choices, emissions reductions are rapid. By streamlining processes, a company can also make savings, so it is also worth investing in climate work from an economic perspective. Calculating and identifying emissions is a prerequisite for credible climate work.

Climate units as part of an ambitious sustainability effort

The use of climate units is not linked to emission calculation process. Units can be acquired at an early stage of climate work, as part of a company’s sustainability objectives and social impact. However, when evaluating your own activities to mitigate emissions, the marching orders must be clear: you must determine the current situation by calculating emissions and have a emission reduction plan before using climate units to finalise the emissions offset from your own activities. 

The most important thing in sustainability work is to take real, concrete actions and decisions. That way they will have an impact now and in the future. Climate does not care whose balance sheet the units are on. The main thing is that additional growth, and with it carbon capture and storage, is achieved.

The article was written by:

Eeva-Liisa Heinaro

Eeva-Liisa is a visiting expert who has gained her insight into the carbon market through international sales roles in the forest industry and by working in the domestic carbon market. Eeva-Liisa is also actively following the developments and complexities of the international carbon market.

Read also the previous article: From compensation to contribution, the carbon market is broken, or is it?

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