Reducing GHG Emissions and Offsetting Carbon – How Can Companies Achieve This?

One of the most controversial topics in ESG management is the acceptable methods of greenhouse gas (GHG) emissions reduction. While it may seem odd that reducing GHG emissions could ever be considered unacceptable, not all GHG reduction methods are legitimate. In fact, illegitimate reductions fall into the realm of greenwashing. For a GHG reduction to be considered legitimate, it must be permanent, accurately measured or estimated, and not claimed by another party.

GHG emissions reduction methods fall into one of three categories:
1. Avoiding or mitigating emissions
2. Offsetting via carbon credits
3. Carbon capture and sequestration

In carbon management, a premium is placed on the avoidance of GHG emissions as they are not subject to the same strict accounting requirements as the other GHG reduction methods. For example, leaks from a carbon capture, utilization and storage process or discovery that are not represented in an advertised GHG reduction by a purchased carbon offset can result in those reductions being either partially or fully canceled.

How to: Reduce Emissions

There are two primary ways to avoid GHG emissions: by mitigating leaks or releases of GHGs to the atmosphere, or by reducing fossil fuel-based energy use. Most people associate GHG leaks with natural gas leaks and venting by the oil and gas industry, and link methane leaks to animal agriculture and solid waste landfills. However, two additional sources of potent GHG leaks are used in our daily lives: air conditioning units and refrigerators; the refrigerants that help cool these devices are high global-warming-potential chemicals.

Generating energy by burning fossil fuels, particularly in small and inefficient combustion units, produces large amounts of GHG emissions. By switching to renewable energy sources like wind or solar, or using alternative fuels like ammonia or hydrogen, fossil fuel usage is reduced and significant GHG reductions occur. Yet these solutions are not always viable given a company’s energy demand, location, and/or budget. Regardless of the source, improving energy efficiency through insulation, optimized logistics, and waste heat recovery can also significantly reduce GHG emissions.

How to: Offset Emissions

Compared to reducing emissions, offsetting GHG emissions is an easier option. However, navigating the market is challenging as the quality of GHG offset programs varies considerably. High quality offset programs use a rigorous application and demonstration process involving multiple levels of third-party data validation. These programs require reductions to be accurately measured or estimated, demonstrated as permanent, not claimed by another party, and voluntary (meaning they are not required by regulation). Under these programs, reduction projects must also demonstrate that they are not associated with significant social or environmental harms other than climate change impacts to generate salable offsets. In contrast, low quality offset programs involve very little validation. As companies rush to set emission reduction and net-zero targets, it is important to note that the Science Based Targets Initiative does not allow offsets to be included in a reduction target until all other options for avoiding GHG emissions have been applied and exhausted.

The existence of low quality GHG offsets and the encouragement of GHG emissions avoidance over offsetting does not mean that carbon offsetting is an illegitimate way to reduce GHG emissions. Rather, GHG offset purchases should be made with caution and attention to how they were generated, and they should not be a company’s only method of reducing emissions. Reducing GHG emissions is difficult, yet important, work that requires taking into consideration many different environmental, social, and business factors. It is a controversial topic because no two companies will take the exact same approach. However, this should not be viewed as inconsistency, but instead as a demonstration that there is no “one-size-fits-all” solution. Companies need to employ the full range of legitimate emissions reduction solutions to prevent the worst effects of climate change—and the depth of possible solutions provides companies the flexibility to choose the GHG reduction path that works best.

Leslie Wong specializes in ESG strategy/disclosure, energy efficiency, and carbon accounting. She has 30 years of experience in environmental management with a specific focus on ESG services over the past 15 years.