Oxford Offsetting Principles – 2024 update

Introduction

Many companies include voluntary carbon offsetting in their climate strategies. This involves paying to receive credit for a certified unit of emission reduction or removal performed by another party. The Oxford Offsetting Principles, developed in 2022, outlined provide a framework for ensuring that offsetting contributes effectively to a net zero society. In this knowledge article we describe the most significant updates of the revised principles that was published in February 2024.

Oxford Offsetting Principles: February 2024 update

Since their inception, the Oxford Principles have spurred interest in aligning organizational carbon management and credit procurement with net-zero objectives. Despite this, many current carbon investment strategies lack alignment with net-zero goals, particularly in incorporating long-term removal credits. Moreover, the availability of these credible removals remains insufficiently scaled. The updated Oxford Principles reaffirm the original essentials while urging a shift in carbon market practices and clarifying requirements for net-zero alignment. Notable points include a pressing need to hasten emissions reduction, bridge the removals gap, and leverage nature-based solutions. This timely revision, emphasizing transparency, longevity, and innovation, sets a new trajectory for organizations navigating the evolving carbon investment and climate contribution landscape.

Key updates

The most significant updates to the Oxford Principles are aimed at reinforcing urgency, closing gaps, and clarifying key concepts:

1. Urgency in emissions reduction: organizations committed to net zero must prioritize early investments in renewable energy and energy efficiency. Additionally, they should invest in genuine carbon reduction and removals credits to align with their commitments.
2. Closing the removals gap: there's a shortage of high-quality carbon removals credits and storage options, especially those with the lowest risk of reversal, which is critical to meeting current and future demand.
3. Importance of Nature-Based Solutions: protecting and restoring ecosystems is vital for achieving global net zero and adapting to climate change impacts, regardless of whether these projects generate credits as offsets.
4. Clarifying durability risks and co-benefits: the revised principles delve deeper into the risks associated with storage across different project types and emphasize the co-benefits of various carbon removals and storage options.
5. Defining terms and reflecting new guidance: terms like "offsets," "credits," and "projects" are defined to align with international guidance on net zero and nature commitments. This distinction acknowledges the evolving landscape of carbon markets and standards.
6. Recognizing mitigation efforts: while the principles discuss net-zero-aligned offsetting, they acknowledge other reasons for procuring carbon credits and supporting mitigation projects. This includes supporting wider societal reductions or ecosystem restoration efforts.

Oxford Principles for Net Zero Aligned Carbon Offsetting (revised 2024)

The four revised principles are:

1. Cut emissions, ensure the environmental integrity of credits used to achieve net zero, and regularly revise your offsetting strategy as best practice evolves

Following best practices developed over the last decade to deal with carbon credits and projects, adherents to the Principles should:

a. Prioritise reducing your direct and indirect emissions to minimise the need for offsetting. Reducing emissions has multiple co-benefits and there are limits to the availability of high quality credits.

b. Ensure the integrity of carbon credits. Credits must be measured, reported, verified, and correctly accounted for. Credit-generating investments must yield results that are demonstrably additional to what would otherwise have occurred, have a low risk of reversal, and avoid negative impacts on people and the environment.

c. Maintain transparency from A to Z. Disclose current emissions, accounting and verification practices, targets and transition plans to reach net zero, and the type of credits you employ, as well as your selection process and the verification processes associated with the credits.

2. Transition to carbon removal offsetting to counter residual emissions by the global net zero target date

While current credits mainly focus on emission reductions or avoidance, they serve to safeguard carbon stored in vulnerable ecosystems and expedite the shift to a low-carbon society in the short to medium term. However, as we approach the net zero target date, the capacity for further emission reductions diminishes. Therefore, organizations must pivot towards carbon removals, which extract carbon from the atmosphere to achieve net zero. To achieve this, prioritize increasing the proportion of carbon removal credits, aiming for 100% by the global net zero date (by 2050 at the latest). Additionally, complement credit usage with other mechanisms to both avoid and reduce emissions before and after the net zero target date.

3. Transition to carbon removals with durable storage to offset any residual emissions by the net zero target date

Effective storage of carbon dioxide (CO2) removals is crucial to maintaining a net zero balance. Different storage methods vary in their susceptibility to releasing greenhouse gases (GHGs) back into the atmosphere, known as the "risk of reversal." Nature-based approaches that restore and protect carbon in resilient ecosystems can store carbon for extended periods, provided they receive ongoing maintenance and remain resilient to future climate change impacts. However, current deployment levels of durable carbon removal and storage methods fall short of what is required for global net zero. Early and rapid investment in these methods is critical to scale them up to meet demand. Investing in high-integrity projects with a moderate risk of reversal, such as certain nature-based removals, can also play a valuable role in the short to medium term while complementary approaches with lower reversal risk are developed and deployed. These approaches offer additional benefits beyond carbon removal and storage.

4. Support the development of innovative and integrated approaches to achieving net zero

The market for high-quality removals, whether used to generate credits or for wider offsetting approaches, is immature and in need of early adopters to support its growth. Users of these Principles can develop the market to support net zero by:

a. Using long-term agreements that are bankable and investable to provide certainty to project developers so they can raise capital efficiently;

b. De-risking project finance;

c. Forming sector-specific alliances to work collaboratively with industry peers to develop the market for projects aligned with net zero;

d. Supporting the protection and restoration of a wide range of ecosystems in their own right. Not only will this contribute to reducing emissions and removing CO2, but it will also further secure the multiple ways society is supported by nature, including adaptation to the impacts of climate change. While high-integrity ecosystem restoration projects usually store carbon, such efforts should also be supported for their social and environmental benefits, not solely for the purpose of compensating for ongoing emissions;

e. Adopting and publicising the Principles and incorporating them into regulation and standard-setting for net zero; and

f. Investing in additional beyond value chain mitigation.

Contact

For further guidance on integrating the Oxford Principles into your net zero strategy and optimizing your carbon credit investment strategy, feel free to reach out to us.