As a new report reveals, offsetting carbon emissions will be an essential part of Australia’s quest for net zero but must not become an excuse to delay cutting emissions.
Governments around the world are moving to ‘net zero’, to limit the impacts of climate change. All Australian state and territory governments have the goal of reaching net-zero carbon emissions by 2050 at the latest, and the prime minister has committed Australia to net zero by 2050.
Australian governments can and should act now to create momentum towards the net-zero goal. Strong policies are required to reach net zero, but some sectors and individuals may be able to do more than others at different times. By offsetting overachievement in one sector against under-achievement in another, effort can be shared across the economy and the goal achieved at lower cost.
Offsetting is a difficult part of the net-zero conversation. Some see it as an excuse to delay reductions, others as bringing about unacceptable social change, particularly in rural areas. It has been plagued by integrity problems, and there is understandable cynicism about its potential.
None of this changes the reality: in pursuit of net zero, offsetting will be required because there will be emissions we cannot eliminate, and some where we will not be willing to pay the price to do so. The only option to deal with these emissions is to deliberately remove carbon dioxide from the atmosphere to offset them.
Processes to permanently remove carbon dioxide from the atmosphere are uncertain or expensive — or both. Emitting is certain: we know that every tonne of emissions in the atmosphere contributes to global temperature rise. For this reason, offsetting is not a direct substitute for avoiding or reducing emissions in other ways.
Australia has the structures in place to support offsetting. Our governments should be clear about the role of offsetting in each policy they implement in pursuit of net zero. They should also make sure certification for offsetting units maintains high integrity. Otherwise, companies and individuals will bear costs with no corresponding drop in emissions.
As policies begin to drive demand for offsetting units, governments should step back from being the major buyers, and focus on underwriting the development of technologies and practices to remove carbon dioxide from the atmosphere. This includes acting more as a buyer of last resort for high-quality Australian offsetting units; or buying units to offset government emissions.
There is still considerable uncertainty about the costs, permanence, and measurement of many offsetting activities. These are barriers to scaling up the offsetting market. Government should support research and development and early-stage deployment to help lower these barriers.
Imports and exports of offsetting units will become more important as all countries move towards net zero. There is no need to assume Australia must be self-sufficient in offsetting units, but local supply requires our governments to implement strong policies to drive emissions reduction coupled with policies to encourage removal of carbon dioxide from the atmosphere. The federal government should introduce rules to support international trade in offsetting units, both for exports and imports.
So what is net zero?
Net zero means balancing sources of emissions going into the atmosphere with sinks that take them out, with the aim of staying within a carbon budget and limiting global temperature rise. Because there are some emissions that cannot be eliminated (or that we do not want to eliminate), achieving this balance requires ‘offsetting’: deliberately removing a tonne of carbon dioxide from the atmosphere for each tonne of emissions.
There are many ways to do this, and certifying each offsetting activity makes accounting for sources and sinks easier. Offsetting is not an excuse to delay emissions reduction; rather, it is a necessary part of sharing emissions reduction efforts across sectors, and dealing with emissions that remain once all such opportunities have been adopted.
Before the industrial revolution, natural sources of carbon dioxide and other greenhouse gases were balanced by natural sinks. This kept the amount of greenhouse gas in the atmosphere fairly constant, which maintained global average temperatures within a narrow band and created a stable climate.
The industrial revolution accelerated the use of fossil fuels. Burning these fuels (and other human activity) releases large amounts of greenhouse gases into the atmosphere. But because there is no corresponding sink, those gases persist in the atmosphere and cause global average temperatures to rise, disrupting the global climate system. All climate change policy is ultimately concerned with restoring the balance between sources and sinks, in order to hold global average temperature rises to well below 2°C and ideally below 1.5°C.
To achieve this, there needs to be a limit to how much carbon pollution the world can emit — a ‘carbon budget’. Every tonne of carbon pollution that is ‘spent’ from the budget this year (by putting it into the atmosphere) is one that cannot be spent next year.
Continuing to release emissions at the current rate until 2049 — or even until 2035 — will blow the budget. For countries such as Australia where emissions have been falling slowly, the budget is still likely to be exhausted well before 2050. If we spend our emissions budget at the current rate for the next decade, reaching net zero while staying within the budget will require a very rapid and disruptive change, which will be costly if not technically infeasible.
The carbon budget to limit global temperature rise is premised on a stable level of greenhouse gases in the atmosphere. Given there is a stock of gases in the atmosphere already, a stable level means either zero humaninduced emissions going into the atmosphere, or net zero — a balance between what goes in and what comes out.
