Bonus Session: Offsets Thursday May 20, 14:00 – 15:00 BST

AgendaWelcome and intro – Thomas HalePresentations

• Alberto Carrillo Pineda – CDP• Naomi Swickard – VERRA • Kelley Kizzier – Environmental Defense Fund• Derik Briekhoff – Stockholm Environment Institute

Questions and discussion

Criteria for Net Zero Initiative

Naomi SwickardChief Market Development Officer, VERRA

Criteria for Net Zero Initiative

Alberto Carrillo Pineda

Director, Science Based Targets

@acarrillopineda

May, 2020

The role of offsetting in science-based net-zero targets

Mitigation outcomes to reach net-zero emissions

2

Mitigation outcomes

Abatement of emissions

Conservation of biogenic carbon stocks

Negative emissions

Forest restoration

Reforestation

Afforestation

Soil carbon sequestration

BECCS

DACCS

Decarbonisation

Minimisation of non-CO2 emissions

Reduced deforestation and forest degradation

Forest management

Biological sequestration

Geological sequestration

Other forms of sequestration

Zero net-emissions by mid-century

Zero net-emissions within a decade

Substantial reduction of agricultural non-CO2

emissions despite rapid increase in agricultural output

*Indicators for limiting

warming to 1.5°C with

no or limited overshoot

Important role in the 2nd half of the

century to counterbalance the

impact of residual emissions and to

bring back CO2 concentrations to

safe levels

The list of mitigation measures hereby listed is non exhaustive and is included for illustrative purposes only

Components of corporate net-zero strategies

3

Components of corporate net-zero strategies

Abatement

Neutralisation

Compensation

Decarbonisation

Conservation of biogenic carbon stocks

Minimisation of non-CO2

emissions

Negative emissions

Avoided emissions through the use of sold products

Carbon finance

Mitigation outcome

occurs within the

value chain of the

company

Mitigation outcome

may occur within

or outside the

value chain of the

company

Compensation: Measurable climate

(mitigation) outcomes, resulting from

actions outside of the value-chain of a

company to compensate for the

impact that a company causes on the

climate.

Neutralisation: Effect of

counterbalancing the impact of

releasing greenhouse gases to the

atmosphere through appropriate GHG

emission removal measures.

Others

Mitigation outcome

occurs outside the

value chain of the

company

Abatement: Actions that companies

take to reduce their impact on the

climate by reducing greenhouse gas

emissions associated with their

operations and value chain.

What constitutes an effective neutralisation strategy?

4

• Permanence of

sequestration option;

• Risk of reversal;

• Leakage (Direct and

indirect);

• Volume and type of GHG

released;

• Atmospheric lifetime of

GHG

• Warming equivalence of

GHG emissions (e.g.

GWP*);

Shorter-term

storage

Longer-term

storage

Harvested wood

productsBiogenic sinks

Geological

sequestration

Type of forcer

being

neutralised

Short-lived

climate pollutant

(e.g. CH4, etc)

Long-lived

climate pollutant

(e.g. CO2, N2O)

Net-zero as a north star for mitigation (and compensation) strategies

5

• Compensation is not a substitute for abatement of emissions or

neutralisation;

• When considering sustainability constraints and associated risks,

neutralisation is hardly a substitute for abatement of emissions;

Net-zero as a north star for mitigation (and compensation) strategies

6

2050Base year

Neutralisation

of residual

emissions

2050Base year

Share of

compensation /

neutralisation in

mitigation

strategy

Residual

emissions

Share of

emissions

abatement in

mitigation

strategy

Companies are expected to reduce

emissions in line with 1.5°C / Paris-

aligned pathways and encouraged to

compensate unabated emissions to help

accelerate decarbonisation beyond their

boundaries

A transition towards effective neutralisation

measures (i.e. permanent carbon

sequestration) to mitigate residual

emissions is needed. Yet, this represents a

transition from the current practice, and this

transition needs to happen in a way that

maximises sustainability and climate

benefits along the journey

Compensation

of unabated

emissions

Unabated

emissions

Towards a common terminology and credible claims

7

Components of corporate net-zero strategies

Abatement

Neutralisation

Compensation

Decarbonisation

Conservation of biogenic carbon stocks

Minimisation of non-CO2

emissions

Negative emissions

Avoided emissions through the use of sold products

Carbon finance

Mitigation outcome

occurs within the

value chain of the

company

Mitigation outcome

may occur within

or outside the

value chain of the

company

Others

Mitigation outcome

occurs outside the

value chain of the

company

Ne

t-ze

ro / C

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on

Ne

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ty

Cli

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itiv

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Offsets in Net Zero

Kelley KizzierAssociate Vice President, International ClimateEDF

Offsets and Net Zero Obligations• Globally we need to transition to net-zero emissions

– In 2050, global net zero with residual emissions balanced by removals

• The path to 2050 - to get there we need to enhance emission reductions and removals

– Mismatch between mitigation opportunities and resources to mitigate

– An important role for countries and non-state actors with net zero commitments to support emissions reductions and removals by transferring resources to enhance and expedite the transition

• Urgent Reductions / Time Limited Opportunities– Tropical Forests

• Hard to Abate Sectors– Opportunity to leverage climate commitments from these to drive

emissions reductions in other areas

Total emissions reductions from in billion tonnes CO2e

Source: EDF

1. The global use of carbon markets could allow nearly doubling climate ambition at same cost,relative to current NDCs

Carbon markets can enable greater ambition

Net Result – Reductions or Removals• Is achieving a net zero target inconsistent with emission reduction offsets?

