Stop saying “carbon offset” A Carbone 4 series&nbsp;discussing the&nbsp;new&nbsp;carbon neutralityEpisode 2 : Moving from carbon offsetting to contributingBy&nbsp;<a href="http://www.carbone4.com/staff/cesar-dugast/?lang=en">César Dugast</a>&nbsp;and&nbsp;Renaud BettinOriginally, “carbon credits” were created to&nbsp;help the 37 countries committed to reduce their emissions, as part of the Kyoto Protocol signatories, to comply with the emission threshold. To prevent any outreach of this threshold, it was allowed to finance carbon offset projects in a non-committed country and claim the “ownership” of the reduction.Then came the voluntary offsetting market.&nbsp;All the stakeholders, especially the corporate ones,&nbsp;relied on it on a&nbsp;massive&nbsp;scale&nbsp;to “compensate” their own emissions. No&nbsp;regulatory need&nbsp;here : it was only about buying as many carbon credits as needed by a company on a given perimeter,&nbsp;so that a company can rightfully claim&nbsp;itself “carbon neutral”. The whole of the carbon emissions could therefore disappear behind a magic zero, as far as&nbsp;a company was making a vain wish to “reduce its emissions as much as possible before&nbsp;compensating&nbsp;through&nbsp;carbon offset projects”.<h3>THE VERY TERM “COMPENSATE” REFERS TO A MISLEADING IDEA</h3>But this mechanism, whilst rather positive (when considered as an additional&nbsp;financing lever to fight climate change), suffer&nbsp;from a&nbsp;poor image,&nbsp;due to its abusive use and&nbsp;a few structural pitfalls.<h4>1. NOT REDUCING&nbsp;ITS COMPANY EMISSIONS IS EQUIVALENT TO FINANCING A REDUCTION ELSEWHERE:&nbsp;FALSE</h4>Of course, the climate crisis is a global one. A ton of CO2 emitted has the same impact on the climate regardless of where it was emitted from. Still, in order to aim at a global carbon neutrality by 2050, avoiding the&nbsp;reduction of its own company emissions is not an option. Every sector and every company needs to drastically reduce its emissions&nbsp;and be compatible with a climate scenario limiting global warming to +2°C or +1,5°C, and this effort can not be outsourced. Buying a carbon credit, meaning financing the reduction project of someone else, is something to be encouraged, but will never replace its own efforts.<h4>2.&nbsp;A CARBON&nbsp;EMISSION HERE CAN BE IMMEDIATELY&nbsp;BALANCED&nbsp;BY A REDUCTION OR A SEQUESTRATION ELSEWHERE: RATHER FALSE</h4>Indeed, in terms of temporality, reducing emissions elsewhere rather than in its own company is&nbsp;equivalent if the financed project implies an immediate emission reduction. In other cases, this is false, for example, when the&nbsp;carbon credit comes from a forestry project: the CO2 sequestration happens over the&nbsp;many decades of the tree growth, not on the day the credit is purchased. As the climate crisis continue to worsen and the windows for action are shrinking, even slight differences are significant. Besides,&nbsp;there is no guarantee&nbsp;that the carbon will be stored long enough in the tree, as forest are not immune to climate hazards (fire, strong wind…), diseases or deforestation related to human activities.<h4>3. BUYING A CARBON CREDIT ALLOWS A COMPANY TO SUBTRACT&nbsp;THE SAME AMOUNT OF EMISSIONS FROM ITS GHG REPORT:&nbsp;FALSE</h4>It’s even forbidden by all the&nbsp;reference&nbsp;organization (UNFCCC, Science Based Targets Initiative, Bilan Carbone, ISO 14064, GHG Protocol…) that&nbsp;have&nbsp;some authority on corporate climate reporting requirements. For this reason, Carbone 4 advise its clients to adopt a new carbon accounting system to&nbsp;report&nbsp;more precisely about climate impacts.<h4>4. CARBON OFFSETTING ENCOURAGES A COMPANY TO SHRUG OFF ITS OWN RESPONSIBILITIES:&nbsp;TRUE</h4>The same old tune: carbon offsetting is used to “ease its&nbsp;guilt”, a 21st century version of the Catholic Church indulgences in the Middle Ages, etc. And this is no surprise: as soon as an initiative&nbsp;dangle the possibility to cancel its bad deeds (meaning emissions)&nbsp;by purchasing the good ones (meaning inexpensive carbon credits), it is immediately tempting not to consent to its own reduction efforts on&nbsp;its&nbsp;value chain.Today, after more than 15 years of existence, a vast majority of companies are still reluctant to use the unpopular “carbon offsetting”.&nbsp;And it is a pity, especially when we know the reliability of the&nbsp;voluntary offsetting markets and their ability to raise funds&nbsp;and support&nbsp;low-carbon initiatives, the ecological transition and the improvement of&nbsp;the&nbsp;living conditions of&nbsp;many&nbsp;populations.<h3>REINVENTING THE SEMANTICS TO REINVENT OUR RELATIONSHIP TO CARBON FINANCE</h3>To win the battle against climate, everyone needs to make the&nbsp;required efforts to reduce the emissions at levels that are consistent with a +1,5°C/+2°C global warming objective. But&nbsp;in a spirit of solidarity, and because the climate-friendly financial flows&nbsp;do need to&nbsp;increase, financing the transition beyond its perimeter has to be encouraged as well. However, as long as “carbon offset” hint a possibility to “own” emissions reductions made by others to hide its own,&nbsp;criticism and distrust will persist, and rightly so.We&nbsp;wish&nbsp;to switch from a logic of emissions “ownership” to a logic of “contribution” to those emissions reductions.So far, the voluntary carbon markets were used as a way to compensate its own emissions&nbsp;so that a company can&nbsp;claim itself “carbon neutral”, deciding the perimeter arbitrarily.&nbsp;Today, that vision&nbsp;is disconnected&nbsp;from the regional carbon neutrality objectives. It&nbsp;is lapsed, create very few competitive advantage, and is increasingly challenged by the public opinion.To restore the very meaning of the term “carbon offset”, we need to consider the voluntary carbon markets&nbsp;as what it has always been : an efficient tool to drive action towards a regional net zero.This is what Carbone 4 stand for since 2018, in its consulting activity as well as in its work through the&nbsp;<a target="_blank" rel="noopener noreferrer" href="http://www.netzero-initiative.com/fr">Net Zero Initiative</a>.In fact, this would encourage the promotion of a company contribution to a regional neutral objective, separately from its own carbon footprint. Every organization would then have 3 indicators to&nbsp;monitor&nbsp;simultaneously:<ul><li>The&nbsp;GHG emissions on&nbsp;its entire value chain.&nbsp;Those need to be reduced and compatible with a climate scenario limiting global warming to +2°C or +1,5°C ;</li><li>Its contributions to others’ emissions reductions, in particular through carbon credits&nbsp;financing reduction projects ;</li><li>Its contributions to the development of worldwide carbon sinks, in particular&nbsp;through&nbsp;carbon credits&nbsp;financing sequestration projects.</li></ul>Unlike “carbon offsetting”, it is impossible to&nbsp;ignore the first category (the induced emissions) just because an effort is made&nbsp;regarding the two others. It&nbsp;seems safer to consider those three categories as separated and non-fungible,&nbsp;while keeping in mind it needs to be conducted in an ambitious way. Communicate on a “contribution to a territorial neutrality”&nbsp;rather than&nbsp;“its own neutrality” brings several benefits:<ul><li>More collective: because the global neutrality challenge (the full measure of which has not yet been taken) will only be tackled by a collective and fair participation. This need to be quantified according to the contributions and efforts of everyone.</li><li>More precise : company emissions are separated, in accounting terms, to other positive contributions it can make additionnally (to help others reduce or increase carbon sinks). In other words, we need to set in stone that a company’s emissions do not disappear from the atmosphere when they contribute to someone else’s reduction or the increase of carbon sinks!</li><li>More&nbsp;positive&nbsp;: offsetting cancel the bad deeds, contributing value the good ones.</li><li>Fairer&nbsp;: buying a carbon credit means, above all, to support a project. It is a contribution similar to a climate-friendly philanthropy act that should, just like sponsorship, disregard the carbon price (within the limits of its resources), pay more attention to transparency regarding the use of the funds, and question the margins of the third party registered to sell carbon credits.</li></ul>This position is&nbsp;perfectly consistent with the&nbsp;post-2020 carbon markets&nbsp;taking shape with the Paris Agreement, and stating that only the host&nbsp;countries will be allowed to claim the “ownership” of the emissions reductions&nbsp;according to&nbsp;their NDC (National Determined Contributions).Moving from “carbon offseting” to “contributing”&nbsp;is not a simple semantics change. It is a prerequisite to clean up our collective imaginary about the voluntary carbon finance, which is inhibiting for far too many years the required increase in the financial flows towards low-carbon projects, and fill the “finance gap”*.&nbsp;Helping take the discussion forward, daring to&nbsp;reinvent the very&nbsp;concepts in the light of the new climate&nbsp;change&nbsp;imperatives, while preserving the best existing tools – which will be key&nbsp;advantages&nbsp;to continue&nbsp;shaping the climate action conceptual framework.&nbsp;This is the&nbsp;second episode of Carbone 4 series to&nbsp;discuss the&nbsp;new&nbsp;carbon neutrality. You can find the first episode by clicking here : <a target="_blank" rel="noopener noreferrer" href="http://www.carbone4.com/stop-saying-carbon-offset-territories/?lang=en">For a corporate carbon neutrality committed to its territories</a>&nbsp;*&nbsp;Missing climate investments&nbsp;compared to the current and excepted once.

