The near term: offsetting is key
With global warming expected to reach 1.5 degrees Celsius sometime between 2021 and 20408, corporate decarbonisation targets must balance the longer-term structural changes with the need to take tangible action today. So, while 2050 may be the end goal, Australia’s corporates must still work with what’s available right now.
Carbon offsetting should play an important role in supporting an organisation’s transition to carbon neutrality, especially those in hard-to-abate sectors, such as mining, manufacturing and energy. After all, many have little option but to rely on fossil fuels for their baseload energy needs or manufacturing processes in the near future while new technology such as carbon capture, which could allow them to operate in a less carbon-intensive way, are still under commercial development.
That said, some critics argue that carbon offsets can be too theoretical and too far removed from the carbon that’s being emitted. However, Macquarie believes there are real options upstream, midstream and downstream where offsets can make a difference.
One key to making this strategy work is to properly engage with all stakeholders, including the local community. Many carbon projects provide ESG co-benefits, such as improved local community social and economic outcomes for women, children and underrepresented groups. As such, carbon offset projects can provide an opportunity for organisations to integrate their sustainability initiatives with their wider community and philanthropic engagements.
It is also important to frame (and to use) offsetting as part of a wider, mutlifaceted strategy toward decarbonisation – asset owners should communicate exactly how offsets address a project’s emissions today, as well as the emissions and other ESG solutions they are working towards, in order to directly reduce emissions in the medium to long term.
Offsets can also be used creatively to make historically carbon-unfriendly, but necessary transactions, greener. For instance, Macquarie’s CGM team arranged and executed the world’s first major petroleum trans-continental shipment in which the entire crude oil lifecycle was offset. In addition, CGM has executed other market-leading transactions in carbon-neutral refined petroleum products and carbon-neutral ocean freight. These product offerings represent pragmatic solutions that use carbon offsets as a bridge into longer-term, structural decarbonisation efforts that require time, capital investment and, in some cases, additional technological development.
The path to 2050 is a long one and companies need to have short and medium-term goals along the way. Offsets allow these companies to take immediate action while exploring the technological developments that will ultimately allow them to reach their carbon ambitions.