What is the difference between carbon offset and reduction?

January 14, 2022 by Admin

Carbon offset. Carbon reduction. Net-zero.

These days, it can often feel like there’s a million and one words to talk about climate action. If you get confused by all these terms, you’re definitely not alone.

According to a Government study, 31% of respondents either hadn’t heard of net-zero or knew very little about it. With so much terminology surrounding climate change, it’s hard to blame that 31%. All these terms can get confusing, and it seems difficult to keep up with the changing terminology as our scientific understanding of the climate threat evolves.

At Tariff.com, we want to empower everyone to do their bit for the planet. That’s why we like to explore different environmental terms and make them accessible to everyone. In this blog, we’re looking at two vital, yet unique components of the net-zero strategy: Carbon reduction and carbon offsetting.

 

What is carbon offsetting?

Carbon offsetting is all about compensating for the carbon dioxide emissions produced by an individual, business or country. In a world that’s so dependent on fossil fuels, it’s difficult to cease all emissions overnight. But many individuals and businesses still want to do their bit for the planet. This is where carbon offsetting can come in handy.

If we can take in some existing CO2 and lock it away (or sequester as it’s known in the industry), new emissions can theoretically be released without increasing the net amount of CO2 in the atmosphere. We need to achieve a balance between the two (if not a net decrease in CO2 levels) to protect the planet and prevent temperatures from increasing too much.

Carbon offset projects such as carbon storage, reforestation and investing in renewable energy all help to remove CO2 from the atmosphere, with either immediate or long-term effects. These projects create what’s known as carbon offsets or carbon credits. Businesses or individuals can buy these credits to offset their emissions, the money from which goes to supporting these projects and sequestering carbon dioxide.

For businesses looking to achieve a carbon-neutral or net-zero goal, supporting carbon offset projects is essential. But it’s also important to do your research and ensure that your carbon credits are actually benefitting the environment- there’s a lot of misleading and blatantly false information out there.

 

What are carbon credits?

Carbon credits or offsets as they’re also known are tradeable certificates produced from carbon offset projects. One carbon credit equals the reduction of one tonne of carbon dioxide (and sometimes other greenhouse gases). Purchasing carbon credits means that businesses can still produce some emissions but have peace of mind that they’re being offset somewhere else in the world.

 

What is Carbon Reduction?

Carbon reduction does what it says on the tin. It involves reducing the amount of CO2 an individual, business or country produces. We all have an impact on the planet and our carbon footprint represents the silent, yet very real effects that our everyday life, or business operations, have on the planet and global temperatures.

Carbon reduction is the umbrella term for any action that aims to prevent CO2 from being released in the first place. Whether it’s small things like walking to work or eating less meat or bigger action such as powering a business with renewable energy, if it stops fossil fuels from being burnt and releasing CO2, it’s an act of carbon reduction.

Perhaps our biggest hope for carbon reduction is renewable energy. For centuries, we’ve got our energy from burning fossil fuels. Sadly, greenhouse gases such as carbon dioxide are also a by-product of this combustion. Renewable energy is generated from sources that never run out, nor release GHGs, such as solar, wind or hydroelectric. By powering more of the world with renewable energy, we can significantly reduce the amount of CO2 we put into the atmosphere.

In many countries, Governments are encouraging/putting increasing pressure on big businesses to address and reduce their carbon emissions and not just through carbon credits. They’re also setting national targets to take action against climate change, usually in the form of a net-zero target.

 

How do offsetting and reduction work together?

Whilst carbon offsetting can be used to help the planet, it should be used in conjunction with a total and systemic reform of our energy system, including generation and usage. Without taking action to reduce our emissions, carbon credits simply act as a band-aid solution to environmental issues and will ultimately prove insufficient in the face of the climate crisis.

In order for a business to reach net-zero, it needs to both reduce and offset carbon emissions. Going net-zero typically involves first reducing your emissions as much as possible and then using carbon credit to offset any residual carbon footprint. The emissions that a business releases will there be offset or ‘cancelled out’ by their support of carbon offset projects across the work.

 

What’s the Difference Between Carbon Neutral and Net-Zero?

Whilst carbon neutral and net-zero are similar terms that are often used interchangeably, they do mean different things. Here are the main similarities and differences.

Carbon Neutral

• Mainly focuses on not increasing carbon emissions and achieving carbon reduction through offset schemes or by purchasing carbon credits.
• Concerned primarily with carbon dioxide.
• Only covers emissions that companies are directly responsible for, as well as emissions from purchasing energy.