Stop saying "carbon offset": moving from "offsetting" to "contributing"

Stop saying "carbon offset" A Carbone 4 series&nbsp;discussing&nbsp;a new carbon neutrality Episode 1 : For a corporate carbon neutrality committed to its territories. By <a href="http://www.carbone4.com/staff/cesar-dugast/?lang=en">César Dugast</a>&nbsp;and&nbsp;<a href="http://www.carbone4.com/staff/renaud-bettin/?lang=en">Renaud Bettin</a>&nbsp;<figure class="image"><img src="http://www.carbone4.com/files/wp-content/uploads/2019/06/dino-reichmuth-93777-unsplash-1024x653.jpg" alt=""></figure>&nbsp; On Monday, May 20th 2019, a French non-for-profit organization called Entreprises pour l'environnement (EpE)&nbsp;published the&nbsp;study “<a target="_blank" rel="noopener noreferrer" href="http://www.epe-asso.org/lancement-de-letude-vision-zen-2050/">ZEN 2050 - Inventing and building a carbon neutral France</a>” (in french). This prospective exercice, which Carbone 4 is proud to have taken part in, aims to explore the feasibility of a "net zero emission" objective by mid 21st century on a national scale. To&nbsp;do so, the study focus on both an analysis of&nbsp;the scale of the economy sectors, and a sociological&nbsp;approach of French changing&nbsp;lifestyles. In this&nbsp;EpE study, something interesting occurred : companies&nbsp;tried&nbsp;to define their role in a carbon neutrality objective at a national scale, without ever mentioning "their own" neutrality. But what&nbsp;is&nbsp;the link, and&nbsp;which&nbsp;one should exist, between the neutrality of a territory and the one of a company ?<h3>Local neutrality, a concept covering&nbsp;every scope</h3>Trying to build a ZEN France by 2050, such as&nbsp;the one stated in the&nbsp;EpE study, implies defining carbon neutrality as a local thing.&nbsp;It involves balancing&nbsp;anthropogenic emissions and removals of greenhouse gases in a&nbsp;limited geographical scope. This&nbsp;definition can easily cover any scope : first the earth (<a href="https://unfccc.int/sites/default/files/french_paris_agreement.pdf">article 4 of the Paris Agreement</a>&nbsp;(french), <a href="https://www.ipcc.ch/sr15/">Special report Global Warming of 1.5°C, IPCC</a>) ; a country&nbsp;(étude EpE, <a href="https://www.ecologique-solidaire.gouv.fr/strategie-nationale-bas-carbone-snbc">Low Carbon National Strategy</a>&nbsp;(french)) but also regions,&nbsp;public inter-municipality cooperation establishments (a specific administrative organization in France) and cities. The approach remains the same : balancing emissions and removals of greenhouse gases&nbsp;taking place in a limited geographical area, excluding importations and without considering&nbsp;a single purchase of carbon credits on international markets.<h3>Corporate neutrality : an abstract concept</h3>The idea of carbon neutrality is&nbsp;very popular in the business world.&nbsp;Powerful, federative, seemingly straightforward, the "zero" objective is often claimed, aimed, displayed... with diverse ambition and transparency levels. Today, a "neutral" company roughly follows&nbsp;the same operating mode&nbsp;: to&nbsp;Mesure,&nbsp;Reduce&nbsp;and Offset. Those three steps, although they seem&nbsp;reasonable, lack a couple of things increasingly difficult to ignore.&nbsp;<ul><li>First, no company defines its neutrality on the same emissions perimeter. Some are "neutral" on their whole value chain, others on their office life emissions only... while every company claims the same ambition, as there is but one word, "neutral", to describe a&nbsp;variety&nbsp;of&nbsp;cases.</li><li>Then, the reduction rates expected are often self-declared, based on&nbsp;small&nbsp;and incremental improvements which neither question the business as usual&nbsp;perspective, nor are required to be&nbsp;compatible with a climate scenario limiting global warming to +2°C or +1,5°C&nbsp;. Besides, carbon neutrality is not a future commitment : to be and remain "neutral"&nbsp;does almost never require to respect its emissions reduction targets. In other words, companies claiming to be "carbon neutral" can have their emissions increasing over time !</li><li>Finally, the very term of "carbon offset" suffer from a&nbsp;degraded image. This mechanism, yet virtuous when&nbsp;put to good use, has been a&nbsp;way to shrug off its own responsibilities to reduce its emissions at an affordable cost and for too long. It can even be dangerous and block any action when used to "ease its&nbsp;guilt". And let's not forget that&nbsp;carbon offsets&nbsp;never had the status of a real emissions reduction in corporate carbon accounting.</li></ul>Today, the concept of "corporate carbon neutrality" suffer&nbsp;a&nbsp;confusing and unfortunate conceptual blur,&nbsp;and miss a link with the neutrality targets of the company's territory or country. The latter is&nbsp;neither seek nor claimed. It would therefore be a pity to keep associating&nbsp;an&nbsp;unambitious but current definition to this powerful concept.<h3>The need for a common langage</h3>The need for&nbsp;action&nbsp;has&nbsp;never been greater. We need the action of all the stakeholders, and every financing mechanisms to unlock a transition and reach our targets on an international scale. So how can a company, willing to commit to a carbon neutrality approach with performance obligation at the&nbsp;regional scale, take part ? To answer this question, we need to create guidelines and tools about carbon neutrality. We should step out a navel-gazing vision of a carbon neutrality that would be individual. Let's accept that the real challenge is to reach collectively "net zero emission" at the global, national&nbsp;or local scale. Let's encourage the contributions that every stakeholder (company, citizen, public authorities) is able to make. It is time to reinvent the way we "claim" neutrality.&nbsp; We believe a company willing to be serious about neutrality is serious, above all, about its contribution in reaching the carbon neutral&nbsp;target of its territory,&nbsp;be it a city, a country or even the whole planet. We believe the first step to link companies&nbsp;to their territories lies in defining new indicators, tools and concepts, for companies to monitor their neutrality. To that end, the <a target="_blank" rel="noopener noreferrer" href="http://www.netzero-initiative.com/fr">Net Zero Initiative</a> is designing guidelines, based on a triple bottom line emissions accounting. A common langage, shared amongst everyone, with a set of rules and the same indicators. It is a solidarity and contribution story : beyond neutrality, it is up to us to build a positive and desirable future ! &nbsp;&nbsp;&nbsp;This is the first episode of Carbone 4 series to&nbsp;discuss the&nbsp;new&nbsp;carbon neutrality.&nbsp;

