Carbon offsets: A necessary tool, but only under close scrutiny and precise conditions
- 14 September 2021 (10 min read)
Key highlights
- To meet the Paris Agreement net zero goals, both emissions reductions and carbon offsetting will play a critical role in delivering a manageable transition.
- Reaching net zero will require a vast amount of innovation, policy measures, technological deployment, infrastructure and international co-operation, all of which will take time. An IEA report has set out more than 400 milestones, spanning all sectors and technologies, to mark the path to net zero
- If strategies tackling emissions reduction need to be implemented right now, in the short term, and until new technologies are massively deployed, carbon offsetting will prove unavoidable, especially in the hard-to-abate sectors.
- Carbon offsetting has faced accusations that it amounts to ‘greenwashing’ by allowing, even incentivising, companies to avoid actually reducing their emissions. It has been rightly criticised when used by highly polluting companies with no clear strategy or plan to reduce their emissions or cut production of profitable polluting product lines
- This paper gives an overview of the main areas where scrutiny should apply, to ensure that carbon reduction by offsetting is verified, enforced, permanent and additional.
Disclaimer
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.