June 2, 2023 — There is a clear and statistically significant trend for companies that use a ‘material’ amount of carbon credits to reduce their emissions faster than those that do not.

June 1, Unedited—Using Carbon Offsets Encourages Firms to Decarbonise Twice as Quickly

 

This is the key finding from today’s report published by data and research firm Trove Research. The report uses Trove’s database of emissions performance over the past five years of over 4,000 companies and compares this with the purchase and use of carbon credits for over 350 firms. The analysis shows that there is a clear and statistically significant trend for companies that use a ‘material’ amount of credits to reduce their emissions faster than those that do not.

 

This trend for more rapid emission reductions among credit retirees holds across: all time periods, nearly all sectors and regions, all scopes of emissions (incl. scope 3), different thresholds for what’s considered a ‘material’ use of credits, and different aggregations of typical reductions (mean, median, range, etc).

 

Firms using material quantities of carbon credits are found, on average, to be decarbonising at around 6% per year, compared to 3% per year for comparable firms that do not use carbon credits. 

 

Users of higher integrity / higher priced credits are, on average, reducing their emissions more quickly than users of lower integrity / priced credits, although this trend is weaker than found elsewhere (e.g., for sectors or regions).

 

Guy Turner, Founder and CEO of Trove Research said,  “These findings refute the assertion that companies voluntarily buying carbon credits are creating a ‘license to pollute’. The evidence of the last five years strongly suggests that the voluntary purchase of carbon credits provides companies an incentive to accelerate their emission reductions.” 

 

This is likely to be, in part, because when purchasing credits, companies voluntarily attach a price to their emissions. This results in an annual cash expenditure in their budget, which companies then try to reduce. The opportunity to reduce costs then helps to strengthen internal business case(s) to reduce emissions in that firm’s investment / budget approval processes. 

 

Firms engaging with credits are also likely to take their climate impact seriously and have well-developed mitigation & carbon credit strategies. The analysis also suggests that, while it is important to drive up credit quality over time, credits can help companies today both mitigate their emissions impact and incentivise a reduction in their emissions. 

 

To download this report, please click here.