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Stop saying "carbon offset" : For a corporate carbon neutrality committed to its territories

hese ten principles result from collective work carried out between September 2021 and June 2022, as part of the&nbsp;<a href="https://www.net-zero-initiative.com/fr">Net Zero Initiative</a> project, in collaboration with the ADEME and thirty professionals working on climate change.&nbsp;Their purpose is to define the foundations of an ambitious and rigorous corporate climate strategy, in line with climate science and the Paris Agreement goals.&nbsp;The signatories call for all organisations, whatever their size and sector, to implement these principles to build a climate strategy that matches the challenges to be overcome.&nbsp;<a href="https://carbone4.com/files/Net_Zero_Initiative_10_principles_for_an_ambitious_corporate_climate_strategy.pdf">Download the 10 principles</a>

<h2>The 10 principles in detail</h2><h2>General approach&nbsp;</h2><h3>01. The notion of net zero refers primarily to the global balance between GHG emissions and carbon sinks.</h3>The main goal of climate action is to limit warming to the target temperature set out in the Paris Agreement, by immediately mobilising the resources to collectively attain net zero GHG emissions at the global level during the second half of the century.This international policy goal is based on the scientific recommendations of the IPCC. It requires the drastic reduction of GHG emissions, and in parallel the preservation of existing carbon sinks and the rapid development of natural and (in certain scenarios) artificial carbon sinks.<h3>02. For a company, having a net zero strategy means wanting to carry out the transformations needed to reach global carbon neutrality by 2050.&nbsp;</h3>A corporate climate strategy must aim at making the company's activities compatible with a world of net zero emission by 2050, and contributing at the just level to reach this objective of global net zero emissions through different paths of action.The activity of the company must take place within the global context recalled in principle 1.The climate strategy of a company must be considered as the just share of effort to be made in building a global net zero system. The perimeter and the "just levels of contribution” are set out in principles 5, 6, 8 and 9.&nbsp;In particular, the company's entire strategy must be consistent with this principle. The company's financial strategy must not contradict its climate strategy.&nbsp;<h3>03. To organise their climate action, companies must distinguish three different types of action that are non-fungible: reduction, avoidance, removal.</h3>A company has three levers by which it can organise its climate strategy: reduce the emissions of its value chain, help others to reduce their emissions, and develop carbon sinks. These levers must be assessed, objectivised, managed and reported separately.&nbsp;The company must:<ul><li>Pillar A/&nbsp;Reduce its direct and indirect emissions (scope 1+2+3) to the levels required by decarbonation scenarios compatible with the Paris Agreement.</li><li>Pillar B/&nbsp;Contribute to reducing emissions in society, through &nbsp;either the sales of products and services that decarbonize, or the financing of GHG avoidance projects outside its value chain.</li><li>Pillar C/&nbsp;Preserve and develop carbon sinks in and outside its value chain.</li></ul>These three levers act in synergy and cannot be added or subtracted, and all three must be activated at the just level of contribution.Methods of measuring direct and indirect emissions, avoided emissions and carbon capture, as well as the “just” levels of contribution, are set out in principles 5, 8 and 9.<h2>Emissions reductions&nbsp;</h2><h3>04. The priority objective of companies must be to reduce their emissions.</h3>For most of their activities, reduction at the right level and speed of direct and Indirect emissions must be an absolute priority of a company's climate strategy.In the general case, Pillar A (reducing the carbon emissions of companies) takes priority in relation to the two other paths of action, namely contribution to reducing emissions of others (Pillar B) and the development of carbon sinks (Pillar C).&nbsp;The method of defining the "right level" and the "right speed", i.e. the relevant GHG emission reduction trajectory for the company, is set out in principle 6.Direct and indirect emissions are the emissions of scopes 1, 2 et 3.&nbsp;Some companies sell products and services related to low-carbon transition which allows the rest of the economy to reduce its emissions. In the general interest, it might be desirable for them to expand their activity regarding these specific products and services, even if this development results in an increase in emissions. This point is under discussion within the Net Zero Initiative project. It remains certain however that this type of exemption can only be allowed at the scale of a particular product or service and not for the entire range of products of a company.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<h3>05. Companies must assess and communicate on all the emissions of their value chain.</h3>The assessment of the company's GHG footprint must cover at least all the direct and significant indirect emissions.In conformity with the rules of ISO 14064-1:2018 and the Carbon Balance, the company must quantify and report all the significant emissions of its activity, whether direct or indirect (scopes 1, 2 and 3). The accounting perimeter is its organisational and operational perimeter. The significant emissions for which the company esteems that it does not have a lever should nonetheless be included in the assessment.The direct and indirect emissions must also include those linked to the land sector (forests, soils).<h3>06. The emission reduction goals must be consistent with climate science.</h3>Companies are faced with the inevitable and urgent need to set reduction goals for their carbon footprint. For a credible climate strategy, these objectives must be consistent with 1.5° or well below 2°C carbon budgets. These goals must be specified for medium and long-term time frames.To define its reduction goals, the company can rely on the recommendations of reference frameworks and scenarios.The scenarios on which the company will build its emission reduction strategy can be:<ul><li>International scenarios: The SBTi requires following a 1.5°C reduction pathway for scope 1-2 emissions, and at least a well below 2°C for short-term goals of scope 3 emissions.