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Carbon neutral, net-zero or carbon offsetting: What’s your business goal?

About this article

People, products, businesses, and countries have carbon footprints. Today it is possible to use specialist vocabulary to greenwash that simple fact. That’s why we put together this handy guide with the all info you need to understand the carbon conundrum.

calender 05 Jan 2024
clock 5 min
user Mario van den Hoeven

What does carbon-neutral mean?

In short, carbon-neutral, or carbon neutrality, refers to the balance between carbon emissions and carbon absorption. While carbon emissions are the result of human activity, carbon absorption is not something businesses can actively participate in themselves; it’s done by the Earth’s own carbon sinks. 

Carbon sinks are the ecological systems that absorb more carbon than they emit (e.g., oceans, soil, and forests). To imagine the scale of their work, the European Union estimates that natural sinks remove between 9.5 and 11 gigatons of CO2 per year – a gigaton is 1,000,000 metric tons. In terms of emissions, a single passenger flying from London to New York produces approximately 1 metric ton (1000kg) of CO2. To put this into perspective, a gigaton is equivalent to 1,000,000 passengers flying from London to New York. So once again, thank you planet Earth.

To claim carbon neutrality, and it is increasingly marketable to do so, businesses can reduce carbon emissions as much as possible by acting on their worst carbon indicators, the areas where they emit the most carbon. After which they may choose to offset what’s left – a point we will return to shortly.

What is net-zero, and how is it different than carbon-neutral?

Net-zero certainly overlaps with carbon neutrality. Both signify individuals, businesses, and countries’ activities to reduce, if not balance, their carbon footprint. However, they are not the same thing. 

While carbon-neutral refers to the balance of carbon emissions and absorption through compensation (typically offsetting), net-zero demands an actual reduction in emissions towards the point where no carbon is emitted is whatsoever. Instead of investing in offsetting schemes, to reach net-zero, businesses need to actually get rid of emissions through efficiency, electrification, renewables, and other vital reduction measures. 

In turn, no carbon needs absorbing, capturing, or offsetting. The critical difference is that carbon-neutral does not necessarily refer to any reduction in emissions, whereas net-zero does.

To complicate things further, net-zero can be divided into two categories: net-zero carbon and net-zero emissions. ‘Net-zero carbon’ means there are no carbon emissions to absorb. However, ‘net-zero emissions’ refers to the overall balance of greenhouse gas emissions – including methane and nitrous oxide as well as carbon – produced and removed from the atmosphere. So confusingly, the way the term ‘net-zero emissions’ is used is similar to carbon-neutral.

What exactly is a carbon footprint?

Put simply, a carbon footprint is the total sum of all carbon emissions released into the atmosphere for a product to be manufactured or an activity to happen. A product could be as big a car or as small as a lollipop. An activity could be a three-month road trip around a different continent you flew to get to, or it could be a night in watching the telly. Whether big or small, all products and activities that cause carbon emissions have a carbon footprint.

When we talk about individuals, businesses, and countries having carbon footprints, we mean the sum of all the many products and activities that constitute that person, organisation, or national community. Because products have carbon footprints, when you purchase something new (e.g., a fast-fashion jacket or a reusable meal box) its carbon footprint is the sum of materials, energy, and fuel used to manufacture, transport, and market it. Then this is added to your individual carbon footprint. 

Carbon emission
Carbon emission

Why do carbon footprints matter to carbon neutrality? 

Carbon footprints provide the measures by which we can reduce or offset emissions in order to then claim carbon neutrality. Without neutralising emissions by reduction or offsetting, our personal carbon footprints keep growing ever larger with each purchase and every activity. Imagine how big carbon footprints can get for businesses and countries and the equivalent offsetting they must finance to claim carbon neutrality.   

What is carbon offsetting?

If it’s impossible to reduce emissions entirely, then carbon offsetting provides a way for businesses to claim carbon neutrality or, at least, reduce their carbon footprints. To offset their carbon footprints, businesses can invest in carbon reduction or removal projects by purchasing carbon credits. Carbon credits allow businesses to claim ownership of reduction and removal measures, such as: tree planting campaigns and global environmental projects.  

Reforestation programmes work by supporting the cultivation of carbon sinks to help remove CO2 from the atmosphere. Some carbon credits relate to rights gained from carbon absorbed by a given piece of land. Any CO2 this land removes gets subtracted from the investor’s carbon footprint, helping them redress their balance in favour of carbon neutrality. 

Another option is to purchase carbon credits that invest in providing local communities, especially those most at risk of the adverse effects of climate change, with low-carbon technologies. While this approach does not remove any existing carbon from the atmosphere, it can significantly help reduce carbon emissions elsewhere. 

What makes a ‘high-quality’ carbon offset?

The ‘quality’ of carbon offsetting refers to the confidence that a given carbon credit will serve the fundamental purpose of reducing or absorbing carbon emissions. This sounds simple, but in practice it’s difficult to guarantee. 

 

High-quality offsetting has two main criteria. First, a high-quality carbon credit must remove or, in the case of global reduction projects, reduce at least one metric tonne of unclaimed CO2 emissions. Second, it should come from activities that do not significantly contribute to social or environmental harm elsewhere. Therefore, businesses must ensure that the offsetting project is transparent and, ideally, involves local communities in the process.

Carbon offset

Does offsetting reduce carbon emissions?  

Crucially, carbon offsetting does not reduce the carbon emissions (i.e., carbon output) of the investing company. Carbon offsetting can help other communities reduce their emissions, and it can support the cultivation of carbon sinks that remove carbon from the atmosphere. 

But to reduce carbon footprints and make the move towards carbon neutrality, carbon offsetting is best practised alongside invaluable reduction measures closer to home. If you’re serious about improving your business’ carbon credentials (and not just appearing to), offsetting is not the solution. Simply put, reducing emissions is the only way to bring down emissions. 

There you have it, carbon in a nutshell. If you have any questions about carbon neutrality or any of the terms we’ve discussed, don’t hesitate to get in touch.

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Mario van den Hoeven

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