Fast reading
- The demand for nature-based carbon offsetting is set to rise, particularly in hard-to-abate sectors.
- Potential benefits include nature restoration, biodiversity protection and improved water and air quality, as well as job creation and economic development.
- Key challenges include measurement and verification, and ensuring that the carbon remains locked away for a significant period.
At the Biodiversity COP16, we heard a lot about nature-based solutions and nature-based carbon offsetting – mitigation strategies to help address climate change. This might be through conserving, restoring, or managing natural environments to remove greenhouse gases from the atmosphere and store them, to prevent them contributing to global heating.
This approach – where companies purchase nature-based carbon credits to offset and compensate for their residual carbon emissions – is referred to as nature-based carbon offsetting (NBCO). Offsetting may be integrated into a company’s decarbonisation strategy to help it reach net zero1 in line with a Paris Agreement-aligned 1.5°C climate target. Companies in hard-to-abate sectors may seek to rely on them.
According to the Intergovernmental Panel on Climate Change (IPCC), carbon dioxide must be removed from the atmosphere at scale to limit the global temperature rise to below 1.5°C. 2 While reducing carbon emissions remains the priority, sequestering carbon from the atmosphere is equally crucial. Carbon dioxide can be removed in two ways – via technology-based solutions or nature-based solutions.
Although technology-based solutions such as carbon capture, utilisation, and storage (CCUS) face uncertainties and cost challenges, as we set out in a recent article, nature-based solutions can provide a way forward. Not all offset projects directly remove carbon dioxide from the atmosphere. Avoidance projects are aimed at preventing future carbon emissions – for example, via avoided deforestation or improved land and forest management. Removal projects directly reduce the carbon in the atmosphere, via soil carbon sequestration, afforestation or reforestation, for example. Restoration of mangroves, peatlands and wetlands, and regenerative agriculture strengthen ecosystems and nature’s ability to absorb carbon, therefore counting as both avoidance and removal.
Benefits of carbon offsetting
Compared with technology-based carbon offsetting, nature-based offsets are economical and scalable, helping to mitigate risks and reduce the overreliance on technological solutions. They can also deliver environmental and social benefits beyond carbon storage, such as nature restoration, biodiversity protection, improved water and air quality, job creation and economic development.3 In addition, they may provide an opportunity for developing countries to access private capital to support climate-resilient, productive and sustainable agriculture.
Challenges and key concerns
The voluntary carbon offset market is currently unregulated, which poses inherent risks for companies seeking to rely on offsets as part of their decarbonisation strategy. Credibility and reliability remain a concern, and in a July 20244 report, the Science Based Targets initiative noted that “various types of carbon credits are ineffective in delivering their intended mitigation outcomes”.
- Measurement and verification
Accurately measuring and verifying the effectiveness of projects can be challenging. Carbon sequestration rates can vary widely, depending on the tree species used, soil type, climate conditions and management practices. Developing reliable methodologies for measuring these rates is crucial. For forestry projects, the carbon sequestration rate is low when the trees are first planted, but accelerates as the trees mature. Inaccurate measurements can undermine the credibility of these initiatives.
- Additionality
This refers to the idea that each project should result in carbon sequestration that would not have occurred without it. This ensures that the offsets represent real and incremental benefits to the atmosphere. Demonstrating additionality can be complex, as it involves proving that the project is not a continuation of existing practices or would not have happened without the offset incentives. The accounting and assessment of additionality requires a comparison with a business-as-usual scenario, which is highly dependent on the data, assumptions, and emissions modelling used. [5] Projects that fail the additionality test undermine the integrity of the offset market.
- Permanence and leakage
For an offset to be effective, the carbon must be stored for the long term. Projects may be expected to run for up to 100 years, to ensure the permanence of sequestration beyond the carbon crediting stage. However, natural systems are vulnerable to wildfires, floods, droughts, and changes in land use, which can release stored carbon back into the atmosphere.
- Social impacts
While nature-based offsets can offer significant social benefits, such as improved livelihoods for local communities, these benefits are not guaranteed. Poorly designed projects can lead to land tenure conflicts, displacement of local communities, and loss of biodiversity. Ensuring that projects are implemented with strong social and environmental safeguards is essential to maximise positive outcomes and minimise potential harms.
In part two of this series, we will look at how these concerns and challenges can be addressed and overcome.
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1 Net-Zero-and-Voluntary-Carbon-Markets.pdf (vcmintegrity.org)
2 SR15_Chapter_2_LR.pdf (ipcc.ch)
4 https://sciencebasedtargets.org/resources/files/Evidence-Synthesis-Report-Part-1-Carbon-Credits.pdf
5 Carbon Market Principles (jpmorganchase.com)
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