</li><li>Regional and national scenarios, for example Europe’s climate neutrality plan and the French SNBC (National Low Carbon Strategy).</li><li>Scenario analyses carried out by the company regarding 1.5°C or well-below 2°C scenarios.</li></ul>By way of information, the mitigation efforts expected at the global level require a reduction of 5% to 7% in emissions per year.Companies are not necessarily bound to apply these figures as such to ensure compatibility with the Paris Agreement, since the efforts to be made depend on the sector and nature of the company. Nonetheless, the order of magnitude of the reductions expected at the global scale provide an idea of the magnitude of the emission reductions to be implemented, and illustrate the need to significantly rethink the business models of companies to take up the climate challenge.The trajectory must define the goals for several timeframes: the medium term (5 to 10 years) and the long term (more than 20 years) consistent with the time scales of the activity.Lastly, regarding the specific cases of companies selling decarbonising products and services, see principle 4.<h3>07. In addition to making commitments, it is urgent for companies to obtain concrete and rapid results on reducing their emissions.</h3>A climate strategy only has value if it leads to real reductions of the company's GHG emissions, in line with the trajectory pursued. To achieve this, it is vital to define a company transformation plan that must be followed and managed dynamically. Companies must give themselves the means to achieve their ambitions.Measuring emissions and defining a trajectory are pointless if they are not followed by the implementation of concrete actions to achieve the absolute reduction of emissions, providing tangible results and in line with the targets set.To achieve this, it is vital to define an action plan, i.e.,&nbsp;a list of initiatives, prioritised and scheduled through time that must be deployed in the company to generate emission reductions in its value chain. Those initiatives cannot be limited to step-by-step improvements of the company's processes. To provide the expected level of emission reductions, there is no other way but to transform business models, reorient investments and rethink the company's strategy. To this end, the company must carry out scenario analyses to help it rethink its activity and make it compatible with a net zero planet.The reduction of the company's GHG footprint must be monitored and managed dynamically at the highest level of the organisation.To build a full action plan, the company can rely on sectoral references such as ADEME's international initiative <a href="https://actinitiative.org/">ACT – Assessing low Carbon Transition</a>, to ensure consistency between the actions carried out and the reduction targets.Lastly, regarding the specific cases of companies selling decarbonising products and services or compatible with 1.5°C, see principle 4.<h2>Positive contributions&nbsp;</h2><h3>08. Companies must contribute to the decarbonization of their ecosystem as much as possible, through the generation of avoided emissions.&nbsp;</h3>Further to their action to reduce their value chain emissions, companies are encouraged to contribute to decarbonation beyond the scope of their carbon footprint, on the one hand by developing a range of products and services that decarbonize their clients, and on the other hand, by financing additional emission reductions outside their value chain.In addition to working to reduce their emissions, which remains the priority in most cases, companies are encouraged to contribute towards decarbonising the economy in general by generating emission reductions beyond the scope of their carbon footprint, quantified as “avoided emissions”. This can be done by using two main levers:<ol><li>Emissions avoided by products and services: the company sells 1.5°C-compatible low carbon solutions that reduce their clients’ carbon footprint.</li><li>Emissions avoided by financial contribution outside the value chain: the company generates additional avoided emissions through the financing of certified projects on the voluntary market, or through any other scheme that enables avoiding emissions according to a rigorous method recognised by reference institutions (e.g., Gold Standard, Verra methodologies, etc.).</li></ol>The first lever must be considered as having priority in comparison to the second, since the company’s portfolio of solutions is directly linked to its business strategy and risk exposure.Generating avoided emissions is different from the company's carbon footprint. One cannot be subtracted from the other.Avoided emissions by the company's solutions should be distinguished from the reduction of Scope 3.11 - “Use of sold products":<ul><li>The company can very well increase its scope 3 while generating increasing amounts of avoided emissions (case in which the company increases the sales of its decarbonising products);</li><li>On the contrary, scope 3 can very well decrease without however generating avoided emissions (case in which the company decreases the sales of carbon-intensive products that do not avoid emissions).&nbsp;</li></ul>Avoided emissions quantify the impact of a solution on the decarbonization of society, whereas a reduction in scope 3 emissions quantifies a decrease in the company’s emissions.&nbsp;As with the reduction of the carbon footprint, the company must adopt a three-step approach for its action related to avoided emissions:<ul><li>Assessment: use a rigorous and recognised method for the annual assessment of avoided emissions generated inside and outside the value chain.&nbsp;<a href="https://www.carbone4.com/files/Publication_2022_NZI_Guide_Pilier_B.pdf">A standardisation of this calculation</a> was proposed In June 2022 by the Net Zero Initiative project.</li><li>Targets: set quantitative targets for generating avoided emissions, that must reflect the just level of action of the company to achieve global net zero. Such methodological work is in progress within the Net Zero Initiative project.