- New report by BusinessLDN and Arup outlines potential for a business-led UK Collective Offsetting Fund to address the current shortfall in available UK offsetting schemes
- 99% of carbon offsetting purchases by UK organisations are currently made overseas, amounting to £150m-£200m annually
- With the UK continuing to track below removal targets, the proposed Fund aims to support organisations with consolidating future offsetting purchases for investment at scale
Businesses across the UK should team up to aggregate their current and future purchasing power and collectively offset their residual emissions – establishing a new fund, according to a new report by campaign group BusinessLDN and sustainable development consultancy Arup. This could spur investment into high-quality offsetting schemes that tackle climate change and deliver wider benefits such as enhancing biodiversity, nature recovery and social value.
Blueprint for a Business-led UK Collective Offsetting Fund demonstrates the vital role of offsetting to attain net zero, highlighting that the current and projected availability of responsible UK offsetting schemes is well below the volume needed to support the climate commitments of the country and individual businesses.
Although it is widely recognised that all UK organisations must prioritise reducing the annual volume of greenhouse gas emissions that they are responsible for, the UK continues to track below the UK Climate Change Committee’s Net Zero Balanced Pathway removal targets by over 1.5million tCO2e cumulatively from 2020 to 2023.
As such, the report calls for the private sector to establish a national mechanism – a new business-led UK Collective Offsetting Fund – to provide a credible alternative to current schemes which allow firms to buy offset credits in the UK through the Voluntary Carbon Market (VCM).
Muniya Barua, Deputy CEO at BusinessLDN, said: “Many businesses are working hard to cut their emissions to meet ambitious net zero targets, but it is a tall order to expect all firms to be able to eliminate all carbon from across their supply chains. Offsetting schemes have an important role to play but the current options are limited in scope, often lack transparency, and run the risk of accusations of greenwashing. This new UK-wide fund would enable firms to offset with confidence in the knowledge that it was directly benefiting net zero projects across the country – from reforesting to retrofitting homes.”
Ben Smith, Climate and Sustainability Director, Arup said: “The Collective Offsetting Fund has the potential to be a game changer for the UK in addressing residual emissions, as well as delivering wider benefits to enhance biodiversity, restore nature and deliver social value across the country. Unlocking investor confidence and cross-sector collaboration, the Fund could mobilise collective private finance to help dramatically accelerate the UK’s capability to remove greenhouse gases from the atmosphere, while also securing the supply and price guarantee for UK organisations to integrate within their net zero and climate positive pathways.”
Currently UK organisations use the VCM to address residual emissions by purchasing from global schemes that aim to either avoid, reduce or remove an equivalent volume of greenhouse gas from the atmosphere elsewhere. Routes to achieving this include direct air capture and storage, retrofitting and reforestation.
While a vital mechanism, as things stand, the UK VCM does not currently have the capacity to meet the growing demand for offsets from UK organisations. As a result, investment into offset credits flows overseas. Of the estimated £150m spent on carbon credits in the UK in 2021, less than 1% was spent on UK offsetting schemes.
To address these challenges, BusinessLDN and Arup – following consultation with more than 50 UK organisations from across the public and private sectors – propose creating a business-led UK Collective Offsetting Fund which would:
- Allow UK organisations of all sizes and types to make advanced purchase of UK carbon offset credits as long as they meet certain decarbonisation criteria.
- Procure robust UK carbon offset credits for UK organisations at scale. This would support UK organisations confidence in delivering credible climate action by tackling collective concerns around greenwashing through comprehensive due diligence and scrutiny of schemes.
- Provide both near and long-term investment by aggregating the purchasing power from different UK organisations to underpin a consistent pipeline of high-quality offset projects in the UK.
- Increase impact beyond climate action by supporting UK offsetting schemes which demonstrate wider benefits such as job creation, enhanced biodiversity and nature restoration, social value and community engagement.
The report also highlights how existing planning regulations surrounding carbon compensation schemes could be enhanced further through local authorities pooling existing efforts with the Fund to deliver decarbonisation at greater scale.
The London Plan requires major new developments that do not achieve net zero operational emissions to contribute to Local Planning Authority (LPA) carbon offset funds.
Due to internal constraints and lack of resource, LPAs have struggled to collect and spend the cash they receive through this process. Between 2016 and 2022, only £32 million out of a possible £242 million was spent on decarbonisation projects in the local areas the funds were collected.
A new approach to pooling LPA offset funds could enhance the impact of local decarbonisation efforts. By combining resources, potentially on a sub-regional basis, LPAs could leverage economies of scale and collaboration to develop high impact offsetting projects which support local growth, job creation and biodiversity.
Over the long-term, LPAs could further support the new business-led carbon offsetting fund by channelling resources from their individual funds into it and putting forward high-quality offsetting schemes for potential investment.