Cost of carbon offsetting ‘to soar by 2030’
THE cost of companies’ carbon offsetting could soar by 256 per cent this decade, according to research.
A report, published by PriceWaterhouseCoopers, found that FTSE 350 companies publicly reported £38million of voluntary carbon offset purchases in 2022.
But analysis of BloombergNEF forecasts suggests the same volume of offsets could rise dramatically to more than £154million by 2030.
It also found that prices were expected to continue going up until 2050, with the cost of the same volume of offsets peaking at £356million as businesses race to meet net-zero goals.
The findings prompted warnings that companies may fail to reach their targets if they find them unaffordable in future.
An individual, organisation or company can buy carbon offsets to fund decarbonisation projects and technology in place of lowering their own emissions.
At least 80 per cent of the volume of offsets reported to have been bought by FTSE 350 firms in 2022 were classed as “avoidance offsets” – projects that avoid environmental impact, such as renewable energy or reforestation. But there is growing opinion that avoidance offsets are not fit for purpose and only removal offsets – generated from projects that extract or permanently store CO2 from the atmosphere – should be allowed.
But experts found that without avoidance offsets, price rises could be even higher, with the spend in 2022 costing £483million by 2030 – a 1,051 per cent increase.
The energy sector alone could see an average of 8.5 per cent of 2022 gross profits being spent on removal only carbon offsetting by 2037 under this forecast.
Ian Milborrow, of PwC UK, said firms “must consider the potential financial impacts of rising offset prices as part of their netzero planning”.
He added: “If we get to that stage where the use of offsetting to reach net-zero targets becomes sufficiently expensive so as to become unviable, and in the absence of other strategies, companies will be unable to meet their net-zero commitments in the timeframes they have published.”