In December 1997, the UN Conference of the Parties (COP) adopted a major text imposing obligations to reduce greenhouse gas (GHG) emissions.

It is essentially the developed countries - the Annex I countries - that are committed to reducing their emissions by setting binding targets (national budgets). In addition to their own efforts to reduce GHG emissions, developed countries can also participate financially in projects to reduce the emissions of organizations located in other countries (JI, CDM).

Voluntary carbon offsetting follows the latter logic, since it "consists in financing a project to reduce or sequester GHG emissions for which one is not directly responsible".

For each project, the project owner and the certification body determine the quantity of greenhouse gases that will be avoided or sequestered, thus setting the number of carbon credits that will be issued for the project in question, with one carbon credit representing one tonne of CO2-equivalent avoided or sequestered.

It is important to distinguish between the "regulatory" (mandatory) carbon market and the "voluntary" market, which is the subject of this article:

• The regulatory market generally covers the sectors with the highest GHG emissions (energy, steel, cement, etc.), and imposes quantified targets ("emission quotas") on the companies concerned - in the European Union, this is the Emissions Trading Scheme (EU ETS), which covers over 40% of total EU emissions
• The voluntary carbon offsetting market, which is open to all economic agents, but is particularly aimed at players who are not subject to legal or regulatory constraints limiting their GHG emissions (companies, individuals, etc.).

To be valid and relevant, a compensation project must respect several cardinal principles:

• Additionality: the project must generate emissions reductions that would not have occurred without the label and the carbon financing obtained through it. As a result, only emissions reductions resulting from actions that go beyond a reference scenario established by the method used are counted.
• Measurability: the project must be measurable, i.e. the greenhouse gas emissions captured or reduced can be quantified.
• Permanence: the project must be a long-term one
• Verifiability: project progress and its evolution over time must be easily and regularly checked.

Offsetting is part of the avoid-reduce-compensate sequence, after measuring an organization's carbon impact. Thus, by going beyond emissions reductions, voluntary carbon offsetting is a means of reaching the goal of global carbon neutrality more quickly.

There are 4 main players on the market:

• Certification bodies, which verify that a project meets the defined objectives and validate the reduction in GHG emissions, and therefore the number of associated carbon credits.
• The project leaders (or developers), who actually implement the project
• Intermediaries, who bring together buyers and sellers of carbon credits - some entities may act as both project developers and intermediaries.
• End buyers, who acquire carbon credits as part of their low-carbon transition process (mainly companies and individuals).

Some players involved in carbon offsetting are sometimes criticized for the way they communicate about this approach, and we explain why:

• The term "offsetting" can give the false impression that purchasing carbon credits is equivalent to cancelling an organization's emissions, creating a risk that it will neglect its efforts to reduce greenhouse gas (GHG) emissions.
• Some organizations use their offsetting approach to claim that they are "0-carbon", but carbon accounting methodologies are clear: you cannot subtract emissions offset elsewhere from your own GHG emissions.

To make the most of carbon offsetting, it is therefore necessary to include it in an overall carbon transition approach (measure, avoid-reduce, offset) and to be transparent about the various actions undertaken (reductions, financing of offsetting projects), and not to focus solely on a "purely arithmetical" vision of carbon neutrality, as ADEME reminds us in an opinion issued at the beginning of 2022.

In conclusion, the advantages of carbon offsetting are obvious: as Carbone4 points out, offsetting enables funds to be channelled into low-carbon development, making it a relevant lever for achieving global carbon neutrality more quickly. However, offsetting must be part of an overall low-carbon transition approach, and transparent communication on the various actions undertaken by an organization is essential to avoid focusing solely on offsetting.