CO₂ compensation: what is it and how does it work?
A company can achieve CO₂ compensation by purchasing a CO₂ certificate via an intermediary company. This certificate is generated by CO2-saving activities of a project, such as the generation of renewable energy. The amount of CO2 saved is determined using calculation methods defined by a certification company. These calculations are then verified by auditing companies, such as TÜV, and CO2 certificates are issued on this basis.
The largest certifier on the market is Verra: over 75% of all emissions on the voluntary offsetting market worldwide are certified by Verra and 40% of these certificates guarantee CO₂ reduction through the protection of forests. This is not about reforestation, but about ensuring that forests are not cut down.
Problems with CO₂ compensation through forest conservation projects
The calculations for CO2 savings are very complex and therefore difficult for many people to understand, which can lead to this problem remaining undetected for a long time.
CO₂ compensation through forests extends over a longer period of time, but offsetting takes place immediately – however, forests can be destroyed or altered at any time due to natural or anthropogenic influences.
CO₂ compensation should only apply if “additionality” is guaranteed, i.e. it must be proven that the amount of CO₂ emitted would certainly have been emitted without the purchased certificate, but this is difficult to prove.
In this context, an August 2023 study by West et al and Verra Registry found that after analyzing a significant percentage of projects, more than 90% of rainforest carbon credits are likely “phantom credits” and do not represent real carbon reductions.
