Emissions offsetting in industry – an effective solution or a pretense of ecology?

What is emission offsetting in the industrial sector?

Emission offsetting is an action consisting in balancing greenhouse gas emissions – most often CO₂ – by investing in projects that reduce emissions elsewhere or absorb them from the atmosphere. This means that a company that is unable to eliminate its emissions can “offset” some of them by supporting external emission reduction measures.

Offsetting can take many forms: from planting trees, to investing in renewable energy sources, to supporting energy efficiency projects in developing countries. The most important aspect is that emissions do not disappear – they are simply balanced somewhere else.

Why do companies offset emissions?

Companies decide to offset emissions for several reasons, which result from regulatory pressures, market expectations, and long-term climate strategy. One of the most important factors is the requirement to reduce greenhouse gas emissions. This is especially true for energy-intensive companies, where emissions are generally very high. In many cases, these companies have difficulty meeting the required emission limits – even after implementing reduction measures

Offsetting then becomes a tool that allows them to get closer to climate goals and avoid the consequences of exceeding permitted emission levels. For some companies, emission compensation is also an element of implementing a responsible business strategy – especially when the company declares that it will achieve climate neutrality or reduce its carbon footprint by a specific year. In this approach, compensation complements actions taken in the field of energy efficiency, technology modernization, or switching to renewable energy sources.

Examples of goals for which companies want to compensate emissions:

• meeting regulatory requirements – some companies operate in emission trading systems (e.g., EU ETS), which require having emission allowances or demonstrating a desire for climate neutrality,
• corporate goals – more and more corporations declare that they are implementing a zero-emission strategy or reducing their net carbon footprint, and compensation can help achieve these goals faster, before technological changes can be implemented,
• expectations of investors and customers – sustainable development is becoming an element of competitive advantage. Transparency of climate actions affects brand image and customer purchasing decisions,
• short-term flexibility – modernization of industrial installations can take up to several years (taking into account design, obtaining permits, implementation), while emission compensation can be implemented faster and at a lower initial cost.

How can industry compensate for emissions?

In practice, emission compensation is done by purchasing certificates confirming the implementation of climate projects. Each certificate corresponds to the removal or avoidance of one ton of CO₂ from the atmosphere. The most popular methods include:

• afforestation and forest protection – trees absorb carbon dioxide from the atmosphere. Companies can finance programs to plant or protect tropical forests,
• renewable energy sources – supporting the construction of wind farms, solar farms, or biogas plants in regions with a high share of fossil fuels,
• energy efficiency projects – e.g., replacing furnaces, improving insulation, modernizing heating systems in developing countries,
• CO₂ capture – investing in carbon capture and storage (CCS) technologies or innovative methods of neutralizing it.

It is important, however, that compensation projects are verified by independent certifying organizations.

Advantages of emission offsetting

Well-designed and sensible compensation actions can bring many benefits:

• quick impact on the climate – projects can be implemented where emission reduction is most cost-effective,
• opportunity to act “here and now” – before new technologies are implemented, companies can reduce their carbon footprint through compensation,
• support for sustainable development – many compensation projects improve the quality of life of local communities (e.g., access to clean energy, water, health care),
• facilitating the implementation of the ESG strategy – climate action is an important part of non-financial reporting and building a responsible value chain.

Disadvantages and controversies related to emission offsetting

Emission offsetting is not a solution without disadvantages:

• risk of apparent ecology (greenwashing) – if a company uses compensation as the only climate action, without reducing its own emissions, it can be considered an attempt to improve its image without real changes,
• difficulty in verification – not all projects are equally reliable. Low-quality certificates can lead to “paper” emission reductions without any climate effect,
• lack of local impact – compensation in another country does not change the environmental situation where the company operates.

Is emission compensation greenwashing?

Emission compensation can be an effective and valuable tool – provided that it is used responsibly. It should be treated as a supplement, not a replacement for reduction measures. If a company invests in improving energy efficiency, modernizes installations, reduces the use of fossil fuels, and at the same time compensates for unavoidable emissions – this is a coherent and logical strategy.

On the other hand, a situation in which a company does not take any reduction measures, but only buys cheap certificates, can be perceived as an attempt to pull the wool over the eyes – both of customers and stakeholders. Then emission compensation really becomes a greenwashing tool. It is also worth mentioning that on a larger scale, emission compensation, e.g., by planting trees, may simply be unprofitable and take away the meaning of the entire undertaking. Why?

As part of one of DB Energy's implementations at Soufflet Malt House in Poznań, thanks to the use of several combined energy efficiency solutions, we reduced the Client's CO₂ emissions by 9,543 tons per year. For comparison, to compensate for the same amount of emissions using tree seedlings, it would be necessary to plant over a million trees, which would absorb an average of 8 kg of CO₂ per year during the first five years of their life. In the case of pine seedlings, for example, which can be planted at the highest density per hectare, this number of trees would correspond to the area of over 200 football pitches!

“Although planting trees and taking care of green areas are undoubtedly actions beneficial to the environment and sustainable development, in the context of industry and energy-intensive companies, a much more effective solution for reducing both CO₂ emissions and energy consumption are projects within the boundaries of the production plant. That is, by implementing modernizations and technologies that allow for long-term emission reductions, while also leading to energy savings and lower energy costs, which makes decarbonization worthwhile.” says MSc Eng. Przemysław Kurylas, Operations Director of DB Energy.

According to the above example of Soufflet Malt House, thanks to a well-designed project aimed at improving energy efficiency, we reduced emissions by 9,543 tons of CO₂ – a huge change. For our Client, this means a 40% reduction in the company's emissions in terms of fuel burnt and energy consumption. However, we know that not all emissions can be reduced, which is why we talk about net zero – i.e., zero net emissions. This term does not mean that there are no emissions at all – it means that emissions are reduced to a minimum, and the remaining ones can be compensated. These are the so-called residual emissions, i.e., those that cannot be avoided. For industrial companies, where emissions are particularly high, investing first in energy efficiency technologies is a more effective and sustainable solution than relying solely on emission compensation.

Let’s sum up – emission compensation in industry is a tool that, if properly used, can play an important role in the energy transformation, while supporting climate improvement. It enables the reduction of the carbon footprint in places where other actions are impossible. However, it requires a responsible approach, transparency, and treating it as one of many elements of the climate strategy – not as a simple “purchase of a clear conscience.” Emission compensation should be treated as a complement to a broad decarbonization strategy, in which the main emphasis is placed on reducing emissions at the source. Only such an approach guarantees lasting benefits for both the environment and the company itself, supporting a real transformation towards sustainable development.