Carbon Insetting Explained: All You Need to Know

Carbon Insetting Explained: All You Need to Know

Grace Smoot

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Stay impactful,

You’ve probably heard of carbon offsets as a way to reduce carbon emissions, but did you know that their counterpart, carbon insets, can play an equally important role in combating the global climate crisis. So we had to ask: What are carbon insets really, and could they help us mitigate climate change?

Carbon insets are the implementation of nature-based projects into a company’s supply chain to reduce carbon emissions. They do not directly reduce your carbon footprint and are only effective if projects are certified against existing standards. Yet, they are one tool to mitigate climate change.

Keep reading to find out what carbon insets are, the impact you can have with them both individually and globally, their benefits and drawbacks, and why they may not be the most effective way to mitigate climate change.

The Big Picture of Carbon Insetting

Carbon insetting is the implementation of nature-based solutions (i.e., reforestation, agroforestry, and renewable energy) into a company’s supply chain. It involves investing in resilient and regenerative practices that are related to a company’s products, which addresses and seeks to restore a company’s balance within our ecosystem.

Carbon Inset: interventions along a company’s value chain that are designed to generate [greenhouse gas] emissions reductions and carbon storage, and at the same time create positive impacts for communities, landscapes and ecosystems”

International Platform for Insetting

Carbon insets address scope 3 emissions, those that the company indirectly impacts in its own value chain. Scope 3 emissions typically represent the majority of a company’s total greenhouse gas emissions, so reducing them can have far-reaching impacts on environmental health.

Two examples of carbon inset projects implemented by the International Platform for Insetting are: 

  • Nespresso: The agroforestry carbon inset project was launched in 2014 in Guatemala, Colombia, and Ethiopia. It planted native trees on coffee farms and in the surrounding landscape, providing enhanced water provision, biodiversity conservation, and improved soil health. By 2019, nearly 3 million trees had been planted and there were 8,000 beneficiaries. The project created carbon sinks by planting trees, which helps compensate for the residual carbon emissions that Nespresso cannot reduce otherwise. 
  • L’Oréal: In 2016, beauty and cosmetics company L’Oréal launched a sustainable sourcing program for one of their main ingredients, shea butter. They partnered with communities in Burkino Faso, a West African country where 33% of the population falls below the poverty line and where one of the largest shea tree populations in the world is located. L’Oréal acquired 1,500 efficient cookstoves to replace the traditional cookstoves used to boil water to scald the shea nuts. The project enhanced cookstove performance thereby reducing the amount of wood needed. And as a result, it combatted deforestation and cut carbon emissions.
What carbon insetting isCarbon insets are the implementation of practices that reduce a business’s carbon footprint outside of its direct operations but within its own supply chain.
How carbon insetting worksBusinesses invest in nature-based practices, generating environmental and social benefits.
The impact of carbon insetting on your own emissionsCarbon insets do not directly reduce your carbon footprint.
The impact of carbon insetting on global emissionsCarbon insetting mitigates the problem, but it doesn’t work at the core issue of reducing overall CO2 emissions.
The overall effectiveness of carbon insetting on reducing carbon emissionsCarbon insetting is effective if projects are verified according to existing standards. 
The main benefits of carbon insettingCarbon insets increase carbon sequestration, maintain soil health, restore water cycles, reverse deforestation, protect biodiversity, and build climate resilience.
The main drawbacks of carbon insettingCarbon insetting is effective if projects are verified according to existing standards.

How Does Carbon Insetting Work

Essentially, carbon insets are reductions in carbon emissions within a company’s supply chain. Since these emissions usually make up the majority of a company’s total emissions, reducing them provides global emission reduction benefits. 

How Does Carbon Insetting Reduce Carbon Emissions

The goal of carbon insets is to reduce total carbon emissions to mitigate climate change.

  • Carbon insets represent indirect emission reductions. They are the implementation of practices that reduce a business’s carbon footprint outside of its direct operations but within its own supply chain. 

When you hear the words “carbon inset”, think about the term “embedded”. Insets represent indirect emission reductions from activities embedded within a business’s supply chain. This includes upstream activities (i.e. purchased goods and services, fuel and energy-related activities, waste generation, employee commuting) and downstream activities (i.e. sold product processing, usage, and end-of-life treatment). 

For example, company A pays company C to perform forest restoration initiatives. Company A has reduced its carbon footprint, and company C has helped reverse deforestation, protect biodiversity, and create jobs for the local community.

What Impact Does Carbon Insetting Have on Your Own Carbon Emissions

One of the best ways we can aid in the fight against global climate change is to reduce our carbon emissions. 

