Scoping Out Corporate Carbon Neutrality
With activists at COP26 and beyond accusing financial-sector leaders of greenwashing by relying on carbon offsets, the debate about climate-aligned investing has heated up. While critics are right that pay-to-pollute strategies have no place in a net-zero world, some offsets could still have a positive – if temporary – role to play.
NEW YORK – In the run-up to this year’s United Nations Climate Change Conference in Glasgow (COP26), a growing number of companies hopped on the sustainability bandwagon, declaring commitments to achieve carbon neutrality – net-zero carbon-dioxide emissions – by mid-century. And among the many ambitious announcements to come out of COP26 is that almost 500 financial-services firms have “agreed to align $130 trillion – some 40% of the world’s financial assets – with the climate goals set out in the Paris agreement, including limiting global warming to 1.5°C.”
But many commentators have been skeptical about such proclamations, suggesting that they amount to greenwashing. Critics point to corporations’ heavy reliance on “offsetting,” which has become an increasingly important – and controversial – issue in the broader climate debate. So great is the confusion about what is real and what is not that the Taskforce on Scaling Voluntary Carbon Markets, led by UN Special Envoy for Climate Action and Finance Mark Carney, has established a new governance committee to review corporate emissions pledges.
The skeptics are right to be concerned about the use of offsets. The world needs to get to net-zero by mid-century, and it cannot do that with offsets. Companies buy offsets precisely so that they can continue emitting greenhouse gases (GHGs) while claiming that their emissions are zero, net of the offsets. The very existence of an offset means that the purchaser’s emissions are not zero.