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Carbon Ratings

Yes, carbon offsets are imperfect—but we need them

June 23, 2022
Why we need carbon offsetting

Nature versus nurture. Science versus religion. You’re with us or against us.

False dichotomies are the enemy of reasonable argument. They’re most frequently deployed in debates where the stakes are high, and where adversaries have become emotive. It’s unsurprising, then, that the conversation about how humanity ought to tackle the climate crisis is particularly vulnerable to this logical fallacy.

Some of the most egregious uses of false dichotomies crop up in the context of carbon offsetting—financial investment in projects such as the preservation of ecosystems, carbon capture and storage, the construction of wind farms or the planting of forests—which companies can use to compensate for carbon released elsewhere. They’ve been the focus of significant attention in recent weeks, with the U.S. Securities and Exchange Commission announcing a draft rule in March that would require companies buying offsets to provide authenticating details, including the source, cost, the amount of carbon they represent and the location of the project they are linked to. This is only a draft rule, and not yet finalized, but the offsetting disclosures are considered uncontroversial so are likely to be included—which would be a big step forward for transparency.

But according to opponents (including some major conservation groups) offsets are a “scam,” a “bookkeeping trick,” a form of “greenwashing,” and a distraction from real climate action. In other words, you’re either “for” offsets, or you’re for root-and-branch reform that will get the world to net zero emissions.

The truth is nuanced.

But this stark binary doesn’t in any way represent the range of options on the table for the planet. The truth is much more nuanced: if we’re to have a hope of preventing catastrophic global warming, offsets must be one of several tools in our arsenal. While land use is currently responsible for nearly a quarter of all global emissions, with careful stewardship it could become a carbon sink—capable of removing 20 years’ worth of CO2 based on 2018 levels.

To be fair to their detractors, though, there’s a scenario where offsets do become part of the problem. The sector has had its fair share of scandal, with phantom trees left unplanted and baseline projections that create wildly inflated expectations of how much carbon could be saved via forest conservation. The lack of transparency, the use of shaky assumptions, and poor project auditing have made offsets a destination for hucksters, and everyone has suffered as a result.

To say this is a problem with offsetting, though, is like claiming we should ban all therapeutic pharmaceuticals because of the harm caused by illicit drugs. The true problem isn’t with offsetting itself, but with its execution. What we need is not its abolition, but the creation of guardrails so companies can know they’re investing in real outcomes that will buy the planet time to come up with fundamental solutions. In turn, this will contribute to the creation of a dynamic market for carbon that will help get us closer to root-and-branch decarbonization.

Upholding integrity in supply and demand.

The first piece of the puzzle is supply side integrity: creating standards so offsets aren’t fake or bloated, and to ensure their accounting adds up. This is about validation, verification, monitoring and reporting. Once upon a time (when it was done at all) such auditing involved cumbersome techniques such as measuring the circumference of trees and extrapolating out to the whole forest to figure out how much carbon was stored there. While companies such as ours still do fieldwork to calibrate our measurements, we also combine these methods with the use of geospatial 3D laser scans—taken on the ground and via aircraft—and with satellite data and machine learning to more rapidly and accurately audit the quality and progress of nature-based offset projects. This allows us to generate extraordinarily clear, meaningful, and multidimensional ratings that help ensure corporate offsets have a verifiable climate impact, and that project developers doing great work can get the credit they deserve.

The next step is demand side integrity: What can emitters legitimately claim when it comes to reducing their carbon footprint? As pressure from government and civil society mounts, companies will be unable to side-step environmental accountability. In March, in fact, the ​​SEC also put forward a requirement that publicly listed companies will have to disclose climate-related risks and greenhouse gas emissions to investors. In the near future, carbon will become an unavoidable line on a company’s balance sheet. This means that, alongside offsets, it’s vital that policymakers push for ambitious decarbonization strategies for the economy as a whole. The good news is that offsets are not just a supplement to this project: By providing clear price signals and fostering a dynamic market in carbon, they help to catalyze and accelerate such innovation.

Right now, the global patchwork of carbon markets means the price fluctuates wildly, and is hard to pin down with precision. But think about a world where carbon has a true price, set via demand and supply dynamics in the offsets market. Like the trade in any proper commodity, this would allow you to create a cost curve that anticipates how the carbon price will fluctuate in the future. That means you can hedge future risk and manage future costs—something that any carbon-intensive industry should be mightily interested in right now.

To understand the implications of this idea, imagine you’re a start-up trying to produce a carbon-free engine for long-haul aviation. If you want to get investment to grow the business, you need to prove to funders that they will get a return for their money. And the only way to do that is to project forward based on a real price for carbon. Without it, there’s little incentive to sink money into your solution. But if you can argue that in 2030, carbon will cost the aviation sector, say, $300 billion a year, suddenly your product becomes a lot more compelling.

This is how the profit incentive and scaling up of carbon markets—including the verified offsets that underpin them—will help drive the adoption of the fundamental technologies that stand a chance of getting the planet towards net zero carbon. Using economic incentives to kick-start innovation is likely to be a lot more effective than expecting a mass moral and behavioral conversion.

Rejecting offsets isn't an option.

And after all, what is the alternative? Outright rejecting offsets means telling hard-to-decarbonize industries—like aviation—that they can effectively sit on their hands while the planet burns. But if we encourage them to invest in offsets as a first step, at least that gets them used to a future where carbon is inevitably going to be on the balance sheet, as well as helping them to pluck low-hanging carbon from the atmosphere while new technology is in development.

Perhaps the worst false dichotomy in the debate about the climate crisis is the belief that you’re either a believer in high ambition, or you’re an incrementalist. The reality is that one stance can’t come at the expense of the other. If we are to stand a chance of staying within a 1.5-degree-Celsius temperature rise, humanity needs us to wear both hats—which means we need offsets.

This article was originally published June 10, 2022 on

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About the author
Co-founder and President

Sam started his career in London working for top US law firms. He specialized in the formation and regulation of Investment Funds, working on a number of high-profile launches. More recently he focused on Environmental, Social and Corporate Governance (ESG) products and has advised on major carbon credit issuances, which sparked his interest in carbon markets. He left law to co-found Sylvera and is now a regular speaker at industry events and a trusted advisor to multilateral institutions, government bodies and sustainability professionals.