Contribution claims, a genuine approach for climate impact

from offsetting to contribution claims

6 min readDec 13, 2022

The carbon market is considered as one of the most powerful tools of climate policy. But carbon offsets are not without their flaws. Companies wishing to navigate the low-carbon transition are confronted with the limitations of the current voluntary carbon market (VCM).

Climate compensation — a faux pas

For the past few years, offsetting, also referred to as carbon compensation, has suffered from a negative reputation. Companies who voluntarily supported climate action risked greenwashing accusations. However, with the introduction of science based targets, there are finally more guidelines on how to steer offsets. With the maturation of these guidelines, so does the precision and use of terminology within the VCM space.

Contribution claims are an alternative to the criticized “carbon neutrality” and “offsetting” claims and offer a genuine alternative for corporations looking to support voluntary climate action. Instead of offsetting abroad, companies now voluntarily finance projects that deliver verifiable and additional emission reductions in return for carbon credits, to contribute to national climate targets.

From offsetting to contribution claims — how did the conversation develop?

Referring to carbon offsets to meet climate targets became risky and is often associated with low environmental integrity. Companies that invest in non-verified credits, often prioritize reductions over in-house emissions. This can indirectly cause double-counting carbon credits which could result in possible litigation risks. How did this conversation develop over time?

“Carbon credits” were initially created in 1997 as part of the Kyoto Protocol to help industrial countries reduce emissions to comply with their committed climate targets. The Protocol had set rules on how carbon credits could be created, traded and tracked. Financing climate action in developing (often southern hemisphere) countries became a strategy to reduce emissions, as the protocol only included emission reduction targets for 37 developed countries. This opened up a huge opportunity for offset projects and has led to voluntary offsetting as we know it.

From Kyoto to the Paris Agreement — A paradigm shift

With the end of the Kyoto Protocol era and the start of the Paris Agreement in 2015, a paradigm shift occurred. Under the Paris Agreement, countries could independently decide on their own contributions. Based on their ambitions, Nationally Determined Contributions (NDCs) were created towards the overall goal of keeping the average global temperature rise to “well below” 2°C, while acknowledging the end goal of 1.5 °C.

This approach encouraged more countries to commit to climate targets, including developing countries. Mitigation goals and the strategy to reach these goals differed as countries independently established policies to reduce emissions, such as the baseline year from which targets are measured, the year these targets will be met and if targets are measurable.

Developed countries are now expected to maintain economy-wide absolute targets, while developing countries are confronted to balance their own climate goals against potential demand for mitigation outcomes from other countries. The landscape for climate finance and offsets has changed and what was once a clear and common framework for carbon markets, now presents challenges, especially regarding reporting climate actions.

Double accounting and offset integrity

The voluntary carbon market (VCM) provides an opportunity to fund emission reduction projects that would otherwise not be possible. Most Nationally Determined Contributions (NDC’s) recognise the carbon market as a relevant asset class and anticipate using the market to reach their goals.

The Paris Agreement framework challenges current carbon offsetting practices. Under the Paris Agreement, the issue of double counting has unfolded. Given that all countries have climate targets under the agreement, and are required to collectively lower their emissions to net zero, it should not be possible for two countries to count the same emission reduction towards their respective national targets. Otherwise their accumulated “net zero” would be inaccurate, simply having created an accounting loophole instead.

In the pursuit to make non double counted offsetting claims, a so-called “corresponding adjustment” should be applied, meaning a country should adjust its own levels of emissions when it sells reductions to another country.

For example, if a country emits 100tCO2e in year 1, and 80tCO2e in year 2, but has sold 5tCO2e reductions to another country in year 2, it should report 85tCO2e in year 2 to include sold reductions.

When it comes to private companies offsetting on the voluntary market, the question is more complex. Countries, taken all together, must reach net zero emissions as soon as possible. Companies’ emissions are included in the measurement of countries’ emissions, but are not separately accounted for to demonstrate progress of a national climate pledge. When companies voluntarily support climate action, the main risk is that the respective country captures the emission reduction as well, causing to displace nationally driven climate action, leaving emission levels unchanged.

Contribution claims for Voluntary Climate action

For example, if Unilever reduces its emissions from a UK factory, this will account for Unilever’s “target” and the United Kingdom’s official progress towards meeting the Paris Agreement objective. The reduction is claimed by both Unilever and the UK, but it discourages reducing emissions anywhere.

Imagine the United Kingdom adopted a policy to reach the NDC target (i.e. plans to decarbonise transport), the funding from the voluntary carbon market could make the need for this policy obsolete, leaving overall emissions of the UK unchanged.

Double accounting eliminates an offsetting project’s integrity and needs to be avoided. To avoid double the issue, countries can make corresponding adjustments to national carbon balances.

The benefits of contribution claims for impact leaders

The association with carbon compensation has given carbon offsetting a negative reputation. Achieving carbon neutrality using offsets are no longer in line with the national climate targets, set under the Paris Agreement.

Contribution claims provide a sensible alternative to the “carbon neutrality” and “offsetting” claims. Companies are no longer limited to supporting projects in developing countries and contribution claims encourage investing in projects that directly reduce emissions (either at a national level or abroad). Instead of compensation for emissions, credits could be used to measure the financial contribution to national climate targets, without transferring emission outcomes. The focus should be on additional emission reductions that would otherwise be financially unrealizable.

How to make a valid contribution claim. Source: https://contributionclaim.com/

With contribution claims, a company, product or service isn’t per se carbon neutral, but could contribute to achieving global carbon neutrality. After reducing as much emissions as possible, companies can choose to communicate the products’ remaining emissions to consumers, offering a more honest insight regarding climate impact.

Moving from “carbon offsetting” to “contributing” allows us to redefine old associations about the carbon market. It is not just a new narrative; it avoids the double accounting problem and helps protect consumers from being exposed to false advertising, making them believe certain products and services have climate impact, and giving companies less exposure to greenwashing accusations. This approach is often seen as more effective, because it focuses on reducing emissions at the source, rather than simply trying to balance them out through offsetting.

About Senken

Senken is the leading marketplace for on-chain carbon credits. Easily purchase, trade and retire carbon credits from verifiable climate projects in a credible and transparent manner.