Oxford University has updated its flagship guidance for entities using carbon offsets, calling for a “major course-correction” to get the market on track.

The Oxford Offsetting Principles were launched in 2020 to help provide clearer expectations about how to appropriately use carbon offsets, after years of greenwashing allegations in the sector.

In a statement published today, Injy Johnstone, a research associate for the university’s sustainable finance school, said “the vast majority of current offsetting approaches are not getting us any closer to net-zero emissions, and trust in the concept of ‘offsetting’ has been so badly damaged that some organisations are moving away from using the term at all”.

The term offsets has been usurped in some key frameworks by phrases such as ‘beyond value-chain mitigation’. This has been done to reflect a move towards carbon credits being used as a means of supporting economy-wide decarbonisation, but not as a replacement for the reduction of emissions within a company’s own operations.

Last year, the Net Zero Asset Owner Alliance (NZAOA) updated its target-setting protocol to say that investors should not count carbon offsets towards their entity-level decarbonisation targets. Instead, the UN-backed body said, until 2030, pension funds should achieve their climate goals by making sure their portfolio companies are reducing their direct emissions.

Oxford’s latest guidance echoes this view, calling for “mitigation efforts beyond organisational net-zero targets”.

It also stresses the need for the voluntary credits to be generated by projects that remove carbon from the atmosphere and store it, rather than those that simply avoid emissions.

“Hardly any of the carbon market removes and stores carbon at all,” said Kaya Axelsson, co-author of Oxford’s offsetting principles. “Currently, the majority of carbon credits are for avoided emissions, and these are often over-credited or have trouble proving that they had an impact beyond what would have happened anyway.”

In its updated protocol last year, the NZAOA encouraged its members “to contribute to a liquid and well-regulated carbon removal certificate market before 2030” so that, when the time came for investors to offset residual emissions in their portfolios, there was an established pipeline of voluntary credits tied to carbon removals.

It also urged members “to invest in projects and technologies of durable CO2 avoidance and removal to scale future markets rapidly”.

Yesterday, Bain & Company became the first entity to make a claim using new rules from the Voluntary Carbon Markets Initiative. The management consultancy will buy high-quality carbon credits to offset 100% of the emissions it generates after it has decarbonised its own operations enough to meet its annual commitments under the Science-based Targets initiative.

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