The Revised Oxford Offsetting Principles and What They Mean for Your Firm
By Injy Johnstone, Research Associate in Net Zero Aligned Offsetting at the Sustainable Finance Group and Researcher at Oxford Net-Zero
Despite offsetting being often the major plank in the net zero planning of corporations, next to no offsetting is currently net zero. This needs to change.
We know from the Intergovernmental Panel on Climate Change that to reach net zero carbon we need to balance our residual emissions with additional removal capacity. However, the vast majority of carbon credits are dominated by projects that pay people to avoid releasing emissions, rather than actively reducing or removing them. Because it can be hard to robustly evidence that such an emission would have occurred in future, recent investigations have found that up to 90% of credits in some projects may be worthless. It’s not just the type of project that matters, but also how new it is and whether it would have occurred regardless of carbon credit financing. In 2023, some corporations were still retiring carbon credits from projects whose mitigation impact happened in 2006 or earlier. At the same time, we see funds flowing to projects that may already make economic sense already–such as installing renewable energy in most parts of the world.
The need to scale removals to meet net zero is also demonstrated by the fact that global emissions are still increasing. Indeed, based on recent estimates of global CO₂ emissions and removals, in 2023 for every 1 ton we removed, we released a further 18.5 tonnes into the atmosphere. What’s more, the vast majority of the removals, are only storing CO₂ temporarily, meaning they need to be replaced in future for us to meet net zero. It is therefore clear that the status quo of carbon offsetting is not primed for net-zero alignment.
Rather than continuing to entrench the unsustainable results of today’s offsetting the Oxford Offsetting Principles work backwards from what’s needed for net zero alignment. The four Principles are:
- Cut emissions, ensure the environmental integrity of credits used to achieve net zero, and regularly revise your offsetting strategy as best practice evolves
- Transition to carbon removal offsetting for any residual emissions by the global net zero target date
- Shift to removals with durable storage (low risk of reversal) to compensate any residual emissions by the net zero target date
- Support the development of innovative and integrated approaches to achieving net zero
Originally released in 2020, the Revised 2024 version now offers important and additional insights. It notes with concern that despite engagement in the prospect of net zero aligned offsetting since the release of the original principles, an urgent course correction of offsetting practice is needed. It further recognises that despite additional guidance on both the supply and demand aspects of the voluntary carbon market having been developed in recent years, these do not go far enough to calibrate net zero aligned offsetting strategies. The Revised Principles also add more nuance as to the vital role played by investment in nature-based solutions to protect nature in its own right separate from any potential mitigation benefits it may yield. Finally, they recognise that given the significant need to scale climate mitigation across the board, that all actors who can, should consider additional ‘beyond value chain’ investments in projects which reduce or remove emissions.
There are a number of key implications for law firms that stem from the Revised Oxford Offsetting Principles:
- As Implementors
Law firms are increasingly setting their own net-zero commitments, both as individual firms and as part of collectives such as the Net Zero Lawyers Alliance and the Legal Charter 1.5. For firms to reach such commitments there are practical steps they can take to limit their own value-chain emissions and craft a net-zero aligned offsetting strategy to address residual emissions; this being one that adheres to the environmental integrity, transparency and review standards of Principle One, invests in carbon removal offsetting, with a pathway to fully durable removals by the net zero target date in line with Principles Two and Three and considers investing in additional beyond value chain mitigation in line with Principle Four.
- As Advisors
Advised emissions are also an integral part of firms’ scope 3 emissions. As a result, they also present an avenue to implement Principle Four: innovative and integrated approaches to achieving net zero. When firms are advising clients who have or want to make net zero commitments, it is fundamental to communicate the Revised Oxford Offsetting Principles as a benchmark for net-zero aligned offsetting and–if adopted–to ensure that there is a credible pathway to the realisation of the transition to durable carbon removal for residual emissions. Indeed the Voluntary Carbon Markets Integrity Initiative recognises that companies should “seek independent legal advice on all aspects of the use of green, carbon and climate claims in the context of carbon credits in all jurisdictions…”. Firms that are equipped to provide this advice can help not only ensure that clients are advised on best-practice offsetting, but also if net zero aligned offsetting strategies are implemented correctly, it could also significantly reduce the litigation risk that clients could face when compared with the current status quo of the voluntary carbon market. It is also important as legislators are increasingly considering further measures to both reign in voluntary carbon offsetting practices and stimulate investments in carbon removal.
In this way, law firms have an integral role to play in ushering forth the era of net zero aligned offsetting. The Revised Oxford Offsetting Principles were released to assist with this. For further insights on how to operationalise these Principles, please keep an eye on the Smith School for Enterprise and the Environment’s website. If you would like to dive deeper, you can also apply to join the first-ever Oxford Programme on Net Zero Aligned Offsetting, happening in person in Oxford later this year.
