Many entities are using carbon credits to offset residual emissions in their net zero climate strategies. There are standards and literature identifying measures to reduce associated risks. The Oxford Offsetting Principles outline how offsetting should be approached to achieve a net zero society. The four principles are:

1. Cut emissions, ensure the environmental integrity of credits used to achieve net zero, and regularly revise your offsetting strategy as best practice evolves
2. Transition to carbon removal offsetting for any residual emissions by the global net zero target date
3. Shift to removals with durable storage (low risk of reversal) to compensate any residual emissions by the net zero target date
4. Support the development of innovative and integrated approaches to achieving net zero

1. Cut emissions, ensure the environmental integrity of credits used to achieve net zero, and regularly revise your offsetting strategy as best practice evolves

Following best practices developed over the last decade to deal with carbon credits and projects, adherents to the Principles should:

1A Prioritise reducing your direct and indirect emissions – Minimise the need for offsetting. Reducing emissions has multiple co-benefits and there are limits to the availability of high-quality credits.

1B Ensure the integrity of carbon credits – Credits must be measured, reported, verified, and correctly accounted for. Credit-generating investments must yield results that are demonstrably additional to what would otherwise have occurred, have a low risk of reversal, and avoid negative impacts on people and the environment.

1C Maintain transparency – Disclose current emissions, accounting and verification practices, targets and transition plans to reach net zero, and the type of credits you employ, as well as your selection process and the verification processes associated with the credits.

2. Transition to carbon removal offsetting for any residual emissions by the global net zero target date

Most credits in the voluntary market today are associated with emission reductions or avoided emissions. These can play a key role in the short and medium term to protect the carbon stored in vulnerable ecosystems and accelerate the transition to a low-carbon society, but the scope for further emission reductions will decrease as we approach the net zero target date. Organisations must shift towards carbon removals, which remove carbon from the atmosphere to counterbalance residual emissions and achieve net zero. Those targeting net zero with the use of credits will need to increase the proportion that comes from carbon removal, rather than from emission reductions, aiming to reach 100% carbon removal credits by the global net zero date (2050 at the latest). Other mechanisms besides the use of credits will also be needed to avoid and reduce emissions, both before and after the net zero target date.

3. Shift to removals with durable storage (low risk of reversal) to compensate any residual emissions by the net zero target date

All CO2 removals must be stored to maintain a net zero balance. Long-term storage methods with low risk of reversal are needed, such as storing CO2 in geological reservoirs or through mineralization. It's crucial to invest in these methods early and ramp up rapidly to meet global net zero goals. Investing in high-integrity projects with a moderate risk of reversal, such as certain nature-based approaches, will also play a valuable role while complementary lower-risk methods are developed. These approaches may offer additional benefits beyond carbon removal and storage.

4. Support the development of innovative and integrated approaches to achieving net zero

The market for high-quality removals, whether used to generate credits or for wider offsetting approaches, is immature and in need of early adopters to support its growth. Users of these Principles can develop the market to support net zero by:

4A Using long-term agreements that are bankable and investable to provide certainty to project developers so they can raise capital efficiently;

4B De-risking project finance;

4C Forming sector-specific alliances to work collaboratively with industry peers to develop the market for projects aligned with net zero;

4D Supporting the protection and restoration of a wide range of ecosystems in their own right. Not only will this contribute to reducing emissions and removing CO2, but it will also further secure the multiple ways society is supported by nature, including adaptation to the impacts of climate change. While high-integrity ecosystem restoration projects usually store carbon, such efforts should also be supported for their social and environmental benefits, not solely for the purpose of compensating for ongoing emissions;

4E Adopting and publicising the Principles and incorporating them into regulation and standard-setting for net zero; and

4F Investing in additional beyond value chain mitigation.

Source:

The Oxford Principles for Net Zero Aligned Carbon Offsetting (revised 2024) were devised through collaboration with experts across the University of Oxford. They incorporate expertise from the Blavatnik School of Government, Environmental Change Institute, Nature-based Solutions Initiative, Oxford Martin School, Oxford Sustainable Finance Group, Saïd Business School, School of Geography and the Environment, and the Smith School of Enterprise and the Environment.

Axelsson, K., Wagner, A., Johnstone, I., Allen, M., Caldecott, B., Eyre, N., Fankhauser, S., Hale, T., Hepburn, C., Hickey, C., Khosla, R., Lezak, S., Mitchell-Larson, E., Malhi, Y., Seddon, N., Smith, A. and Smith, S.M. 2024. Oxford Principles for Net Zero Aligned Carbon Offsetting (revised 2024). Oxford: Smith School of Enterprise and the Environment, University of Oxford.