CO₂ compensation: does it work or doesn’t it work?

CO₂ compensation: does it work or doesn’t it work?

News item
08 Jun 2023

We dived during FairClimateFund’s Relationship Day
together with our customers
together with our customers
world of CO₂ compensation.

The voluntary CO₂ compensation market is complex and a lot is happening at the same time. It has probably not escaped your notice that there has been a lot of criticism lately about the claimed climate impact of CO₂ compensation projects and the way in which companies use CO₂ compensation to reduce their CO₂ footprint. FairClimateFund has long advocated more transparency in the voluntary CO₂ market and a fair distribution of carbon monies.

We strive for a CO₂ market that benefits people and communities in the most vulnerable regions of the world, because that is desperately needed. The effects of climate change have been visible for years and the impact in vulnerable areas is significant. Stopping CO₂ compensation is therefore not an option as far as FairClimateFund is concerned. We really need all measures now to mitigate the effects of climate change. And yes, there is still a lot of room for improvement in CO₂ compensation in the meantime.

Our projects make an impact
FairClimateFund’s compensation projects not only reduce CO₂ emissions, they also have a positive impact on the living conditions of the most vulnerable. For example, cooking over an open fire is very harmful to the health of women and children and cleaner cooking also provides many other benefits, such as time savings and reduced deforestation. In addition, our projects also focus on adaptation measures, such as the planting of shade trees for vulnerable crops, such as coffee bushes.

In the meantime, climate finance is desperately needed for vulnerable communities and the voluntary CO₂ market can make an important contribution to this if the carbon income actually reaches local households. The value of the voluntary CO₂ market is expected to rise to as much as 10-40 billion euros by 2030 according to the Boston Consulting Group.

FairClimateFund is the leading global provider of CO₂ credits that are certified by Gold Standard and the Fairtrade Climate Standard, which means that local communities own the CO₂ credits and receive a fair price for them, including a Fairtrade premium. This premium is managed by local cooperatives and invested in climate adaptation activities.

Climate impact of companies
Not only do our CO₂ compensation projects make an impact, recent research by Trove Research also shows that companies that use carbon credits reduce CO₂ twice as fast as companies that do not do so, and that is of course good news for the climate.

For many companies it is not yet possible to go completely to zero CO₂ emissions and CO₂ compensation is then a good solution. We advise companies to follow an active climate policy and to focus primarily on CO₂ reduction. You can then price remaining CO₂ emissions internally. As a company, you then use the climate financing you create with this to further reduction, innovation and investment in impactful projects in the field of climate adaptation, climate mitigation and biodiversity.

As a company, it is important to communicate transparently and honestly about your climate policy. For example, we recommend avoiding hard claims such as CO₂ neutral and climate neutral as much as possible. These claims are often not 100% correct. This may be due, among other things, to the robustness of your CO₂ footprint analysis or the climate project with which you compensate. Consider, for example, trees that still need to be planted, or are not yet fully grown or that disappear due to a natural disaster. Rather, tell your entire climate story clearly, including setbacks and highlights. The form and presentation of your climate story are the key to success.

More transparency
Finally, FairClimateFund is a strong supporter of the assessment of CO₂ compensation projects and “climate neutral” claims of companies by independent organizations. Fortunately, there are international initiatives in development that will deal with this, such as the Voluntary Carbon Markets Integrity Initiative – VCMI, the Integrity Council for the Voluntary Carbon Market – ICVCM and the Carbon Credit Quality Initiative – CCQI

Do you also want to reduce your CO₂ emissions or are you already working on this and if you have any questions about this, please feel free to contact one of our colleagues and we will be happy to help you.

“Together we work towards a better and fairer climate for all of us!”