</li><li>Action plan: set up an action plan to reach those targets, manage them dynamically, monitor them and report the results.</li></ul>Regarding financing actions outside the value chain, specific attention must be given to the quality of the projects financed, especially to ensure the reality of their carbon contribution (in particular, the rigour of the quantification, uniqueness, additionality), as well as to the social and environmental impacts beyond carbon, in particular in favour of developing countries. The use of recognised standards (Gold Standard, VCS, etc.) is encouraged. Furthermore, companies shall be transparent on the volume of financing allocated to projects outside the value chain and, if relevant, on the volume of CO2 avoided.This action must be carried out in parallel with that of carbon sinks described in principle 9, and that of emission reduction described in principles 4 to 7.<h3>09. Companies must develop carbon sinks at the just level.</h3>In addition to their action to reduce their value chain emissions and contribute to the decarbonation of society (emission avoidance), companies are encouraged to contribute at the just level to the sustainable capture of CO2 in carbon sinks, by acting in priority within their value chains.In addition to working to reduce their emissions (which remains the priority) and avoiding emissions, companies are encouraged to contribute to the sustainable capture of CO2 in carbon sinks:<ul><li>In their value chain: in natural carbon sinks (soils, forests) and technological sinks (BECCS, DACCS, etc.), owned by the company or present in the value chain;</li><li>Outside their value chain: via the purchase of certified carbon credits, or other schemes for financing carbon removals according to a rigorous method recognised by reference institutions (e.g., Gold Standard, Verra, etc.).</li></ul>Carbon sinks in the value chain must be considered as having priority outside the value chain, since they are directly linked to the company's scope of responsibility.As with the reduction of the carbon footprint, the company must adopt a three-step approach for its action relating to carbon removal:<ul><li>Assessment: use a rigorous and recognised method for the annual assessment of carbon removals generated inside and outside the value chain, by applying recognised standards (in particular the GHG Protocol on Removals&nbsp;by the WRI, whose release is scheduled for the end of 2022).</li><li>Targets: set quantitative carbon removals targets that must reflect the just level of action of the company in its contribution to global net zero, by distinguishing a specific sub-target for removals inside the value chain.</li><li>Action plan: set up an action plan to reach the targets determined, manage them dynamically, monitor them and report the results.</li></ul>For projects outside the value chain, special attention must be given to the quality of the initiatives financed, notably to guarantee the robustness of their carbon contribution (quantification, uniqueness, permanence, additionality, etc.), as well as to the social and environmental impacts beyond carbon, in particular in favour of developing countries. The use of recognised standards (Gold Standard, VCS, etc.) is encouraged. Furthermore, companies shall be transparent on the volume of financing allocated to projects outside the value chain and, if relevant, on the volume of CO2 removed.Carbon sinks are distinguished according to their type and level of permanence.This action must be carried out in parallel with that of avoided emissions described in principle 8, and that of emission reductions described in principles 4 to 7.<h2>Communication</h2><h3>10. If companies wish to communicate on their climate strategy, it must be done with rigour and irreproachably.</h3>Companies are invited to communicate transparently and sincerely on their climate strategy, by placing emphasis on their concrete results, and by using indicators and elements of language that contribute to promoting a rigorous approach to climate change.Through concern for transparency, and to highlight the progress achieved, companies are encouraged to communicate internally and externally on the content and outcomes of their climate strategies.&nbsp;The dashboard of the&nbsp;<a href="https://www.net-zero-initiative.com/fr/referentiel">Net Zero Initiative</a> provides a relevant reporting framework.Companies are invited to go further than a declaration of intent and targets, by placing emphasis on the results delivered.Communicating quantitative indicators requires:<ul><li>specifying the methodology used for the quantification, and using a reference methodology (e.g., ISO 14064-1:2018, GHG Protocol, Bilan Carbone…);</li><li>specifying the perimeters (spatial, temporal, organisational) and the main hypotheses;</li><li>indicating the contextual elements required to understand the figures communicated (e.g., targets set, sectoral averages, significant events).</li></ul>Furthermore, the company must take care to use formulations that faithfully mirror the reality of the results and promote a rigorous approach to the climate challenge. In particular, in conformity with the&nbsp;<a href="https://librairie.ademe.fr/eco-responsabilite/5335-utilisation-de-l4argument-de-neutralite-carbone-dans-les-communications.html">opinion of ADEME</a> on carbon neutrality, and its&nbsp;<a href="https://presse.ademe.fr/2022/02/lademe-publie-un-avis-dexperts-sur-lutilisation-de-largument-de-neutralite-carbone-dans-les-communications.html">experts' opinions on the use of the “Carbon neutrality” argument in communications</a>, we strongly advise against the company making allegations of carbon neutrality regarding its products, services and events. We also advise against the notion of “carbon offset”. Instead, the company is invited to place emphasis on its contribution to global and collective carbon neutrality through its alignment with the reference trajectories of climate change mitigation, with the three indicators, namely reduction, avoidance and removal.&nbsp;Communicating can also be the opportunity for highlighting the co-benefits provided by setting up the climate strategy (e.g., social, biodiversity, resilience, etc.)

