Carbon Offsetting and Corporate Travel: The Good, the Bad and the Ugly

Posted in Blog

By Julien Etchanchu,  Managing Consultant

Like most businesses these days, corporate travel programs are under pressure to adopt more sustainable business practices. Respected scientists are forecasting dire consequences of climate change and sustainability is now a concern across most age groups, so it is nearly impossible not to take action. That’s why, for example,  many airlines have successfully implemented eco-friendly initiatives, including buying more efficient aircrafts, investing in alternative fuel, improving on-board sustainability, and so on. When sourcing a managed air program or booking business travel, it helps to be aware of these initiatives.

One common method airlines and other corporates use to improve their green credibility and make a real impact in their sustainability efforts is CO2 compensation, also known as carbon offsetting. Carbon offsetting is the process of compensating for CO2 emissions stemming from business activities by participating in initiatives designed to make equivalent reductions of CO2.

You might be surprised to learn that the CEO of Delta recently said, “Carbon offsets are not the solution, we need to be investing in projects that make a difference.” Although the airline itself has invested millions in offsetting, we need to recognize the fact that it is not THE solution for climate change, but rather it can be an effective part of a holistic approach to sustainability.

In this article we’ll look at the good, the bad and the ugly truth about CO2 compensation.

The Bad: What Are the Problems with Offsetting?

There are four main issues with carbon offsetting:

  1. Temporality and uncertainty
  2. Assessing the real CO2 impact
  3. Carbon price calculations
  4. Piggybacking on planned projects

Let’s look at these in more detail.

1. Temporality and uncertainty

The main issue with carbon offsetting is the uncertainty factor. One common carbon offsetting method is planting trees, but this is far from ideal, due to the time it takes to capture the carbon. Carbon Neutral estimates that it takes about 30 years (or even longer) to capture carbon, and it takes about 15 trees for a single ton of carbon.

The trouble is, you can’t guarantee that a tree planted in an offsetting scheme today will still be around in 30 years. In the last year alone, there have been serious fires in Turkey, Australia, Brazil, and other parts of the world that have destroyed huge numbers of trees, very likely including some that were part of carbon offset programs. When this happens, then the value of that offset is effectively wiped out, as the CO2 ends up back in the atmosphere.  Hence, there is a lot of uncertainty involved if a carbon offset strategy of planting trees will successfully compensate emissions.

2. Assessing the real impact of flights

Many airlines tend to underestimate the environmental impact of their flights, for example, they usually only focus on CO2 in their reporting, while aircrafts emit other gases during flight – like nitrogen oxide (NOx) – that contribute to the global warming effect, even more than CO2.

The European Environment Agency (EEA) estimated that the real impact of a flight is 2 to 5 times higher than just CO2, therefore 2 to 5 times higher than what airlines are calculating, and then compensating. This means when airlines offset, they’re probably not doing enough to mitigate the impact.

3. Carbon price calculations

When calculating the carbon price to assess the level of required CO2 compensation, airlines claim to follow the market price when making their estimates. Many estimate the price at under €10, with data from the EEA showing prices of €4-6 per ton in the period of 2013 to 2017.

Project Syndicate research suggests that at the low end of the spectrum, the price of carbon cannot be below $100 per ton, while other studies even set a price between $200 and $400 per ton. As with inaccurate CO2 impact assessments, low carbon price calculations mean that any compensation measures likely don’t go far enough. While there is no standard for calculating this price, somewhere between €30 and 40 per ton would probably be a good first step.

4. Piggybacking on planned projects

Finally, sometimes there’s a little creative accounting when it comes to CO2 compensation. This is when a company says it’s offsetting but is basically piggybacking on a planned reforestation or other projects that were already in the works. That means there’s no actual compensation, and no net gain. Sometimes it’s hard to know whether the project is truly new and designed to offset recent emissions, or if it would have been undertaken in the short future anyway.

The Ugly: The Perverse Effects of Compensation

If those are the bad aspects of CO2 compensation, what’s the ugly side of carbon offsetting?

As we said at the start, CO2 compensation works well as part of a holistic approach to sustainability. But the problem is that some corporations, not just airlines, sometimes present CO2 compensation as THE solution. They are under pressure to set ambitious goals for achieving carbon neutrality, but a huge part of these strategies lies with offsetting. Many businesses may even have strong initiatives in place, but if offsetting didn’t exist, they would need to come up with another way to solve these challenges.  And as we’ve seen, offsetting often doesn’t go far enough.

Some climate scientists argue that offsetting might actually be “worse than doing nothing” and simply represent “greenwashing.” While it gives the illusion that something is happening, a single-solution approach can sometimes prevent companies or airlines from undertaking major structural initiatives that would bring about lasting change. Indeed, from this perspective offsetting buys a “license to operate” to continue with business as usual on the company and traveler side.

The Good: How Can You Make Offsetting Virtuous?

It’s not all bad news, though. Offsetting can still be a great tool for business travel programs. They can use carbon offsetting AND simultaneously take other steps to make lasting environmental change. Here is what Advito recommends that travel managers do to create more sustainable business programs:

1. Adopt Advito’s Four-Step Approach to Building a Sustainable Travel Program

The first step is realizing that CO2 compensation cannot be the first priority in a sustainable strategy. It’s essential to make other changes first to create a holistic approach:

  1. Travel Less
  2. Travel Better
  3. Use Sustainable Suppliers
  4. Then, and only then, offset residual CO2

Learn more about Sustainable Collaboration in the second part of our guide to sustainability and air travel.

2. Use a Reliable Partner

Many airlines do their own CO2 compensation. For example, Air France and BA compensate their domestic flights, while EasyJet works out compensation across its whole network. Though this is a good starting point that must be welcomed and recognized, remember that they may be inadvertently not doing enough because CO2 emissions estimations and the carbon price are grossly underestimated.

A better approach is to use a reliable third-party supplier for compensation. Though this is more costly, it will result in compensation at a higher level. If possible, try to also compensate via Gold Standard projects which rely on a standard baseline for carbon offsetting and carbon credits.

3. Focus on Energy Projects

We’ve already covered the uncertainty surrounding compensating with reforestation projects, but this issue is less pressing for energy projects around, such as building wind turbines or solar panels, methane capture, and biomass electricity. These methods can provide quicker efficiency and hence have a more direct impact on offsetting emissions. It is interesting to note that atmosfair, one of the leading companies in the offsetting sector, refuses to work on any reforestation projects.

Even if these issues haven’t affected your business travel program yet, they soon will since public pressure keeps rising. You’ll want to be ready to choose the right suppliers, understand what data is necessary to assess your own carbon footprint, and make sure your program and your travelers are ready for a greener future.

Get in Touch

To understand how Advito can help, reach out to learn more about Sustainable Collaboration.