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Risk-Rating GHG Emissions Offsets based on Climate Requirements
  • Quintin Rayer,
  • Peter Walton
Quintin Rayer
P1 Investment Management Ltd

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Peter Walton
University of Oxford
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To stabilize global warming within the 1.5-2.0°C Paris Agreement goal, greenhouse gas (GHG) emissions need to reach net-zero. Offsetting is required for net-zero emissions (emissions minus offsets), as achieving zero emissions is unrealistic. Offset schemes differ widely in their capacity to mitigate anthropogenic global warming (AGW). Rayer et al. (2021) provide offsetting guidelines to strengthen their long-term climate benefit, this chapter further develops this topic. We propose a framework for rating different offset types based on their climate risk, moving beyond the usual criteria of verification, audit, and additionality. We apply our offset climate ratings to some offsetting types and case studies including the sorts of schemes proposed by major oil companies, and the PAS 2060 carbon-neutrality standard. Some offsets provide little more than economic nudges towards emissions reduction. Climate offsetting requirements are more exacting. The proposed framework grades offsets from most to least benefit. Grades help classify offsets’ climate risks based on: helping terminate it, slowing warming, or only offering economic incentives with little climate benefit. Ultimately, to stabilize global warming, it will be necessary for policy to encourage the highest rated offsets under the proposed framework. Reference Rayer, Q. G., Jenkins, S., & Walton, P. (2021). Defining net-zero and climate recommendations for carbon offsetting. In Walker, T., Wendt, S., Goubran, S., & Schwartz, T. (Eds.), Beyond the 2ºC: Business and Policy Trajectories to Climate Change Adaptation (chapter 2). Palgrave Macmillan.