UK Collective Offsetting Fund proposed to accelerate responsible carbon offsetting efforts

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, 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. The report highlights how existing planning regulations surrounding carbon compensation schemes or offset Funds could be enhanced further through local authorities pooling existing efforts with the Fund to deliver decarbonisation at greater scale.”

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 securing the supply and price guarantee so UK organisations can more easily incorporate into 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. There are well publicised risks associated with purchasing offsetting credits from global schemes in the VCM, particularly those based on a counterfactual basis. 

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: 

1. 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.
2. 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.
3. 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.
4. 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.