What is CO2 compensation?

Carbon dioxide and, in general, greenhouse gases, when highly concentrated in the atmosphere, cause the temperature of the Earth’s surface to rise and, consequently, global warming and climate change. Scientific evidence shows that it is human activities that are primarily responsible for warming our planet. 

In order to contain the increase in global temperature, several international commitments have been made:

• Paris Agreement: First binding global agreement on climate change adopted at the 2015 climate conference. It has been agreed to: keep the average temperature rise below 2 ºC from pre-industrial levels (possibly below 1.5 ºC), emphasize the need to reduce global emissions as soon as possible and undertake science-based emission reduction solutions
• Agenda 2030: action program signed on 25 September 2015 by the governments of 193 UN member countries. It incorporates 17 Sustainable Development Goals - Sustainable Development Goals, sdgs. Countries are committed to achieving them by 2030
• COP26: This is the last UN conference on climate change. The main objectives of the COP26 are: to zero net emissions globally by 2050 and to aim to limit the increase in temperatures to 1.5 ºF, to adapt for the protection of natural communities and habitats, to mobilize funding, encourage collaboration between governments, businesses and civil society

In order to achieve the ambitious global climate targets, it is necessary to implement measures to minimize greenhouse gas emissions from human activities and to offset residual emissions or those that cannot be reduced through sustainable compensation of CO₂ emissions or carbon offsetting.

According to the latest report of the Science-based Targets (SBTi) initiative, in fact, CO compensation and neutralization measures play a critical role in accelerating the transition to zero net emissions globally, but "do not replace the need to reduce CO₂ emissions in the corporate value chain in line with the latest scientific findings". 

The report explains that the reduction efforts may not be enough to reach the 1.5 C target set by the Paris Agreement because of the residual emissions, emissions that a company cannot reduce due to technical or economic constraints. Therefore, the compensation of CO₂ emissions, in parallel with the reduction, becomes a necessary measure to reach the goal of zero net emissions globally.

What is CO2 compensation and what is the difference compared to carbon inspecting activities?

CO₂ compensation is a mechanism that allows companies to buy carbon credits from projects that create a reduction in carbon dioxide or greenhouse gas (GHG) emissions or an increase in carbon storage in order to offset their unavoidable emissions (for example through projects involving afforestation or reforestation or the use of renewable energy sources, etc.). 

In other words, offsetting a ton of carbon means that there will be one ton less carbon dioxide in the atmosphere than there would otherwise have been without implementing a carbon offsetting project.

Compensation projects generally refer to:

• Development of renewable energy to help decarbonize the local energy network
• Energy efficiency and Fuel Switching, that is energy saving measures that reduce CO₂ emissions and allow you to replace fossil fuels with renewable energy sources
• Capture of greenhouse gases
• Limitation of the phenomenon of deforestation (which can both avoid the emission of carbon stored in trees, and absorb additional carbon as trees grow) through, for example, forestry (projects protecting and restoring existing forest areas threatened by deforestation)
• Implementation of agricultural practices that sequester carbon in soils by restoring biodiversity and developing new sources of income for smallholder farmers
• Household devices (cookstoves), efficient kitchens that significantly reduce wood consumption, or biogas digesters that provide sustainable fuel to local communities thus preventing deforestation and avoiding greenhouse gas emissions
• Water management through projects that provide clean water to households in rural communities by eliminating the need to boil water and thereby reducing greenhouse gas emissions
• Waste management, through landfill projects created to capture the methane released from waste disposal and turn it into clean fuel.

Despite the similar term, compensation projects (offsetting) differ from carbon inspecting activity.

Unlike the term carbon offsetting, the concept of carbon insetting refers to all those strategies that allow you to reduce greenhouse gas emissions directly related to the value chain of a company. Therefore, instead of activating compensation projects developed by third parties, the company invests directly in internal projects to reduce emissions in collaboration with the partners in the supply chain.

CO₂ compensation criteria and international reference programs

According to the Carbon Offset Guide created by the Carbon Offset Research and Education (CORE) initiative of the Stockholm Environment Institute (SEI) and the Greenhouse Gas Management Institute (GHGMI), there are 5 quality criteria for carbon offset credits. 

In particular, quality carbon offsetting credits shall be:

• Additional: the criterion of additionality occurs at a time when greenhouse gas reductions were only possible due to the presence of a market for offset credits and without such carbon credits it would not have been possible to start and develop the project.
• Not overestimated: under this criterion, carbon offsetting credits should not be overestimated. Suppose that for every additional 50 tonnes of CO₂ that is reduced by a compensation project, the project developer reports the reduction of 100 tonnes, and 100 compensation credits are then allocated to the project. In this case, half of these credits would have no effect on climate change mitigation
• Permanent: One of the main challenges of carbon offsetting projects is the long-term effects of CO₂ emissions. 25% of the CO₂ emitted remains in the atmosphere for hundreds or thousands of years. To compensate for this, under this criterion, carbon offsetting credits should be combined with greenhouse gas reductions that are equally permanent
• Not claimed by another entity: carbon offsetting credits must guarantee an exclusive right to greenhouse gas reductions. For example, if two different companies claimed the same 100 tonnes of CO₂ reductions together they would require a total of 200 tonnes of reductions, but the actual decrease would be only 100 tonnes 
• Not associated with significant social or environmental damage: in order for a project to produce high-quality compensation credits, it must not contribute significantly to social and environmental damage.