<h2>Glossary</h2><figure class="table"><table><tbody><tr><td>Additionality</td><td>Funding a mitigation action (reduction, avoidance, carbon capture) is additional when the action in question cannot be implemented without this funding, for economic and operational reasons.&nbsp;</td></tr><tr><td>BECCS</td><td>Bio-Energy with Carbon Capture and Storage</td></tr><tr><td>Value chain&nbsp;</td><td>All the actors up and downstream of the company's activity and necessary for it to take place: suppliers, transporters, distributors, clients, etc.</td></tr><tr><td>DACCS</td><td>Direct Air Carbon Capture and Storage</td></tr><tr><td>Decarbonation</td><td>Absolute reduction of the company's direct and indirect emissions (pillar A).</td></tr><tr><td>Avoided emissions&nbsp;</td><td>Generation of emission reductions in comparison to a counterfactual reference scenario, outside the perimeter of the company’s carbon footprint.</td></tr><tr><td>Significant emissions&nbsp;</td><td>Emissions representing the majority of the company's total emissions.Annex H of ISO 14064-1:2018 specifies a list of potential criteria for assessing the significance of indirect emissions, in addition to the magnitude/relative share criterion of emissions (which must be included by default):<ul><li>level of influence/lever,</li><li>risk/opportunity,</li><li>specific sectoral guideline,</li><li>subcontracting,</li><li>commitment of personnel&nbsp;</li></ul>For example, the Science-based Targets Initiative requires companies committed to SBT to include in their reduction perimeter all their significant emissions which they define as follows:<ul><li>the whole of scope 1+2;</li><li>the categories of scope 3 representing at least ⅔ of the whole of scope 3.</li></ul>&nbsp;</td></tr><tr><td>GHG&nbsp;</td><td>Greenhouse gas: all gases that contribute to intensifying the greenhouse effect, thus climate change. The main GHGs are: CO2 (carbon dioxide), CH4 (methane), and N2O (nitrous oxide).&nbsp;</td></tr><tr><td>Just level of contribution</td><td>For a given challenge, the theoretical level corresponding to the relative share of collective effort that should, ideally, be allocated to an actor as a function of their responsibility in the challenge and their capacity to address it efficiently.&nbsp;</td></tr><tr><td>Net zero / Net zero emission&nbsp;</td><td>Equilibrium situation at the level of the planet or a country, between two physical flows: greenhouse gas emissions (expressed in tCO2e) on the one hand, and CO2 removals on the other.&nbsp;</td></tr><tr><td>Neutralisation</td><td>In the vocabulary of the SBTi's Net-Zero Standard, all the actions relating to carbon capture (pillar C of the NZI) for a quantity of CO2 equivalent to the residual emissions of the company in 2050, according to a reduction pathway of 1.5°C.</td></tr><tr><td>Carbon neutrality</td><td>See “Net zero”</td></tr><tr><td>Perimeter</td><td>Boundaries defined for calculating an indicator or planning an action.&nbsp;<ul><li>Time perimeter: period of time considered (for example, a calendar year).</li><li>Spatial perimeter: geographical area considered (for example, metropolitan France).</li><li>Organisation perimeter: all the sub-entities of the company considered (for example: a branch, a brand, or the whole group).</li></ul></td></tr><tr><td>Permanence</td><td>For carbon capture: assurance that a ton of CO2 is captured sustainably, and that it will not be released into the atmosphere in the medium term due to, for example, a forest fire or anthropogenic deforestation.</td></tr><tr><td>CO2 capture</td><td>Storage - permanent or very long term - in carbon sinks (products with very long lifetimes, stable ecosystems, geological wells) - of CO2 of atmospheric origin, either by natural processes (plant growth, decomposition of organic matter), or by technological processes (direct capture of carbon, transformation of biomass).&nbsp;</td></tr><tr><td>Uniqueness</td><td>For an emission reduction or carbon capture: the fact that it is accounted for only once.</td></tr></tbody></table></figure>