Net-Zero

• Involves reducing your emissions to the lowest amount possible and using offsetting measures as a last resort.
• Generally, encompasses other greenhouse gases such as methane.
• Considers emissions generated across the whole value chain (i.e. emissions from purchased goods/services)
• Needs a national and global effort to feel the real benefit of net-zero strategy, as established in the Paris Agreement.

Ultimately both terms involve offsetting carbon dioxide emissions with the aim of balancing the amount of CO2 that’s released and taken in. Net-zero builds on the general principles of carbon neutrality but takes it a step further by putting the focus on reducing all emissions, not just CO2.

Whilst the term carbon neutral has perhaps been in the public imagination for longer than net-zero, most countries and businesses are now leaning more towards a net-zero approach. Reducing the emissions we produce has to be the centre of any serious attempts to tackle climate change and prevent global temperatures from increasing above that 1.5-degree limit.

 

Why do businesses need to think about net-zero?

The UK Government aims to reach their net-zero target by 2050. This means that the UK will have finally balanced its emissions and will no longer be contributing to increasing CO2/greenhouse gas levels in the atmosphere. It’s an ambitious target and if we’re going to meet it, we all need to pull our weight. Businesses are no exception and arguably bear greater responsibility than individuals.

Yet the business world doesn’t only have a moral obligation to act. Some businesses will also have a legal requirement to track their emissions and take action. Indeed, there are currently two schemes in the UK that impact big business:

SECR (Streamlined Energy & Carbon Reporting)

The SECR came into effect in April 2019 and requires all quoted, unquoted and LLPs to disclose both their energy usage and emissions on an annual basis. Companies that meet the following criteria are obligated to report this information or face a potential fine.

• 250 or more employees
• Yearly turnover of more than £36m
• Annual balance sheet of £18m or more

In addition to this, companies must also report what action they are taking to increase the energy efficiency of their business. Whilst this only applies to larger companies that meet the above criteria, the Government also encourages all other companies to measure and report their energy use and emissions (although they’re not required to do so by law).

 ESOS (Energy Savings Opportunity Scheme)

The ESoS is an energy assessment and saving scheme that dates back to 2014. It’s a separate scheme to the SECR but for some organisations, there will be a crossover and they’ll have to complete both. Unlike the SECR, however, ESOS reporting is only required every 4 years. Organisations or UK undertakings qualify for ESOS if they:

• Employ 250 or more people
• Have an annual turnover of over €50 million and an annual balance sheet of €43 million or over
• As laid out on the uk website, the ESOS comprises of several main stages, including:
• Identifying all parts of an organisation
• Identifying total energy consumption
• Identifying significant energy consumption (at least 90% of your total energy consumption)
• Carrying out an audit on all significant energy consumption
• Identifying energy savings opportunities

 

How can I take my business net-zero?

If you’re looking to take your business net-zero in 2022, Tariff.com is here to help. We understand that going net-zero isn’t easy. That’s why we help your business set achievable targets, ensuring a smooth and gradual transition to net-zero emissions. We believe that every business has a moral obligation to act and want to make the journey to net-zero as simple as possible.

Our consultants are trained to audit your business, calculate your carbon footprint, and offer support and advice to reduce and offset your emissions. With the Tariff team on your side, you’ll have expert support every step of the way, so you can do right by both your business and the planet.

 

Jargon buster Summary

Net-Zero

A target aimed at negating the amount of greenhouse gases produced by human activity by reducing and absorbing CO2 and other gases from the atmosphere.

Carbon Neutral

A term that means there’s no net gain of CO2 in the atmosphere, often achieved through offsetting emissions.

Sustainable

Refers to the long-term maintenance of the planet and its resources by causing little to no damage to the environment.

Green

A colour that’s often used to describe something that’s generally beneficial for the environment/sustainable e.g green energy/tariffs.

Carbon credits

Certificates that can be bought and sold represent one tonne of carbon dioxide removed from the atmosphere.

Greenhouse gases (GHG)

A type of gas that absorbs and emits radiant energy creating the greenhouse effect. Increased levels of these gases (carbon dioxide, methane, and water vapour) are causing global temperatures to increase.

Electric Vehicles (EVs)

Vehicles that are powered by electricity rather than petrol or diesel. Better for the environment when the electricity is from renewables, helping to tackle the climate crisis and air pollution.

SECR

Streamlined Energy & Carbon Reporting. A scheme that requires certain businesses to disclose both their energy usage and emissions on an annual basis.

ESOS

Energy Savings Opportunity Scheme. A scheme that requires businesses to audit their energy consumption and identify energy-saving opportunities.

Greenwashing

When companies try to make themselves look greener than they are in their marketing materials but actually don’t do much for the planet.