Summary

The Oxford Offsetting Principles (OOP) aim to guide and incentivise good corporate climate investment in offsetting. These ‌widely-used principles offer offsetting recommendations from world-leading climate scientists, and the long-awaited update, launched this week, shows a path for companies get to net zero emissions in time. 

The revised Principles double down on the basic table stakes for a robust climate strategy: cut your own emissions as much as possible; and make sure the credits you buy for the remainder have high environmental integrity. 

The original set of OOP released in 2020 failed to answer the trillion-dollar carbon removals question: When should a company invest in carbon removals, and how quickly should it happen?

When they were first published 3 years ago, the Oxford Offsetting Principles highlighted the need for companies to gradually move away from avoidance credits and towards durable removals to achieve their net zero targets. 

The updated principles make it abundantly clear that a good offsetting strategy means companies need to start buying removals now – and progressively increase the amount bought, ultimately reaching 100% of their residual emissions by their net zero date.
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The TLDR of the most significant updates

1. It is still as important as ever to  reduce emissions as quickly as possible
2. Carbon removal is required as part of any robust net zero strategy to remove unavoidable residual emissions, and you should start now 
3. Nature-based removals are still critical for mitigating climate change
4. Climate claims, net zero, and nature commitments terminology; have been updated to reflect new international guidance
5. Providing updated clarity to the durability risks and co-benefits within carbon removal projects
6. Recognising that there is value offsetting outside of an organisation's value chain, that do not contribute to net zero targets, but can support broader climate action (also known as beyond-value-chain-mitigation, BVCM investment)

Companies investing in projects to counterbalance residual emissions should progressively increase the portion of their investments into carbon removal projects, starting now, ultimately aiming to reach 100% removals by the global net zero date (2050 at the latest) to ensure alignment with the Paris Agreement.

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What do the new principles say? They give clear and practical guidance for organisations who are currently active in the voluntary carbon market and those businesses who are new.
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The four revised 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
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Principles Overview

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

Emissions reductions are the core component of any credible science-based net zero strategy. Voluntary initiatives and standards on net zero commonly advocate using the mitigation hierarchy. This emphasises the need for actors to reduce emissions from within their own value chain as much as possible, and to invest in mitigation outside their value chains to contribute towards societal (global) net zero.

It is important to directly reduce emissions as much as possible because there are limits to the global capacity for removals. Every year of delay before starting emission reductions decreases the remaining time available to reach net zero emissions in line with Paris Agreement temperature targets.

Principle 1 best practice is laid out over three subsections:

1A. Prioritise reducing emissions and scale removals within value chain to minimise the need for offsetting.

1B. Ensure environmental integrity. Credits and projects must be additional, monitored, verifiable, correctly accounted for, and have low risk of reversal or negative unintended consequences to ecosystems and communities.

1C. Regularly revise and disclose strategies, accounting practices, targets, and credits or other investments to reach net zero. 
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Principle 2: Transition to carbon removal offsetting for any residual emissions by the global net zero target date

The distinction between emissions reduction and carbon removals. The only way to achieve and maintain net zero is to either not emit in the first place, or to compensate any residual emissions with durable carbon removals.(See Principle 3 for durability considerations).

Most carbon credits available today relate to projects that avoid or reduce emissions (read our blog on offsets vs removals). These can be an efficient way to accelerate the transition to a lower-carbon society in the short to medium term but cannot be used as a way to neutralise emissions and to achieve net zero in the long term.

If organisations kept emitting at the net zero target date while paying another organisation or actor to only reduce their emissions, global emissions would never reach net zero. “ If there are any remaining residual emissions at the net zero target date, these will have to be balanced by removals. An actor’s minimum removal target will be implicitly defined by the level of residual emissions it predicts at its end-state of net zero.” This is to say that what cannot be reduced, must be removed to reach net zero. These carbon removal targets should be explicit and re-examined at regular intervals to reflect actual progress in reducing emissions.

