Carbon Management Strategies: Insetting Part 2

The Differences Between Insetting & Offsetting 

Continuing with the previous blog concerning Insetting and Offsetting, we have attempted to give a summary of the key differences between the two options which are highlighted as follows [1]: 

Development

Offsetting 

Emissions reduction projects developed by “project developers”.

Insetting 

Emissions reduction potential is identified by businesses exploring their supply chain, staff, and customer GHG footprints.

Verification and Certification

Offsetting 

Projects are verified and certified through programmes such as the Clean Development Mechanism, Voluntary Carbon Standard, or Gold Standard to name a few. 

Insetting 

Agreement between stakeholders on how emission reductions will be achieved through collaboration action. How the resulting benefits will be shared and communicated. The total emissions reductions may be uncertain at the point of agreement of inputs.

Transaction

Offsetting 

Emissions reductions credits are traded between two entities. Quantities and prices are specified in the contract and normal trading conditions are applied on issues such as timing of delivery.

Insetting 

Agreement between stakeholders on how emission reductions will be achieved through collaborative action and how the resulting benefits will be shared and communicated. Total amount of emission reductions may be uncertain at point of agreement of inputs.

Monitoring/ Follow-up

Offsetting 

Monitoring and follow-up is normally specified in contract. 

Insetting 

Emissions reductions occur within the boundaries of one or several of the participants and will be captured within the scopes of corporate or individual GHG accounting. 

Relationships

Offsetting 

Purchaser and offset provider are normally discrete/ non-related entities (essentially a trading relationship).

Insetting 

Project is a collaborative activity between stakeholders in one or more businesses.

Written by Jimmy Olet

[1] Econometrica.com

Carbon Management Strategies: Insetting Part 1

What is Carbon Insetting?

It is certainly clear that the environment is of significance being thrust to the forefront of public perception in recent years. As a response, countries and corporations are increasingly seeking to demonstrate their environmental leadership either through policy (such as introducing Emissions Trading Schemes or planning them), or by announcing and acting on carbon reductions strategies.

On the side of companies, whilst it is clear for a company to seek to reduce their energy usage and conserve resources, they ultimately will have limited effects if carbon neutrality is desired. For as start, continually cutting targets for energy usage become more challenging over time in a manner akin to the shape of an exponential decay curve – the magnitude with which cuts are feasible (without hurting the bottom line) decreases.

The company can then invest in renewable energy for the remaining energy requirements. Even at the end of all of this, there will always be a residual footprint because of operating from a host of sources such as corporate travel, refrigeration leaks, outsourced goods etc. For a company where these emissions sources are significant, it is more than possible that they may undermine emissions reduction efforts.

There are a number of means in which these can be neutralised such as carbon offsetting, which if unfamiliar, is the process of neutralising emissions within an organisational boundary, by avoiding the release of emissions in another location – preferably, where the required technology will have social benefits such as generate jobs, or provide stable electricity for example.

Given the nature of the instruments, there are often fierce debates associated with carbon offsetting which are understandable. The source, as with any purchase is key, where depending on said source, it can determine the effectiveness of the carbon offsets and whether they can meet the intended aims.

At their best, the offsets are real, manageable, and verified emissions reductions that adhere to additionality achieving far greater reduction in tonnes on CO2e per unit currency than an investment in internal carbon reductions. The reductions are transparent, adhere to additionality, offer no leakage, are not double counted, and raise awareness [1]. There are a host of strict verification-bodies (or third parties) such as Gold Standard, or VCS to help ensure these benefits are realised.

The Implementation of Carbon Insetting

In addition to offsetting, a solution known as “carbon insetting” can be employed. This can be defined according to Tipper, Coad, and Burnett (2009) as:

“A partnership / investment in an emission reducing activity within the sphere of influence or interest of a company (outside WBCSD [World Business Council for Sustainable Development] Scopes 1 and 2), whereby the GHG reductions are acknowledged to be created through partnership and where mutual benefit is derived” [2].

In other words, emissions reductions are realised through partnership with an entity in the company’s supply chain, or stakeholders. The result is mutual benefit where the company reduces the environmental impact, and the partner realises social or financial benefits. It is thus considered the most innovative carbon-offsetting product in the world. 

What is also key is the fact that at a time where company's are becoming aware of the climate risks associated with climate change, this can offer a useful means for the corporate entity to reduce it emissions, reducing and promoting the reduction of emissions amongst those it does business with (suppliers), and also aids the vitality of the company and the environment as a whole. See here for another piece on Climate Change Incurred Business Risks.

Differences between Carbon Offsetting and Carbon Insetting

The main difference between offsetting and insetting is that in offsetting, emissions and reductions are considered discrete activities with no interaction between parties except a financial transaction. On the other hand, insetting involves the exploration and partnership with various stakeholders to identify emissions reduction opportunities.

The compensation actions of the "offsetting" are held in a separate locations and use uncorrelated technical activities and entities; "insetting" integrates socio-environmental commitments at the heart of the companies’ sectors and occupations where benefits include:

• The integration of mechanisms, and offset impacts within your sector and occupations; 

• Securing your development by actively conserving resources upon which your activities depend upon (such as plants, climate, water, raw materials, etc.); 

• Working in partnership with other parties to enhance your impact and added value; and 

• Acting in accordance with your business aims [3].

To be continued...

Written by Jimmy Olet

Consultant at CNI (UK)

[1] http://secondnaturebos.wordpress.com/2010/03/25/carbon-insetting/

[2] http://www.ecometrica.com/assets//insetting_offsetting_technical.pdf

[3] http://www.purprojet.com/en/insetting-definition