Once a trustworthy path to meet climate goals, carbon offsets are losing favor among many top corporations. Companies like Delta Airlines, Google, and EasyJet were once top buyers of these credits. But now they have stepped back or have completely stopped purchasing offsets related particularly to renewable energy projects.
Renewable-Energy Offsets Lose Steam
This change in mindset reflects that such carbon offsets do not deliver the environmental benefits they promise. Instead of buying offsets, many companies are trying to directly reduce their emissions. This process is tougher and costlier than buying offsets.
A Bloomberg Green analysis of public offset transaction records shows a significant sales decline for the second consecutive year. This clearly indicated a trend towards fewer offset purchases.
Lambert Schneider, a carbon markets expert from Öko-Institut in Germany, emphasized that scientific reports have repeatedly questioned the “credibility” of such offsets, casting doubt on their contribution to genuine emissions reduction.
A closer look at the carbon offset market shows a sharp decline in renewable-energy credits, which dropped 29% in 2023. Historically, these offsets funded wind, solar, and hydroelectric projects. However, critics argue that many of these projects would be financially viable without the credits. Thus, their additional environmental benefits are questionable.
These concerns prompted the Integrity Council for the Voluntary Carbon Market (ICVM) to refuse its “Core Carbon Principles” label to renewable-energy offsets earlier this year.
This decision labeled many of these credits as “junk” or ineffective for the environment and leading companies like Chevron, JetBlue, and BP withdrew from them.
New Carbon Markets Could Offer Renewable Offsets a Second Life
Bloomberg has come up with another interesting analysis. Despite dwindling interest in renewable-energy credits, these offsets could see a revival. They may still attract buyers in a new regulatory setting. This framework aims to standardize international carbon trading and hold companies accountable.
At the upcoming COP29 climate summit in Azerbaijan, discussions will revolve around establishing a UN-backed carbon trading market for countries and corporations with climate commitments.
New registries, such as Qatar’s Global Carbon Council are stepping in and regenerating interest in renewable-energy credits. However, many environmental experts warn that these registries may perpetuate “junk” credits that provide no meaningful climate impact. Consequently undermining the credibility of the offset market.
Big Names Step Back, but Not All Abandon Carbon Offsets
As Bloomberg highlighted the companies that ditched these renewable carbon offsets, a few companies still back these credits. TotalEnergies, Shell, and Engie still support renewable-energy offsets, expressing confidence in their effectiveness and investments.
New buyers like Japan’s Kobe Yamato Transport and Colombia’s Grupo Argos, have also entered the market despite the rising skepticism.
On the other hand, some companies are moving entirely away from offsetting and focusing on verified carbon-removal technologies, which draw carbon directly from the atmosphere.
For example, Jet2 is shifting its resources towards sustainable aviation fuel (SAF), while Ernst & Young is halting renewable-energy offset purchases altogether. As public scrutiny grows, more companies are choosing to invest in impactful sustainability solutions rather than cheap credits.
Danny Cullenward, a researcher at the Kleinman Center for Energy Policy, emphasizes the need for accountability. He said,
“The problem won’t disappear until there’s greater responsibility for misleading claims in the voluntary carbon market.”
The Future of Carbon Offsets: An Evolving Market
Due to opposition to renewable energy offsets, the largest public registries, such as Verra and Gold Standard, have stopped participating in the majority of renewable energy projects and are restricting the credits’ origins to the least developed nations.
As businesses reassess their sustainability plans, the future of carbon offsets is still unclear. The market for premium carbon reductions is expanding, but the demand for inexpensive credits is declining.
According to Bloomberg, only credits with verifiable environmental benefits will maintain long-term market interest. Some businesses, meanwhile, are clinging to the prospect that the carbon offset sector would eventually get credibility and order from UN-backed rules.
Until then, companies that value credible, science-based approaches to sustainability are increasingly stepping away from traditional offsets. On a positive note, they are setting more impactful and direct emissions reduction targets to fight climate change.
CONTENT SOURCE: Carbon Offsets See Falling Demand but COP29 May Open New Market – Bloomberg