Carbon removal will play an essential role in achieving net zero emissions to halt global warming and may be required to further reduce temperatures after net zero is achieved. The magnitude of removal required depends on the mitigation scenario, as per figure below. Globally, based on our current trajectory, we are not on track to achieve the levels of removal deployment needed for net zero by 2050.
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Principle 3: Shift to removals with durable storage (low risk of reversal) to compensate any residual emissions by the net zero target date

The shift towards lower risk of reversal in geologically stored carbon removal. Any credits used to neutralise residual emissions increasingly need to come from activities that store carbon effectively permanently, with a low risk of re-release into the atmosphere. Whereas Principle 2 concerns the distinction between emissions reduction and carbon removal, Principle 3 addresses the importance of storing carbon permanently with a low risk of reversal. 

The risk of carbon being inadvertently released back into the atmosphere must be acknowledged and accounted for in a strategy to achieve net zero. Different types of carbon storage (biological and geological) have differing characteristics depending on how they are deployed and managed.

It is critical that significant investment in carbon removal with a low risk of reversal begins now to reach the level of removing 10 billion tonnes of carbon emission per year by 2050. A diverse portfolio of carbon removal and storage technologies should be supported to maximise the chances of scaling removals whilst minimising the risks to biodiversity and food production from over-reliance on any one given approach at scale. To help close the gap between demand for removals and storage and current supply, a net zero aligned offsetting strategy must progressively increase both the portion of carbon removal (Principle 2) and the portion of projects that store carbon with a low risk of reversal (Principle 3). 
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Principle 4: Support the development of innovative and integrated approaches to achieving net zero

The need to stimulate the carbon removals market now. While there are carbon removals that meet Principles 2 and 3 exist today, the absolute and proportional levels of carbon removal with a low risk of reversal must rise, and costs must decline, in order to make this transition more feasible. 

Actors should not wait until just a few years before their net zero target and assume that the solutions they will need to counterbalance their residual emissions will be available. To address this, Principle 4 highlights the various levers actors have at their disposal to stimulate the development of removals, which includes, but also goes beyond, offsetting via carbon credits. 

It affirms the need for organisations to signal and commit today to buy carbon removals to balance residual emissions and meet their net zero targets, (e.g. through advanced market commitments). While purchase volumes will initially be small, given the high cost associated with rigorous, first-of-a-kind durable carbon removals, offtake agreements and other innovative mechanisms can unlock financing for suppliers and motivate investment and project creation. This can enable the exponential growth required in this critical decade to ensure sufficient durable carbon removal is available in the future to meet net zero commitments.
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Conclusion

The vast majority of current offsetting approaches are not net zero aligned. To correct this, the Oxford Offsetting Principles offer a science-based framework for achieving and maintaining a net zero balance. While users must still exercise due diligence when building their offsetting strategies, these Principles offer guidance for those dedicated to high-integrity climate outcomes.
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Who Created The Principles? 

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

Understanding types of projects available in today’s carbon markets 

Emission reductions

There are three broad categories of options for reducing emissions:

1. Avoid or reduce emissions from the geosphere. Emissions can be avoided by deploying renewable energy to replace fossil fuel use, or by improving efficiency.
2. Avoid or reduce emissions from the biosphere by protecting ecosystems and their soils and vegetation from damage or degradation.
3. Reduce emissions from the geosphere by capturing and storing fossil carbon from industrial point sources or fossil-fuelled power stations.

The scope for further emission reductions will decrease as emissions decline towards the net zero target date.

Carbon removal and storage types

Most carbon removal in Paris-aligned pathways involves sequestering carbon from the atmosphere and storing it in biological or geological reservoirs.

1. Carbon removal to the biosphere involves enhancing the carbon stored in the biosphere, such as by restoring healthy ecosystems (e.g., woodlands, grasslands, wetlands, and marine habitats) or enhancing soil carbon on agricultural land.
2. ‍Carbon removal to the geosphere involves extracting CO2 from the atmosphere and storing it in the geosphere, such as through direct air capture with geological storage (DACCS) or converting atmospheric carbon into rock through remineralisation.
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Defining Terms and Targets

Ahead of developing a net zero aligned offsetting strategy, it is critical that users be clear and transparent about the targets they are setting. In this section, we define relevant targets and key terms.
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Beyond Value Chain Mitigation

Mitigation action or investments that fall outside an organisation’s value chain, meaning beyond their scope 1, 2 and 3 emissions.9 An actor may wish to set a target for its beyond value chain mitigation efforts that complements its organisational net zero strategy.

