A BRIEF ANALYSIS OF THE CARBON OFFSET MARKET

Reference to Net Zero emissions feature heavily press releases and companies sustainability reports. But less visible are details on how those businesses will accomplish their goals! Dig deeper into the text, and among the enthusiastic claims of making a better world are invariably references to using ‘offsets’ part of the overall strategy.

That single word now represents a multi-billion dollar opportunity for financial traders looking for the next lucrative instrument to market. Mark Carney, the Canadian who became the Chairman of the Bank of England, thinks trading in carbon offsets is going to be worth $100 bn by 2030, and he has formed a company to take advantage of that growth.

Sustainability is at the heart of both the coffee and cocoa industries, which is why it’s a topic we dedicate coverage to at Bartalks. Environmental matters go beyond ethical issues and are existential to our industry.

Business’ continue to greenwash by conflating statistics, switching KPI’s every year so that YoY comparisons are impossible, and other similar tricks, have been used widely.

With regulation forcing transparency, some of those companies are now looking to use offsets as a fast way to boost or maintain those same green credentials they had previously laid claim to.

Incoming regulation will make it much harder for companies to brush their poor practices under the rug as it seems even the use of the word ‘Sustainable’ will be defined by policymakers.

Some are starting to cry foul or attempt to delay the regulation saying it’s a complex problem that needs more time (they’ve had 20+ years). Others are moving with the times and using it as a PR opportunity to promote their green agenda. We are fine with a company crowing over their positive initiatives, as long as they are actually doing them.

McKinsey & Co, a consultancy, thinks the market for carbon credits is hotting up, and entirely new infrastructure is building to surround the trading of credits, from new market systems to auditing and rating the value of different offsetting assets.

The Problem of Offsetting GHG’s and Sustainability

But just because the financial traders like the offset market doesn’t mean that it’s good for our industry. Coffee and Chocolate companies might think that offsets are a relatively easy way to keep compliant and promote their ‘green agenda’. However, I’d like to make the case that we should hold these companies to a higher standard. One in which positive sustainable actions are the main contribution to Net Zero programmes, and carbon offsets make up only a small percentage.

A recent study showed that the majority of carbon offsets are actually bogus and don’t contribute to reducing GHG at all. It’s a largely unregulated market that bears more resemblance to a tax loophole, than anything of practical worth. In my view, a carbon credit does not have the same value as when a company actually makes a change that reduces its carbon footprint.

An exception to this could be when a company is creating their own offsets, such as re-forestation. Even then, we need to examine what kind of trees are being replanted and the biodiversity they are creating.

In fact, this issue has been raised by those trying to form a market for carbon credits as well. Different trees can absorb different amounts of CO₂, but currently, they are treated equally.

The offset market is only going to grow, but as savvy consumers and industry participants, we should be aware of the benefits and limitations, and ensure the coffee and chocolate companies are employing the right tools for transparent and meaningful results.

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