Of the estimated £150 million spent on carbon credits in the UK in 2021, less than 1% was directed towards UK-based offsetting schemes. This indicates a significant outflow of investment that could otherwise support local decarbonisation efforts.
In a move to address the growing challenge of carbon offsetting in the United Kingdom, a new report by BusinessLDN and Arup has proposed the establishment of a UK Collective Offsetting Fund. This initiative aims to change how businesses approach their residual emissions and accelerate the country’s progress towards its net-zero goals.
The report, titled “Blueprint for a Business-led UK Collective Offsetting Fund,” highlights a critical shortfall in the current availability of responsible UK offsetting schemes. This deficiency poses a significant obstacle for organisations striving to meet their climate commitments and support the nation’s decarbonisation efforts.
According to the UK Climate Change Committee’s Net Zero Balanced Pathway removal targets, the country is currently underperforming by over 1.5 million tCO2e cumulatively from 2020 to 2023. This stark reality underscores the urgent need for innovative solutions to bridge the gap between ambition and action in carbon reduction.
The proposed fund seeks to address several key challenges in the current carbon offsetting landscape. Of the estimated £150 million spent on carbon credits in the UK in 2021, less than 1% was directed towards UK-based offsetting schemes. This indicates a significant outflow of investment that could otherwise support local decarbonization efforts. Moreover, existing offsetting schemes often face scrutiny due to lack of transparency and the risk of greenwashing accusations.
The UK Voluntary Carbon Market (VCM) currently lacks the capacity to meet the growing demand for offsets from UK organisations, forcing many to rely on international schemes. The new fund aims to provide a more credible and transparent alternative, focusing on UK-based projects.
The UK Collective Offsetting Fund proposes a comprehensive approach to tackle these issues. It would allow UK organisations of all sizes and types to make advanced purchases of UK carbon offset credits, provided they meet certain decarbonization criteria. By aggregating demand, the fund would procure robust UK carbon offset credits at scale, ensuring higher quality and more competitive pricing.
Furthermore, the collective purchasing power would support a consistent pipeline of high-quality offset projects within the UK, providing both near and long-term investment opportunities. Beyond climate action, the fund aims to support UK offsetting schemes that deliver wider benefits such as job creation, biodiversity enhancement, nature restoration, and community engagement.
“Many businesses are working hard to cut their emissions to meet ambitious net zero targets, but it is a tall order to expect all firms to be able to eliminate all carbon from across their supply chains,” said Muniya Barua, Deputy CEO of BusinessLDN.
Barua highlighted the potential of the fund to enable firms to offset with confidence, knowing their investments directly benefit UK-based net-zero projects.
Ben Smith, Climate and Sustainability Director at Arup, described the proposed fund as a potential “game changer” for the UK in addressing residual emissions. Smith emphasised the fund’s capacity to unlock investor confidence and cross-sector collaboration, potentially mobilizing collective private finance to accelerate the UK’s greenhouse gas removal capabilities.
The report comes at a critical time when businesses across the UK are grappling with the complexities of carbon offsetting and the need to demonstrate genuine progress in their sustainability efforts. By providing a unified, national mechanism for carbon offsetting, the proposed fund could significantly reshape the landscape of corporate climate action in the UK.
Recent investigations have raised concerns about the efficacy of various offsetting schemes. A joint analysis by the Guardian and Corporate Accountability found that 78% of the top 50 carbon offset projects globally were classified as “likely junk or worthless” due to fundamental failings that undermine their promised emission cuts.
This underscores the importance of developing robust, transparent, and effective offsetting mechanisms like the proposed UK Collective Offsetting Fund.
As the proposal gains traction, it is expected to spark discussions among policymakers, business leaders, and environmental experts about the future of carbon offsetting in the UK and its role in achieving the nation’s ambitious climate goals. The success of this initiative could potentially serve as a model for other countries seeking to enhance their domestic carbon offsetting capabilities and ensure that investments in climate action deliver tangible benefits to local communities and ecosystems.