CO2 compensation – climate protection instrument, fraudulent labelling or modern indulgence trade?

Climate change is progressing and worldwide concern about its consequences is raising. There are increasingly polarised debates about responsibility for this and about a coherent framework for action that enables self-efficacy, creates incentives for climate-smart production as well as changes in needs towards climate-friendly behavior and at the same time has emission avoidance as a priority – also by increasing the price of climate-damaging behavior. 

Such a framework is provided by the social market economy, which seeks to combine the advantages of a free market economy with social balance as a corrective. In this system, policymakers can define the framework conditions for economic activity and thus create incentives for climate-friendly production and consumption – for example, through the steering effect of a CO2 price or a CO2 tax. 

Key aspects around climate protection are changes in production methods and consumption, and thus the avoidance, reduction or at least compensation of emissions – even if the latter is not a panacea and is also not beyond dispute. 

The idea of compensation mechanisms is to finance climate protection projects that save as much CO2 elsewhere in the world as one produces oneself – for example, by offering or using services such as air travel, gas and heating energy or the production of goods. Such climate protection projects can include investments in renewable energies and energy efficiency, serve to reduce or bind CO2, for example in agriculture, forests, forestry and for the preservation of peatlands, or start to improve waste and water management and the emission of climate-damaging gases. 

However, offsetting projects have recently repeatedly come under criticism because it has turned out that they do not actually make effective contributions to offsetting emissions – or to a much lesser extent than stated – or even because there are allegations of fraud regarding the certificates for offsets. This has once again highlighted the need for establishing internationally binding standards and monitoring mechanisms. In the interest of consumers, improved communication on compensation mechanisms is also called for.

In the implementation regions of the partner countries, the worrying effects of some climate protection projects on the indigenous population have recently become apparent again and again, for example in the rainforests of Latin America. It would be essential that the projects benefit the local people – not only economically, but also by respecting their human rights and, in particular, participation rights. This is where development cooperation can come in, seizing the responsibility of the industrialised countries and also the opportunity to (re)build trust in dialogue with partner countries. For example, forums can be created for the exchange of experience between these countries on the legal and factual framework for the implementation of offsetting projects. 

Read the entire monitor: "CO2-Kompensation – Klimaschutzinstrument, Etikettenschwindel oder moderner Ablasshandel? Mit Einblicken aus Lateinamerika" from our Sustainability series here as PDF. Please note, to date the analysis is only available in German.