Carbon Removal

Anthropogenic activities that remove CO2 from the atmosphere and durably store it in geological, terrestrial, or ocean reservoirs, or in products. It includes existing and potential anthropogenic enhancement of biological or geochemical CO2 sinks and direct air carbon dioxide capture and storage (DACCS), but excludes passive CO2 uptake not directly brought on by human efforts.10 As a result, carbon uptake that would have occurred anyway in the absence of any active human intervention (for example, enhanced vegetation growth by CO2 fertilisation due to past global emissions) is not categorised as carbon removal for the purposes of reaching net zero.11
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Carbon Neutral

While carbon neutrality and net zero are terms should be functionally equivalent concepts, practitioners, standards, and regulators alike (particularly referring to claims of non-state actors) have come to interpret and apply ‘carbon neutral’ as a less rigorous, interim claim in which an organisation purchases credits (reductions or removals) to compensate for the total amount of remaining emissions, often ahead of the net zero target.12 This understanding of carbon neutrality demonstrates a departure from the definition of net zero, which is achieved through deep emissions reductions, with any residual GHG emissions attributable to that actor being fully compensated by removals with low risk of reversal.

Credits

Tradeable certificates that represent the mitigation (reduction or removal) of a specified amount of greenhouse gas emissions.13 Credits are usually used to offset emissions but can be acquired and retired without use as an offset as a form of extra beyond value chain mitigation.

Nature Targets: For Biodiversity Net Gain and Ecosystem Restoration

Alongside credible net zero commitments, it is critical for organisations to align corporate objectives and targets with the goals and targets of the Kunming-Montreal Global Biodiversity Framework to halt and reverse biodiversity loss by substantially increase the area of natural habitats and the abundance of wild species by 2050.14 Organisations are increasingly setting targets to reduce negative impacts and increasing positive impacts on nature and people by protecting and restoring ecosystems, including land, freshwater, and oceans, and managing farmland, forestry, and fisheries more sustainably, as well as responding to nature-related risks and opportunities.ii Meeting these targets is important for biodiversity and resilience as well as being vital for climate mitigation and adaptation.
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Net Zero Carbon

See Net Zero GHGs, but with reference to emissions of carbon dioxide only.
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Net Zero Greenhouse Gas Emissions

When anthropogenic emissions of greenhouse gases to the atmosphere are balanced by anthropogenic removals over a specified period. 15 Consensus has emerged among international guidance that to claim net zero, actors must reduce emissions as far as possible following science-based pathways, with any residual GHG emissions attributable to that actor being fully compensated by removals with low risk of reversal, exclusively claimed by that actor, either within their own value chain or through the purchase of high-integrity credits.‍
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Net-Negative / Climate-Positive

When an actor’s greenhouse gas removals, internal and external, exceed its emissions over a declared time period.17 Such targets are often made by organisations in recognition that net zero is a global target requiring actors who can to go further, faster.
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Residual emissions

Greenhouse gas emissions that remain after taking all possible actions to implement emissions reductions given current resources and technology
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Storage

Biological storage methods, such as ecosystem restoration and soil carbon enhancement, if properly managed, have the potential for durable carbon storage, while providing multiple benefits to biodiversity and society 

However, factors such as changing land-use demands, political priorities or economic pressures (e.g., increasing the risk of deforestation) and climate change itself (e.g., increasing the risks of fire, disease, floods, droughts, heat stress) all increase the risk that this stored carbon will be re-emitted from the biosphere in the short to medium term. These risks can be reduced if projects are well-governed, adaptively managed, and designed to be resilient to climate shocks and societal pressures in the project location. Climate resilience may be further enhanced by improving ecosystem health, biodiversity, and connectivity, and by reducing pressures such as pollution, habitat loss, over-exploitation, and invasive species

Geological storage methods, including storing carbon emissions  in geological reservoirs or mineralising carbon into stable forms, may offer a low risk of reversal with storage duration on millennial timescales. 

While some leakage from storage in reservoirs could still occur, for example, due to earth movements causing fractures in the rocks, or unexpected gas movement between rock activities that store carbon increasingly need to come from permanently, with a low risk of re-release into the atmosphere. 

However, as with any other project involving carbon storage, monitoring and verification are required alongside a strategy to compensate for any reversals. For this reason, removal projects with geological storage constitute project types that can store carbon on long-time scales with low risk of reversal, but these may remain challenging to invest in due to the novel technologies involved, limited supply, and, for the time being, high costs

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