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10 principles for an ambitious corporate climate strategy 

A nine-month joint <a href="https://www.theguardian.com/environment/2023/jan/18/revealed-forest-carbon-offsets-biggest-provider-worthless-verra-aoe">investigation</a> by journalists from The Guardian, Die Welt and SourceMaterial has shown that 90% of the REDD+ carbon credits from the world's largest offsetting standard actually have no positive impact on the climate.The team based its findings on three recent scientific publications analyzing Verra's credits, as well as on a dozen interviews with climate scientists, insiders of the voluntary carbon market, and project developers.The result of the investigation is clear: Verra's REDD+ credits, whose goal is to provide private funds to protect rainforests in sensitive areas, seem to have truly avoided deforestation only in a very limited number of cases. 94% of the credits are reported to have had no effect on the fight against climate change.Why such a gap between Verra's predictions and reality? First of all, it is important to understand that REDD+ carbon credits are issued in proportion to the amount of deforestation avoided, i.e. the difference between the situation where the forest is protected and an alternative situation, called the "reference scenario", which would have taken place in the absence of protection. Credits are then generated based on the amount of carbon that was not emitted into the atmosphere as a result of funding the conservation program.

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The REDD+ mechanism rewards projects that avoid deforestation by allowing them to generate as many carbon credits as emissions avoided.