  • Carbon insets do not directly reduce your carbon emissions. 

Carbon insets do not directly reduce your own carbon emissions. Insetting is an indirect method of emissions reduction because it reduces a business’s carbon footprint outside of its direct operations. 

Coupled with direct measures of emission reductions, such as reducing individual energy use and consumption, carbon insetting can be more effective. 

What Impact Does Carbon Insetting Have on Global Carbon Emissions

Every year we pump over 36 billion tons of carbon  into the atmosphere, fueling climate change. Carbon insets aim to reduce global carbon emissions and mitigate this phenomenon.

  • Carbon insetting mitigates the problem, but it doesn’t work at the core issue of reducing overall carbon emissions. 

Carbon insets do not have a significant impact on global carbon emissions because the main goal of insets is to do more “good” rather than doing less “bad”. Insets still do not curtail energy from fossil fuels or limit their production. They simply increase carbon sequestration activities via nature-based solutions.

So far, carbon insets have not been successful in curtailing global carbon emissions. The COVID-19 pandemic triggered the largest decrease in energy-related carbon emissions since World War II, a decrease of 2 billion tonnes. However, emissions rebounded quickly and rose by 6% in 2021 to 36.3 billion tonnes, their highest ever level. This indicates that the earth is still warming at an accelerated rate, and still not enough is being done to implement direct carbon reduction measures.

Illustration of annual CO2 emissions globally
Our World in Data: Annual total CO2 emissions

How Effective Is Carbon Insetting in Reducing Carbon Emissions

Carbon insets can be effective at reducing carbon emissions if they are used correctly.

  • Carbon insetting can be effective if projects are verified or certified against existing standards

Carbon insetting projects can target the largest source of a business’s carbon emissions, which is why they can be effective at reducing overall emissions. They create synergy between climate change mitigation and agricultural adaptations and help restore the ecosystems on which companies depend. Healthier ecosystems can reduce total carbon emissions because they can sequester carbon emissions before they enter our atmosphere. 

However, carbon insetting currently does not require any verification or certification from agreed-upon global standards. Many insetting companies choose to use independent auditors because this gives projects increased credibility, but it is not a requirement. Resources used include standards from the Gold Standard, Verra, Rainforest Alliance, Plan Vivo, and the IPI’s Insetting Program Standard amongst others.

What Are the Main Benefits and Drawbacks of Carbon Insetting

Carbon insets are a great way to build sustainable relationships between businesses and suppliers that seek to maintain the health of our planet and combat climate change. But nothing comes without drawbacks, so it is important to identify what those are and how to minimize their negative impacts.

What Are the Main Benefits of Carbon Insetting 

Using carbon insets can reduce our consumption of fossil fuels (i.e., coal, oil, and natural gas) which, in turn, reduces total carbon emissions. But it also comes with various environmental benefits.

  1. Aligning companies to ecosystems: Insetting allows companies to have an integrated and holistic approach with climate action practices by connecting inset projects to the communities and ecosystems where companies source their products or services from. 
  1. Reducing overall carbon emissions: Levels of carbon emissions increased exponentially to more than 35 billion tons per year at the end of the 20th century, and the global average amount of carbon in the atmosphere today registers at over 400 parts per million. Through the use of carbon insets, businesses can reduce the carbon emissions from day-to-day operations.
  1. Increasing climate resilience: The more carbon there is in our atmosphere, the more the global temperature rises, and the more serious climate change becomes. Rising global temperatures can wreak havoc on our environment, so the more we remove or avoid emitting carbon via the use of carbon insets, the more we slow the rates of sea-level rise, ice melting, extreme weather occurrences, and ocean acidification. 
  1. Re-establishing carbon sinks: Carbon insets help re-establish our carbon sinks (i.e. forests, soils, and oceans). Forests absorb 2.6 billion tons of CO2 every year, the soil absorbs approximately 25% of all carbon emissions, and phytoplankton in our oceans absorb approximately 25% of all carbon emissions. Rejuvenating these sinks via carbon insets increases their ability to absorb carbon from our carbon-producing activities.
  1. Preventing deforestation: Investing in nature-based solutions that protect forest habitats increases carbon sequestration and decreases the effects of global climate change. Deforestation occurs at roughly 10 million hectares (~ 25 million acres) per year. Trees combat climate change, purify the air, provide housing for millions of plant and animal species, protect against floods and water pollution, and improve mental health. 
  1. Increasing sustainable business partnerships: Carbon insets create partnerships between companies and suppliers that are based on more than a simple financial transaction. These partnerships increase transparency to supply chain activities, help identify carbon emissions reductions, and build trust.

