What’s happening? The New Climate Institute (NCI), a German campaign group, has accused companies of using the term “insetting” to disguise carbon offsetting in their net zero plans. Insetting involves companies investing in carbon reduction or removal projects along their supply chains instead of purchasing carbon credits from third parties. However, NCI claims that the practice is fraudulent and is plagued by similar integrity issues as other carbon offsets. (Climate Home News)

Why does this matter? As the carbon offset market comes under criticism and faces controversy, some companies have been turning to insetting. However, the NCI has said that insetting is simply a rebranding operation for “low-standard” offsetting and that it can lead to the double counting of emissions reductions.

Carbon offsets face criticism – In January, the carbon offset market faced criticism following an investigation by the Guardian into Verra, the leading carbon credit standards firm. The investigation claimed that over 90% of the Reducing Emissions from Deforestation and Forest Degradation (REDD+) carbon offsets Verra approved are likely to be “phantom credits”, which means they do not lead to genuine emissions reductions and could even worsen climate change.

Carbon insetting faces the same issues as offsets – Carbon insetting projects can include carbon storage in soil and wood. However, the NCI has said that these projects face the same integrity issues as other offsetting projects due to the difficulties in demonstrating that emissions reductions are additional to what would have happened anyway.

Carbon insetting lacks standards – Companies using an insetting approach are not required to seek independent verification. Most carbon offset standards require projects to go through an independent verification procedure to evaluate compliance with accepted methodologies. The NCI said that since insetting projects are not going through the same processes they are simply a weaker variation of an already non-credible offsetting approach.

Additionally, the NCI said that emissions reduction projects which reduce emissions within a company’s value chain, rather than outside of it, are simply reducing the company’s own emissions. By claiming these reductions would neutralise the firm’s other GHG emissions the company is rejecting responsibility for those sources or counting emissions reductions twice, the NCI added.

Insetting is gaining traction – Despite the problems associated with insetting, the concept has been gaining traction – Nestle and PepsiCo, who distance themselves from offsetting, are among the firms relying on insetting for emissions reductions. Nestle said its main focus is on removing carbon by restoring forests in areas where it sources raw materials. However, like REDD+ carbon offsets, tree planting projects can lack permanence – meaning they don’t result in lasting CO2 removal when trees die earlier than expected or get destroyed in environmental disasters such as wildfires and floods.

Companies lobby standard setters – The NCI report also raises concerns over these companies lobbying standards setters to accept insetting as part of their net zero pathways, accusing the Science Based Targets initiative (SBTi) of “legitimising” insetting. The SBTi has previously said that carbon offsets cannot be used to meet science-based targets. Despite this, the SBTi guidance for forestry, land use and agriculture (FLAG) allows the use of insetting to achieve emissions reduction targets. This could impact the credibility of climate targets from firms using the SBTi’s guidance.