Carbon offsetting in the neighbourhood

How business commitments to net zero can deliver social benefits at the community scale

Carbon offsetting has long been a way for organisations to mitigate the emissions produced by their business or operation, through investment in avoided emissions or emissions reductions elsewhere. The most familiar scenario for many is one in which an airline invites passengers to invest in a tree-planting project in order to offset the emissions associated with flights. While offsetting has sometimes been viewed with suspicion, as a way for organisations to skirt deep emissions reductions from direct operational and consumer behaviour changes, its appeal lies in its scalability and its ability to bring finance into climate projects. 

The fact is that that in some areas of emissions reductions, we do not yet have solutions that can be scaled practically and financially – carbon-free flight, zero carbon concrete and steel. Also, for many businesses there is a limit to what they can do to reduce emissions within their own value chain, without transformation of wider supporting infrastructure and services which are often outside of their direct control. The transition to net zero emissions within the short timescales currently targeted will require some degree of offsetting for most organisations. The competitiveness of initiatives like Race to Zero, Science Based Targets and The Climate Pledge has rightly accelerated the ambitions of climate targets – companies are trying to out net zero each other and race to achieve Net Zero earlier than their competitors. But in order to do this, an increasing number of companies will need to offset. 

Out of territory, out of mind?

Ever since the 1997 Kyoto Protocol introduced global carbon emissions trading, there has been an international dimension to the process of offsetting. Often companies in the northern hemisphere will invest in the global south, for example funding solar arrays, clean cooking solutions or reforestation projects. While beneficial, these geographically remote efforts necessarily lead to a lack of clarity and awareness about what the offsets have actually achieved on the ground, not just for emissions but for wider social, economic and environmental benefits.  

This passes up on a chance to make sustainability interventions a core cultural and operational aspect of a business and its leadership direction. I believe a new focus on local offsetting opportunities could reframe the practice, strengthening its effectiveness and helping to support investments into public benefit projects that may be difficult to fund through traditional mechanisms. 

Not just more trees

As more and more organisations make ambitious commitments to net zero, there is also a need to expand and diversify the portfolio of accredited offset projects that make a meaningful impact on emissions reductions and – particularly – removals. Therefore, investments in local projects can be in addition to continued support for projects overseas. Removal projects could include both nature-based solutions and engineered approaches, as well as hybrid forms. Indeed, planting the number of trees in the UK which would be needed to offset the UK’s corporate emissions is not feasible.   We need a wider range of tools to solve this problem.

The reality is that the scale of offsetting required to meet current net zero targets will require large scale carbon reductions and increasingly carbon removals as experts call for an increased proportion of removals in the lead up to 2050. We can use offsetting to develop and build support for new technical removal solutions, such as combinations of Direct Air Capture and CO2 mineralisation that can create in the future potentially net negative concrete, stimulate green jobs, and contribute to the development of ‘green tech’ clusters.

Understanding carbon offsetting

• Carbon reductions or avoided emissions: Any offset project that contributes to reduce or avoid the emission of greenhouse gases by (e.g.) improving energy efficiency, switching to cleaner fuels, etc.

• Short term carbon removals: Any offset project that directly removes greenhouse gases from the atmosphere on a temporary basis through carbon capture, or sequestration. Examples include tree-planting, which will lock up carbon for the lifetime of the tree. 

• Long term carbon removals: Any offset project that directly removes greenhouse gases from the atmosphere on a long-term or permanent basis. Examples include CO2 mineralisation or Direct Air Carbon Capture & Storage (DACCS).  

• Carbon removals with social benefit: Any offset project that simultaneously removes greenhouse gases from the atmosphere for the long term, while also generating wider socio-economic value for the surrounding community.

This new focus on local offsets would be complementary to existing and ongoing offsetting investments in the global south. An expanded level of localism expands rather than redirects what existing offsetting can achieve. Indeed, larger international companies will be able to invest in both ways at once. For domestic players, there may be a preference for a local connection with community around them. There are also many organisations that have resisted offsetting as they feel their overall corporate purpose is more local. A more diverse range of offsetting options should expand the practice’s relevance and adoption in general.

It's also worth noting that national governments are becoming more resistant to ‘offshoring’ offsets – for example, India is planning to ban the export of carbon credits until its own climate goals are met. A more diverse range of offsetting options should expand the practice’s relevance, effectiveness and adoption in general.

Offsetting goes local

At Arup we have been looking for ways to rethink this practice and use offsetting to tackle a wider range of issues closer to home. It will require new mechanisms that takes organisations’ growing need to offset their emissions, and pools their investments into funds and schemes that address climate issues in a locally relevant, socially valuable way.

Few options exist, but they could be developed, bringing together the interests of commercial organisations and local authorities with long pipelines of net zero projects that currently lack funding. Imagine a central London borough where hundreds of businesses who need to offset emissions and want to participate in improvements to their district could contribute to a local authority offset fund or invest directly in the retrofit local housing. Suddenly, they are joining hands with their neighbours to train local people in retrofitting heating systems for council housing or insulating homes that represent a huge percentage of domestic emissions. A scheme that no single authority could ever fund alone gains momentum and long-term effectiveness overnight. It’s the perfect connection of global responsibility, localism and ESG policy in action.

A new framework and form

Obviously this approach will be unfamiliar to many. We need to figure out whether a buyer of offsets could purchase directly from a local authority or even another company with carbon reduction projects needing investment, or whether a pooling fund would need to be created. There are roles and responsibilities that will need to be filled, including a designated fund manager that is unconnected with the projects themselves. Any new body managing large scale private/public funding will need strong governance and oversight. Transparent evaluation, assessment and accreditation procedures will also be vital, to ensure rigour  in the management of offsets and avoid issues like double-counting of emissions savings. Yet these are not insurmountable obstacles; elements of the international model for offsetting can be replicated at the local level. 

In the UK, local offsetting is making progress. As our research shows, the GLA and Bristol City Council are already using planning law (Section 106) to reinvest developer payments into local projects, which is a non-credit form of offsetting. And Camden Council, with the support of the GLA’s Future Neighbourhoods 2030 programme and Arup, is investigating a local offsetting approach which could enable local entities to invest in local decarbonisation and social value projects. Furthermore, Arup is supporting the development of a new type of local credit with the support of Defra and the Knepp Estate – a rewilding carbon credit. HACT and Arctica partners have developed RetrofitCredits, a model to enable retrofitting of social housing. These are important steps to developing a scalable model.

Tackling a wider set of problems

Tackling climate change always calls for bolder and bigger ideas. Local offsetting could help us to scale good intentions, accelerate net zero efforts and maximise the impacts we have in the community, from improved health and wellbeing to job creation, improved quality of social housing and equitable access to low emissions public transport, and more. Our development work to date has focused on how this idea could take root in the UK, but the approach is entirely transferable to other countries and economies around the world. At Arup we advocate a ‘Reduce, Restore and Remove’ pathway to emissions – prioritisation of direct reductions over offsetting, and where offsetting prioritising removals. But where direct reductions are not possible, local offsets could play a critical role in enabling this framework. As ever with climate, we need to use every tool at our disposal.

Article written by Terri Wills, Urban Strategy Leader and Laura Frost, Associate Director, Climate Change and Sustainability.