If used correctly, carbon insets can provide environmental, economic, and social benefits that go beyond just reducing carbon emissions.

What Are the Main Drawbacks of Carbon Insetting 

As with anything, carbon insets come with drawbacks that must be understood to implement them effectively. These drawbacks include: 

  • Project verification requirements: The main drawback associated with carbon insetting is that it currently does not require any verification or certification from agreed-upon global standards. Many insetting companies choose to use independent auditors because this gives projects increased credibility, but it is not a requirement. Additionality and permanence of projects are therefore not ensured. 
  • Project development and implementation: There is an increased amount of effort required to identify and develop carbon inset projects. Rather than simply paying a company to offset your carbon emissions for you, businesses must take the time to identify and develop meaningful projects with partners. 
  • Scope of emissions: Carbon insetting only applies to Scope 3 emissions, assets that the organization indirectly impacts in its value chain. It does not address scope 1 emissions, direct greenhouse gas emissions that occur from sources that are controlled or owned by an organization, or scope 2 emissions, indirect greenhouse gas emissions associated with the purchase of electricity, steam, heat, or cooling. 

Why Is Carbon Insetting Important to Fight Climate Change

Carbon insetting is important to fight climate change because it is a way to reduce total carbon emissions. Reducing emissions is important because it mitigates the effects of climate change, which has a positive cascade effect on public health and plant and animal diversity. In addition, this boosts the global economy and leads to innovative, more environmentally-friendly solutions. 

However, carbon insets should not be used as a panacea for climate change. Relying on insets solely is impractical because there is no required verification or certification from agreed-upon global standards. Also because insetting is an indirect, rather than direct, method of emission reduction. 

What are Better Alternatives to Carbon Insetting 

Opponents of carbon insetting assert that we should cut the emissions directly at the source instead of relying on insetting. Basically, if we stop emissions from getting into the atmosphere in the first place, we won’t have to worry about insetting.

The fastest way to cut emissions directly at the source is to reduce your carbon footprint. And these reduction measures don’t have to involve drastic changes either. Actions that may seem small can have a big impact because those small changes add up! You can reduce your carbon footprint in three main areas of your life: household, travel, and lifestyle. 

Reduce your household footprint:

Reduce your travel footprint:

  • Walk or bike when possible: The most efficient ways of traveling are walking, bicycling, or taking the train. Using a bike instead of a car can reduce carbon emissions by 75%. These forms of transportation also provide lower levels of air pollution.

Reduce your lifestyle footprint:

  • Switch to Renewable Energy Sources: The six most common types of renewable energy are solar, wind, hydro, tidal, geothermal, and biomass energy. They are a substitute for fossil fuels that can reduce the effects of global warming by limiting global carbon emissions and other pollutants.
  • Recycle: Recycling uses less energy and deposits less waste in landfills. Less manufacturing and transportation energy costs means fewer carbon emissions generated. Less waste in landfills means less CH4 is generated.
  • Eat less meat and dairy: Meat and dairy account for 14.5% of global greenhouse gas emissions, with beef and lamb being the most carbon-intensive. Globally, we consume much more meat than is considered sustainable, and switching to a vegan or vegetarian diet could reduce emissions. 
  • Take shorter showers: Approximately 1.2 trillion gallons of water are used each year in the United States just for showering purposes, and showering takes up about 17% of residential water usage. The amount of water consumed and the energy cost of that consumption are directly related. The less water we use the less energy we use. And the less energy we use, the less of a negative impact we have on the environment.

Because insetting is an indirect way and not a direct way of reducing emissions, it alone will not be enough to significantly reduce global carbon emissions. Direct measures of emission reductions, such as reducing individual energy use and consumption, are better alternatives to insetting. 

Related: Are you interested in learning why reducing your carbon footprint is so important? Check it out in this article here: “4 Main Reasons Why Reducing Your Carbon Footprint Is Important

Final Thoughts

Carbon insets allow us to reduce greenhouse gas emissions that are related to a company’s supply chain, which has cascading benefits on our planet’s environmental and social health. Nature-based inset projects align companies to ecosystems, increase climate resilience, re-establish carbon sinks, prevent deforestation, and increase sustainable business partnerships. When implemented properly, these benefits can outweigh the drawbacks. 

Carbon insets are a good place to start if you want to get into the carbon-emission reduction game, but to be effective in the long term, we must not rely on them solely. Cutting emissions from the source is more effective both in the short and long term.

Stay impactful,

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