Researchers Find Hidden Value in Carbon Offsets

Climate change skeptics and deniers habitually assert that cutting carbon emissions and putting a price on carbon would jeopardize economic growth and job creation. Hence, by their reasoning, we're better off living with the rising costs and profound threats resulting from rising greenhouse gas emissions and a warming climate.

Research carried out by Imperial College London in partnership with the International Carbon Reduction and Offsetting Alliance (ICROA) indicates otherwise. In Unlocking the Hidden Value of Carbon Offsetting, the researchers conclude that investing in carbon offset credit programs yields significant social, environmental and economic returns beyond greenhouse gas emissions reductions.

According to the research results, investing in voluntary carbon emissions offset credit programs creates economic development opportunities, enhances environmental conservation, and improves people's lives by realizing a host of social benefits that range from household savings and health benefits to healthier water resources. Overall, they determined that the additional value – beyond emissions reductions – of each metric ton of carbon emissions avoided by purchasing offset credits totals $664. Ipso facto, they add, carbon offset credits are systemically undervalued.

Value beyond carbon emissions reductions

The amount of carbon emissions reductions resulting from investing in carbon offset credit programs “has been rigorously measured and independently verified for many years,” Imperial College and ICROA note in a press release. However, no research has been conducted to measure and value the impact investing in carbon emissions offset programs has beyond emissions reductions – until now, that is.

As the research team states:

“This research finds that each tonne [metric ton] of carbon reduced has additional benefits – such as poverty alleviation, infrastructure development and nature conservation – worth $664, meaning that businesses which are voluntarily offsetting their emissions are having a bigger impact than perceived.”

Businesses also benefit beyond the value of carbon emissions reductions by investing in carbon offset programs, the researchers conclude. They do so via enhanced brand image, improved employee morale, more engaged employees and market differentiation, according to the report.

“The voluntary carbon market is a smart opportunity for businesses to consider as part of their sustainability strategies,” ICROA Program Director Sody Greenhalgh was quoted as saying.

“This research demonstrates offset programs deliver numerous business objectives, such as employee engagement and resource efficiency savings, and make a positive contribution to local communities in addition to reducing emissions.”

Natural capital accounting methods

The researchers made use of the latest natural capital accounting methods “to demonstrate the impact offset projects are delivering on the ground,” Imperial College environmental economist Yiannis Kountouris explained.

Researchers first gathered data from 59 offset projects around the world and quantified their social and economic benefits. They then monetized the social and environmental benefits using environmental accounting methods. The aggregated total value was used to determine their value per metric ton of carbon dioxide.

The approach holds out the promise of valuing social and environmental benefits of carbon offset investments in a more holistic manner in the future, according to the research team.

In a second phase involved, the researchers investigated 72 of the larger companies participating in voluntary carbon offset programs. Making use of surveys, they gathered information regarding the “tangible business benefits that come about by implementing an offset program.” They also gathered information regarding the willingness-to-pay (WTP) for additional social and environmental benefits.

According to the Imperial College-ICROA research team:

“Better identification and measurement of the extra social benefits of buying carbon credits could encourage more governments, companies and individuals to invest in projects that make a real difference to communities around the world, whilst reducing dangerous carbon emissions.”

The ICROA is a global nonprofit group operating within the International Emissions Trading Association (IETA). IETA members provide carbon reduction and offset services to “thousands of organizations, including household brands and multinationals supporting the reduction of global emissions towards the goal of avoiding dangerous climate change impacts.” A research university based in London, Imperial College is home to the Centre for Environmental Policy.

A full copy of the report is available free to download on the IETA website.

Image credits: Imperial College London, ICROA