However, it appears that these baseline scenarios exaggerated the threat of deforestation in the areas under consideration, which had the effect of overestimating the positive effect of the projects. One of the three studies amounts this overestimation to +400%, and even +950% if three particularly successful projects in Madagascar are excluded from the calculation.Verra certifies three quarters of all carbon credits on the planet, and has issued more than one billion credits since its creation. Its rainforest protection program, the one targeted by the Guardian investigation, accounts for 40% of its credits. It is worth noting that carbon credits are the key element of the <a href="https://www.carbone4.com/analyse-decret-neutralite-carbone-produits">"carbon neutrality" claims</a> used by a large number of companies, either for their products and services or for their own corporate activities. Sometimes, these carbon credits are even directly counted as a direct reduction of their carbon footprint, which is prohibited by international climate accounting standards.In addition to the fact that the notion of "neutrality" at such small scales poses strong <a href="https://www.carbone4.com/en/decoding-ademe-carbon-neutrality">conceptual problems</a>, the Guardian's study reminds us that it is the very system for calculating and generating carbon credits that is undermined by methodological problems.<h3>A rigorous investigation that reveals a systematic overestimation of climate gains</h3>The investigation was based on three research papers. Two of them (<a href="https://www.pnas.org/doi/10.1073/pnas.2004334117">here</a> and <a href="https://arxiv.org/abs/2301.03354">here</a>, as a preprint) were produced by the same international team, the <a href="https://pubmed.ncbi.nlm.nih.gov/35713105/">third</a> by a team from Cambridge University. The work focuses on the analysis of 87 preservation projects certified by the Verra standard. Among the 29 projects for which the data was usable, only 8 had a real impact on the climate. Among these, only one had an effect equal to or greater than what was originally calculated by Verra.

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Among the 29 Verra REDD+ projects analyzed, 21 are reported to have had little to no positive impact on the climate.

It should be noted that the construction of a baseline scenario is a difficult exercise, since it is an estimate, by construction unverifiable, of what would have happened in the absence of the implementation of a project. The art of constructing a robust baseline scenario consists in imagining a future that is as plausible as possible; it is therefore an infinitely more complex exercise than a simple measure of emissions reduction over time, or a measure of carbon removal.

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Behind the generic name of "carbon credit" lies a multitude of different types of projects - and climate impacts.

Nevertheless, despite the uncertainty of this measure, the three research papers on which the Guardian's investigation is based independently show that Verra appears to have systematically overestimated the effectiveness of the projects analyzed. This result confirms the criticisms made of the voluntary carbon market over the past two decades.

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Les projets REDD+ d’évitement de la déforestation, le type de projets concerné par l’étude du Guardian, représentaient 25% du total des crédits échangés sur le marché du carbone volontaire en 2019.

At a time when <a href="https://www.iif.com/tsvcm">powerful forces</a> are moving to massively expand the voluntary carbon market, it is urgent to :<ul><li>correct the methodologies for certifying carbon projects as quickly as possible, so as to put private finance at the service of truly additional and climate-efficient projects. Otherwise, we will collectively lose precious time and money. The structural flaws of the voluntary market have unfortunately been known for the past twenty years; this discovery of the anomalies of Verra's REDD+ methodologies raises serious questions about the ability to one day "fix" this market, <a href="https://www.theguardian.com/environment/2023/jan/18/revealed-forest-carbon-offsets-biggest-provider-worthless-verra-aoe">which some are already calling for to be abandoned</a></li><li>to recall, as often as necessary, that a company has no right to count its carbon credits as emission reductions, as Carbone 4, Net Zero Initiative, ADEME, SBTi, GHG Protocol, ISO, and a host of other benchmarks have repeatedly pointed out. Only real scope 1, 2 and 3 emissions reductions can be counted as progress towards reduction targets.</li></ul>There is no doubt that the voluntary carbon market is playing a dangerous game. While it is necessary to mobilize private finance to fight deforestation, the beneficial effects of such financing should not be overestimated, nor should it be assumed that a company can choose to activate offsetting or decarbonization of its activities as two interchangeable levers.The <a href="https://www.net-zero-initiative.com/">Net Zero Initiative</a>, Carbone 4’s framework on the contribution of companies to global net zero emissions, has always considered the purchase of carbon credits to be a complementary action that must be distinguished from the efforts that the company must make to transform its business model and make it compatible with the Paris Agreement. NZI also recommends strictly separating "reduction", "avoidance" and "removal" credits. This approach to climate action by private actors does not solve all the structural problems of the carbon market, but it does have the merit of establishing safeguards in the development of corporate climate strategies at a time when any delay in climate action could prove fatal.

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Is it true that 90% of carbon credits are worthless?

César is manager at Carbone 4, co-leader or the Carbon neutrality practice. He is specialized in the subjects of climate strategy, carbon neutrality and energy. At Carbone 4 he has contributed to the definition of climate strategies for several companies in the sectors of industry, mobility and luxury. César assisted more than a dozen organizations (companies, public institutions, development agencies, investment funds, tech start-ups) in their reflexions towards climate change and energy transition. He also contributes to the development of a new method aiming to define the concept of carbon neutrality for organizations.Before joining Carbone 4 in 2016, César had a previous experience in a strategy consulting company.

César Dugast

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