For the environmental movement, net-zero emissions by 2050 is our new north star. From the start, CDP has advanced global efforts toward net-zero, catalyzing action by subnational groups – from our partnership in Business Ambition for 1.5 °C, to our thought leadership around foundations for net-zero target-setting in the corporate sector, to our collaboration in the Cities Race to Zero initiative. As the emphasis shifts to faster and deeper GHG emissions reductions by all players in the economy, where do tools like carbon offsets fit into this net-zero future?
Solving the climate crisis will take an “all of the above” approach. We need to reduce emissions rapidly, and we’ll need to draw on every tool in our toolbox to do so.
Companies, governments, investors, policy makers and journalists often ask us where CDP stands on carbon offsets. This question has come up more frequently as the vanguard moves toward a net-zero future. CDP remains consistent in our advice to those looking to join this movement: while the primary focus must be on cutting GHG emissions that are released into the atmosphere, we acknowledge that there are productive, environmentally-positive and socially beneficial ways of implementing offsets.
Good offset projects should lead to real reductions or sequestration of carbon. They should be monitored, verified and must have concrete ownership. Ideally, they should be scalable and have potential for co-benefits like protection of biodiversity, improvement of livelihood for local communities and improved air quality. Forestry and land use sequestration projects offer great potential in terms of volume of offsets, and they provide an added benefit of enhancing the Sustainable Development Goals. Reforestation in particular has the largest potential to sequester carbon globally – an estimated 253 Gt CO2 between 2018 and 2100.
These projects will need financing. Private sector finance must mobilize to protect, restore and enhance global forests as part of science-based net-zero corporate strategies. Carbon markets are not the only vehicle through which financial investment toward GHG reduction will flow. Precisely because we want the finance to flow, for CDP there is a huge amount of value in the voluntary and compliance carbon markets that have driven successful offsetting projects on the ground to date. Such projects have triggered real change, directing private financing to climate-action projects that may not have launched otherwise. They are vital and CDP fully supports them.
However, companies can’t simply purchase offsets and then carry on with business as usual while corporate deforestation and pollution are on the rise. Reforestation is a worthwhile action – but companies cannot pursue it while also destroying forests with impunity. Our recent global forests report, The collective effort to end deforestation: A pathway for companies to raise their ambition, finds that only 1% of companies are taking best practice action across a set of 15 ambitious indicators related to deforestation. Ten million hectares of forests have been lost every year since 2015, which also increases the risk of future pandemics and dangerous climate change. Corporate action must shift from a focus on offsets to real, immediate, comprehensive action to halt deforestation.
For this reason, when it comes to carbon offsets, CDP advocates for an “all of the above” approach. Emissions reductions must be prioritized, but we need to see all of these actions happening in parallel. Reduce emissions, and simultaneously scale up finance for companies to protect ecosystems.
Companies seeking environmental stewardship have a responsibility to catalyze the transition – not just through offsets. In the new net-zero landscape, climate leadership means that a company not only scales up efforts to reduce its own GHG emissions in line with the demands of science but also helps to fill the climate finance gap and advocates for more widespread ambitious climate action.
In the months ahead, CDP will release more information on how we will incentivize these actions going forward. We will move toward a comprehensive system that places planetary boundaries at the heart of all environmental ambition.
One thing you can be sure of: CDP will continue to accelerate the transition to net-zero by incentivizing the adoption of commitments and actions holding companies accountable. As the major climate actors fall in line behind net-zero, there is simply no other way forward.