Successful Offsetting with High CO2 Price and Ambition

Wuppertal Institute research project OffSect presents analysis of advantages and disadvantages of offset approaches

  • News 07.07.2022

Offsetting is an inherent part of national and international climate policy. These approaches enable states and companies to fulfil part of their climate protection obligations by avoiding emissions elsewhere. Against this backdrop, the Wuppertal Institute's project "Analysis of the advantages and disadvantages of offset approaches in selected sectors" – OffSect for short – funded by the Umweltbundesamt, examined the opportunities and risks of offsetting. The project team has now published the project's findings in three final reports.

What conditions must be met for offsets to add value for climate protection and sustainable development and to maintain environmental integrity? The first report "Offset approaches in existing compliance mechanisms – Adding value and upholding environmental integrity?" deals with this question. The researchers investigated whether offsets in the European Union, Alberta, Australia, Colombia and Japan have helped countries to meet their climate protection goals and strengthen climate action in general. The results underline the importance of a high CO2 price in the respective compliance system. Only if the overall price level is high, offsets actually contribute to reducing emissions in and beyond the scope and to strengthening sustainable development.

The second report "Suitability and Success Factors of Offsets post-2020" follows on from the first report. The researchers explore how successful offset use could look like under the changed framework conditions of the Paris Agreement. They investigated how offset approaches can be adapted to the current circumstances and designed in such a way that environmental integrity is preserved, sustainability contributions are achieved and climate change mitigation ambition is raised. Based on an in-depth analysis, the researchers deduce various recommendations for the design of future offset approaches. 

The last report "Potentials for Offset Approaches in Selected Sectors post 2020" develops an assessment framework to support policymakers in identifying sectors in which the application of an offset approach has a particularly high potential. On the demand side, this applies in particular to sectors with emissions that are hard to abate or where emissions cannot be avoided at all. Here, offsets can add real value by involving sectors in climate change mitigation that would hardly be able to contribute to this objective on their own. On the supply side, the focus should be on measures that are not accessible. The findings show thata sectoral assessment on a global level is only possible to a certain extent and that the respective local framework conditions must always be taken into account as well. 

Offset approaches should motivate companies and states to implement climate protection measures successfully and economically – without undermining environmental integrity. All three reports can be downloaded free of charge from the Federal Environment Agency website via the links below.

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