With net zero increasingly considered as the central goal for climate action, pressure on companies to set targets and commit to net zero emissions is rapidly mounting.

Put simply, being a net zero business means you are not adding new emissions to the atmosphere. This will require companies to deeply decarbonise their operations and value chain. However, change does not happen overnight – during the transition period to net zero, organisations will inevitably continue to generate emissions. The ‘net’ in net zero allows for a small amount of GHG emissions to still be generated so long as they are offset by the same amount. Companies are increasingly looking to the carbon credit market to help them take responsibility for these remaining emissions.

Offsetting GHG emissions with carbon credits is not without controversies or complexities. From peatland protection and afforestation projects to renewable energy projects and Direct Air Carbon Capture and Storage (DACCS), carbon offsetting covers a wide range of activities, and it can be difficult to navigate the fragmented carbon market.

Companies face many decisions when choosing to offset their emissions, such as Are removal projects or reduction projects best? Where should you purchase carbon credits? Should you favour biological or technological offsets?; this blog on ‘Removals vs Reductions’ constitutes the first in a series which will help you develop an offset strategy and contribute to a net zero economy.

What is the difference between reduction and removal projects?

Carbon offset projects can be broadly grouped into two categories:

  • Reduction projects (aka avoidance) – these include projects that prevent additional GHG emissions from being released into the atmosphere. This includes renewable electricity production (displacing more carbon-intensive sources of energy); avoided natural ecosystem degradation (including REDD+ and all activities preventing deforestation and forest degradation); fugitive emissions recovery; and improved livestock management.
  • Removal projects (aka sequestration) – these include projects that enable carbon already in the atmosphere to be sequestered. Most of these projects are biological sequestration and include new tree plantations; regenerative agriculture; grasslands and rangeland soil carbon sequestration by changing the land use; restoration of wetlands through replanting mangroves; and the making and burying of biochar. Technology-based removal is nascent but includes direct air carbon capture and storage (DACCS).

To achieve net zero emissions, organisations must reduce GHG emissions where possible and neutralise the impact of any residual emissions by removing an equivalent volume of atmospheric GHG from the atmosphere. This will result in no net impact on the climate.

What does this mean? By 2050 at the latest, companies will need to ‘neutralise’ their remaining emissions by investing exclusively in projects that permanently remove greenhouse gases from the atmosphere. However, in the shorter term companies can choose to invest in projects that either reduce or remove emissions.

Remove or reduce? The Avieco view

Since it is accepted that carbon removal projects are required to achieve net zero, it may seem sensible to immediately direct 100% of offset investment to this type of project. However, there is value in supporting reduction activities in the near term; to limit global warming to 1.5°C we must halve GHG emissions by 2030. To achieve this requires reducing future emissions – not simply continuing to emit at the same rate and subsequently removing the emissions from the atmosphere. Therefore, reduction projects have a vital place in near-term offsetting strategies – to accelerate the transition to a low-carbon economy and thus reduce the volume of future emissions which will then have to be removed.

This view is supported by leading organisations. The Taskforce on Scaling the Voluntary Carbon Market (TSVCM) advises that both project types need financing now to meet the carbon budget associated with 1.5oC warming, and that a move to removals should take place over time. “In the short-term avoidance/reduction projects can and should be used; in the longer term, flows will have to shift toward removals…while continuing to significantly invest in and maintain existing nature loss projects will still be required for decades to come.”

The WWF agrees – stating thatall of the desirable pathways within the IPCC models point to the need for fossil fuel emission reductions before carbon dioxide removal…..we need to stop deforestation and habitat loss before we jump to tree planting”.

The carbon removal market is also not yet mature, and it will need to scale significantly to deliver the removal capabilities required to reach global net zero emissions. Some organisations, such as Microsoft, are deliberately directing their finance to these projects – hoping they can accelerate the development of the technologies required. They recognise that there is a risk in taking this approach and that some projects may fail. Microsoft has identified various challenges with this approach, which are supported by our research, including:

  • The market for corporate procurement of carbon removal is relatively undeveloped and lacks clarity.
  • Existing standards were designed for reduction projects and are still developing appropriate methodologies for removal projects. This means that assessing the quality of removal projects can be challenging.
  • There is currently only a limited supply of verified removal projects – meaning organisations may need to select unverified projects if they are committed to removal solutions
  • Engineered removal solutions are currently nascent, not tested at scale and very costly compared to alternatives.

At Avieco, we encourage companies to offset their GHG emissions through carbon reduction projects in the short-term, and gradually increase financing in carbon removal projects up to 2050, or their own net zero target year.

Conclusion

The rapid uptake of corporate net zero targets is greatly welcomed as we progress through the second year of the IPCC-dubbed ‘decade of action’. To meet national and international climate targets, companies must reduce their carbon footprint, and this should be the priority focus for climate action financing. However, where companies can direct funds towards both decarbonisation and offsetting, compensating for these remaining emissions through carbon reduction projects can further reduce environmental impacts and contribute to a net zero economy.

The next blog article in our ‘Uncovering the ‘net’ in net zero’ series will focus on Biological vs Technological removals.

Stay in the loop

sustain-ability.
more than a word.

We get that change is not easy. But we must be brave, challenge old ways, set new habits, embrace new thinking.