Before realizing the compensation project, it is necessary to verify compliance with the previously mentioned quality criteria.

Although some programs call themselves standards, the main international compensation programs that guarantee the quality of carbon credits are:

Gold Standard: is a voluntary carbon offsetting program that rewards projects that contribute to the United Nations Sustainable Development Goals. The program ensures that the project benefits local communities 

Verified Carbon Standard (VCS): is a program for the certification of CO₂ reduction developed and managed by the non-profit organization VERRA. VERRA guarantees the credibility of carbon reduction projects. Focuses only on greenhouse gas reduction attributes and does not require that projects have additional environmental or social benefits 

Plan Vivo: is the first program for the certification of projects for the protection of land use. Plan Vivo-certified projects are developed by working closely with smallholder farmers and rural communities to promote sustainable development, improve rural livelihoods and services

Benefits and criticality of CO₂ compensation   

CO₂ compensation projects provide various economic, social and environmental benefits both to the companies that activate them and to the local communities in which they are actually implemented.

In particular, companies can obtain the following benefits:

• Improving and strengthening the company’s brand reputation
• Ability to communicate the environmental commitment of the company to internal and external stakeholders
• Neutralization of the climate impact of companies, products, or services
• Realization of projects that help to achieve the SDGs (United Nations Sustainable Development Goals)

While the benefits obtainable from the local locations where CO₂ compensation projects are carried out are:

• Increased biodiversity 
• Habitat maintenance for native animal and plant species
• Improving air quality and local water resources
• Restoration of vegetation on previously cleared areas
• More employment for the local population
• Improving health and education 
• Access to clean and affordable energy
• Improvement of infrastructure
• Technological innovation
• Increased economic activity

Although CO₂ compensation is a very important step towards carbon neutrality and despite the benefits listed above, we must consider some of its limitations, such as:

• CO₂ compensation projects should be activated together with measures that can drastically and directly reduce emissions related to the company and its supply chain
• Carbon offsetting projects offer real environmental benefits if alternative solutions cannot be adopted in the short term and when certain types of emissions cannot be avoided (for example when frequent air travel is required)
• The compensation encourages the commodification of nature and allows large companies to conquer the lands of the most vulnerable communities risking human rights violations (protest also of Indigenous Environmental Network and Indigenous Climate Action during COP26)
• Reforestation projects can take some time to get the expected results: for example, a newly planted tree can take up to 20 years to capture the amount of CO₂ that a carbon compensation project has set
• There is a risk of accidents for reforestation projects: fires, tree diseases, and deforestation can frustrate efforts and worsen the climate situation. The "death" of trees would cause the release into the atmosphere of all the carbon stored over the years

Despite the importance of carbon offsetting projects for the alignment of the fashion industry to global climate goals it is necessary to consider and be aware of the limitations mentioned above, in order to find solutions to address them adequately. 

For example, organizations can make sure they offset their inevitable or impossible emissions by calculating their carbon footprint. An overview of the greenhouse gases emitted by the organization facilitates the distinction between emissions on which the company can intervene directly through reduction actions and the residual emissions that must be offset.

In addition, to avoid or reduce the risk of accidents or human rights violations associated with compensation projects, the company must activate reliable and certified carbon offsetting projects according to major international programs.

Conclusion

CO₂ compensation measures play a key role in accelerating the transition to zero net emissions globally, but, as underlined by SBTi, "do not replace the need to reduce CO₂ emissions in the corporate value chain in line with the latest scientific findings".

As a result, CO₂ compensation becomes a complementary measure to the reduction in order to achieve the goal of zero net emissions globally.

Despite the importance of CO₂ compensation projects for achieving carbon neutrality, it is necessary to be aware of the limits of carbon offsetting projects, such as the risk of offsetting emissions that could actually be reduced by the company and the risk of accidents and human rights violations that can negatively affect the environmental and social benefits expected from the implementation of projects.

In order to better address potential limits related to CO₂ compensation projects and to align with global climate goals, Cikis supports companies in defining an emission reduction path along the supply chain, as well as in the selection of the carbon offsetting project best suited to their needs. This allows companies to achieve concrete results in a short time, communicate their commitment avoiding the risk of greenwashing and have the certainty of a verified and controlled process.