– Not if reductions (and removals) are additional– “Additionality” is fundamental for all carbon credits or “offets”

• A simple example – Entity A and Entity B emit 100 and 200 tonnes respectively– Entity A source their emission reductions from Entity B – provide for100 tonnes of

reduction – Net Result without support = 300 tonnes– Net Result with support = 200 tonnes– The credits are only “additional” if the reductions would not have happened in the

absence of the support.

• Also possible for global net zero - another simple example– Entities A, B and C, emit 100, 50 and 0 tonnes respectively– Entity A buys 50 tonnes of reductions from B, and 50 tonnes of removals from C– Net result = 0 emissions

• Reductions AND removals must be real, additional, verified and have measures to address permanence and leakage

Ensuring Robust Accounting

• Accounting of exported units/credits across countries is a key issue• Without robust accounting – NDCs / Net Zero commitments are

undermined• Also creates incentives to ensure that reductions and removals are

“real”

Source: OECD/IEA CCXG

Thank you!Kelley Kizzier

kkizzier@edf.org

KEY TAKEAWAYS• We need all the tools in the box- need resources to

support reductions and removals• Although everyone offsetting is not consistent with net

zero, it does not mean that anyone offsetting is not consistent with net zero – it is a matter of striking the right balance within entities, between entities and over time

Carbon offsets: What role for net zero?

May 21, 2020

Derik Broekhoff

What is a carbon offset?

• An investment in external greenhouse gas reductions or removals in lieu of reducing one’s own carbon footprint

• Through offsetting, a claim to mitigation is transferred from one entity to another

• Most offset transactions are implemented through the issuance, transfer, and retirement of carbon credits, which convey a claim to certified mitigation

Offset “quality”

Is my offset…

…Not over-estimated?

…Additional?

…Permanent?

…Not harming anyone?

…Not double counted?

Or is it a product of bad accounting?

Or would an upgrade have happened anyway?

How many people are claiming the reductions from this project?

Or will someone be logging my offsets ten years from now?

Is this hydroelectric dam displacing people and destroying ecosystems?

www.offsetguide.org

Aren’t there standards for offsets?

• Offset “programs” were created to provide assurance and standardization for carbon credits• But at the end of the day, they have a binary decision to make:

• Quality, on the other hand, is not binary!• A program may issue credits for every reduction that scores above a

“50” for its level of confidence• But when you buy a credit, is a score of 51 really good enough?

Issue a credit Don’t issue a credit

Image source: Trexler 2019

Double counting

• Under the 2015 Paris Agreement, every country in the world has pledged to reduce greenhouse gas emissions• Currently, Article 6 negotiations are sorting out how to avoid

double counting when one country offsets its emissions with reductions from another• This is an issue for voluntary offsets, too!• Options:• Countries could formally acknowledge the transfer of an

offset to voluntary buyers• Think of voluntary “offsets” as something different: a

voluntary (charitable) contribution towards a country’s greenhouse gas reduction goals

Questions for “net zero”…

• Is “in lieu of” the right way to think about offsets in the context of net zero?

• If not…• Is one “offsetting” or “contributing to external mitigation”?• Why stop at net zero (why not “carbon negative”)?• Should offsets for net zero only involve removals?• Does one need a formal claim to the mitigation, and should

mitigation go beyond countries’ NDC pledges? • If an organization offsets all emissions, when does it get to

formally claim to be “net zero”?

A strawman proposal…

Endpoint (2050)…

• “Offsetting”

• Net zero

• Removals only (preferably geologic CCS)

• Avoidance of double counting strictly enforced

Interim period…

• “Contributions”

• Net zero or negative

• High quality avoided emissions + some removals

• Transparency on claims

Criteria for Net ZeroDiscussion & Questions

1. When is it appropriate to offset?

2. What offsets should be used (e.g. reductions vs removals, biological vs geological, permanence requirements)?

3. What rules/practices are needed for high-quality offsetting?

Criteria for Net ZeroNext Steps

1. Final session with Champions – Thursday 28 May (5pm BST)2. Output documents: “starting line” criteria and mapping 3. Process:

- Circulate for feedback via email/phone- Discuss as a group during final session- Revise based on inputs- Champions will publish final version