Voluntary carbon offsetting

What does voluntary carbon offsetting mean?

Voluntary carbon offsetting means eliminating the harmful climate impact associated with a certain amount of greenhouse gas emissions by reducing or removing an equivalent amount of emissions elsewhere.

Through voluntary offsetting, companies, public bodies and consumers can offset or eliminate the emissions they generate and do not have an obligation to reduce. Carbon offsetting is mainly used by organisations that need to offset their emissions in order to fulfil their claims about climate action, such as carbon neutrality targets. 

As a general rule, it is good practice for users of carbon offsetting to prioritise their own emission reduction measures. Offsetting should only be used if the emissions cannot otherwise be avoided or reduced without unreasonable measures or costs. 

Voluntary carbon offsetting has become more popular in recent years. The domestic market for voluntary offsetting and related services is now at an important stage of growth and development. The increase in demand for these services is motivated by the carbon neutrality targets set by companies and organisations and by consumers’ concerns about climate change.

How does voluntary carbon offsetting work?

Voluntary carbon offsetting usually involves funding projects that prevent emissions or that remove or sequester greenhouse gases directly from the atmosphere. The projects may also produce other benefits, such as increasing biodiversity, boosting employment or reducing health hazards.

Voluntary carbon offsetting is not the same as ecological compensation. Ecological compensation means compensating for adverse effects on biodiversity caused by human activity in a certain area by improving biodiversity elsewhere.

Voluntary carbon offsetting became easier with the amendment to the Money Collection Act in 2021. With the amendment, services that offset emissions by reducing or removing greenhouse gases from the atmosphere or by preventing them from entering the atmosphere using verified, calculated methods are not subject to the provisions of the Money Collection Act. Voluntary carbon offsetting activities falling outside the scope of the act do not require a fundraising permit.

What does high-quality carbon offsetting look like?

When it comes to the quality of carbon offsetting, the availability and reliability of information play a key role. Consumers must be able to obtain reliable information on how emissions have been offset without unreasonable effort or significant costs. The Consumer Protection Act states that companies must not provide false or misleading information in marketing or customer relationships if this information could lead consumers to make purchase decisions or other decisions related to consumer goods that they would not have made otherwise.

High-quality carbon offsetting should fulfil at least the following criteria:

  • Additionality: The emission reduction, carbon sink or carbon reservoir should be in addition to what would have happened otherwise. This means that it would not have occurred without the offsetting project or the sale of offsetting units.
  • Sound calculation methodology: The emission reductions, carbon sinks or carbon reservoirs are calculated using recognised methods that are suitable for offsetting projects. These include calculation methods developed for international compensation standards.
  • Measurement and reporting: The emission reduction, carbon sink or carbon reservoir is measured or modelled for each project using scientific methods, and the results are reported appropriately.
  • Independent verification: The emission reductions, carbon sinks or carbon reservoirs can be verified, and the verification is carried out by an impartial third party.
  • Permanence: The emissions reduction, carbon sink or carbon reservoir should be as permanent as possible, meaning it should last at least 100 years. Some projects in the land use sector are shorter , which means that additional offsetting may be used to reduce risks related to permanence.
  • Transparency: The emission reduction, carbon sink or carbon reservoir generated by the offsetting project should be reported transparently and the calculations should be available for review.
  • Avoiding double counting: The same tonne of emission reductions should not be used more than once, nor should it be included towards several different objectives.
  • Avoiding carbon leakage: The offsetting project should not lead to an increase in emissions or a reduction in carbon sinks elsewhere.

Developing regulation based on research

Together with other ministries, the Ministry of the Environment has examined the current state of voluntary carbon offsetting and explored the role it could play in our work to mitigate climate change. Studies have also looked into the types of projects that produce carbon offsetting units, the international standards for projects, European offsetting schemes and quality assurance in projects.

Offsetting projects in the Finnish land use sector have been studied in a project funded by the Ministry of Agriculture and Forestry, for example. With regard to Finnish operators in the sector, the project examined how offsetting projects measure emission reductions or increases in carbon sinks or reservoirs, how operators report and verify the impacts of their offsetting projects on climate change mitigation, and what kind of methodologies the projects use to calculate their impacts on sinks and emissions.

A project funded by the Ministry of the Environment in 2021 investigated how offsetting services should be regulated in Finland. The study examined which guidance instruments could be used and assessed their suitability and impacts. Report: Regulation of voluntary carbon offsetting.

According to the study, the quality of carbon offsetting operations could be improved significantly through information management, such as by compiling a guide the on best offsetting practices and criteria that companies could commit to voluntarily. The study also found that creating a voluntary register of offsetting service providers would have a significant impact on the market. This would make the offsetting market more reliable for buyers.

A significant finding of the study was that creating new special legislation on voluntary offsetting at the national level is currently not a viable policy instrument. National solutions should take into account developments in international and EU legislation and allow flexibility in policy instruments in the future as rules evolve. It is important to avoid separate national solutions that will soon become outdated.

Establishing ground rules for the use of offsetting

The Ministry of the Environment, in cooperation with other ministries, is using research findings to establish the best policy instruments for the offsetting market, which are being advanced through a variety of projects.

Ongoing and upcoming projects

Special questions related to voluntary carbon offsetting

The project focuses on two areas:

  1. technical and legal issues and matters of principle related to double counting
  2. the relationship between voluntary information management and national legislation applying to voluntary offsetting, such as consumer protection legislation.

The project runs until autumn 2022.

Guidelines for setting climate targets and using voluntary carbon offsetting

The project will draw up guidelines for setting climate targets and using voluntary carbon offsetting, i.e. establish ground rules for the market. The guidelines are mainly intended for organisations that make claims about their climate actions and use voluntary carbon offsetting, but they are also useful for other parties operating in the offsetting market. The project runs until autumn 2023.

Examining the conditions for voluntary register solutions

The project begins in autumn 2022.

Impacts of the development of carbon offsetting (KolKom)

The project is investigating the impacts of carbon offsetting on production and value chains in the forestry and agricultural sectors. The KolKom project is part of the Catch the Carbon research and innovation programme. The project runs until the end of 2023.

Carbon offsetting information service (HIMA)

The project is producing a service for sharing information on carbon offsetting. It runs until the end of 2022.

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Ville Laasonen, Senior Specialist 
Ministry of the Environment, Environmental Protection Department, Climate 0295250250