The Paris Agreement aims to achieve this by committing signatories to achieving “a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century”. In practice, this commitment has been interpreted by individual countries as a goal of “net-zero emissions by 2050 or 2060”.
By 2050 or 2060, each country with a net-zero goal will have to account for permanently removing one tonne of greenhouse gas from the atmosphere for every tonne that goes in. This means actual emissions may be above zero, but they will be balanced by removals, so that the ‘net’ position is zero.
Achieving net-zero emissions by about 2050 is the bare minimum to have a decent chance of limiting global warming to 1.5°C. A commitment to ‘net zero’ is a commitment to deliberate removal of carbon dioxide from the atmosphere. The alternative absolute zero — would require giving up all activities and consumption where emissions cannot be eliminated.
The pathway to net zero is as important as the goal itself. If we achieve a balance between sources and sinks in 2050, but overspend our carbon budget on the way there, we will be left with a ‘carbon deficit’ and will have to remove additional carbon dioxide from the atmosphere in the following decades to balance the carbon budget and stabilise the global climate. The risk of this approach is that the world experiences greater warming in the meantime, overshooting temperature goals and potentially locking in irreversible changes to the climate.
Carbon neutral vs net zero
The terms ‘carbon neutral’ and ‘net zero’ are often used interchangeably, but they are different. To be carbon neutral, an organisation need only refrain from increasing its emissions, and find sinks to balance out its current emissions. To achieve net zero, an organisation needs to first reduce its emissions wherever it can, and only use sinks to balance the remainder.
Every nation that has ratified the Paris Agreement — including Australia — keeps a national emissions inventory. This is the ledger for the carbon budget. Over the course of a year, there will be entries on the debit side, as the carbon budget gets spent through economic activity; and on the credit side, where greenhouse gases are removed from the atmosphere through natural processes or human activity. Combining the credit and the debit sides tells us how much of our national carbon budget we have left.
When an emissions constraint is introduced — either through government policy or voluntary action — this restrains the debit side of the ledger. In essence, it restricts how much of the carbon budget can be spent in a given period of time. Staying within that constraint, and continuing to remove emissions at the same pace, leaves more of the carbon budget left to spend in future years.
Sometimes, spending more than the yearly carbon budget can’t be avoided. But overspending the budget every year quickly exhausts it. To avoid this, the overspend can be ‘offset’ in two ways: by finding someone who emitted less than they expected and offsetting this ‘underspend’ against the ‘overspend’; or by deliberately removing emissions from the atmosphere and offsetting those against the overspend.
Offsetting can take place within a company or entity; between entities in one sector; between entities in different sectors; or between countries. Any entity facing an emissions constraint needs to choose how much of its emissions it wants to reduce, and how much it wants to offset. This choice will be driven by the relative cost of reductions and offsetting activities, as well as the entity’s view of the future value of both activities.
In a net-zero world, every tonne of emissions that goes into the atmosphere would be balanced out by immediate equivalent removals. These remaining emissions would come from sources where no viable technological solution, practice, or alternative has been found.
The only way to offset them would be to remove carbon dioxide from the atmosphere and store it permanently. This would keep the global concentration of atmospheric greenhouse gases stable, which in turn would stabilise global average temperatures, and limit climate change.
Avoiding the tipping point
But emitting now and removing later will not help mitigate climate change. While a tonne of greenhouse gas is in the atmosphere, it is contributing to global temperature rise, and may push the global climate system past a ‘tipping point’ — a sudden and irreversible change in climate. Removing greenhouse gases after a tipping point has been passed will not return the climate to its previous state. For this reason, offsetting is not a substitute for avoiding emissions in the first place.
Relying heavily on offsetting slows the rate of adoption of new loweremissions technologies, because there is no signal to develop and deploy them. This stymies the development of sectors in areas of low-emissions competitive advantage, and slows structural changes in the economy towards low-emissions activities.
Many activities that remove carbon dioxide from the atmosphere and/or avoid emissions have considerable uncertainties around measurement and verification, and others have technical and economic challenges to overcome.
As well, there will be a physical limit to the amount of offsetting activities that can be done. Delaying emissions reductions on the assumption that these activities will be effective, cheap, and widely available risks overspending the carbon budget and passing a tipping point. Therefore, Australia must avoid emissions as a first priority, with offsetting helping but not replacing the need for emissions reduction effort.