About Carbon Offsetting The action of corporations is integral in tackling the growing effects of climate change. Companies that wish to act are turning towards carbon offsetting and many have withing their stated objectives, the goal of working to become carbon neutral. This process is effective when it is well conducted and supplements the reduction of carbon emissions. However, it does have its limits, and a company should understand specific points in order, to make good use of carbon offsets. This area is still under constant development which will lead to emerging approaches, so it should be kept under review. With this in mind, Magna Carbon offers some points to help clarify and better understand carbon offsets and carbon neutrality The idea behind “carbon offsetting” is to compensate for greenhouse gases (GHGs) emitted by an activity, through the funding of other activities that seek to either sequester CO2, or avoid the emission of GHGs. This concept refers to different processes that should be distinguished. On the one hand, there are processes relating to the regulated market (aka the compliance market), and on the other hand, there are those falling under the voluntary carbonmarket. • The regulated market emerged from the 1997 Kyoto Protocol and falls under the 2015 Paris Agreement. It imposes GHG emission limits on signatory States and their largest polluting industries. Businesses under these limits are obliged to reduce their emissions and offset, where applicable, their excess emissions. This market is governed by regulated prices. • The voluntary market is aimed at businesses not subject to regulatory obligations but seeking to act on a voluntary basis. Voluntary carbon offsetting. The archetypal case is a company contacts a specialised operator from whom the company buys “carbon credits” equal to the volume (in tCO2e) of greenhouse gas emissions it wants to offset. The amount paid for these credits helpsfund a project whose principal objective is to curb CO2 emissions, sequester carbon, or both. Voluntary carbon offsetting is not regulated but there are best practices that should be followed in order to gain recognition as a responsible and conscientious climate actor. KEY POINTS IN CARBON OFFSETTING One carbon credit equates to one tonne of CO2 avoided or sequestered by means of the project. “Verified carbon credits” are generated from projects that have been verified and registered by international standards such as VCS or Gold Standard. The correct approach in terms of carbon offsets revolves around: • measuring C02emissions, • reducing C02 emmisions, and • offsetting remaining C02 emissions. . BENEFITS OF CARBON OFFSETTING Voluntary carbon offsetting, when done correctly, is a powerful system, which enables organisations (and individuals) to contribute to the global low-carbon transition and the Sustainable Development Goals of the United Nations. Besides the “carbon” benefits, carbon offset projects enable international cooperation, by generating supplemental economic, social and environmental gains, such as poverty reduction, soil and biodiversity protection, water conservation and even food security. LIMITS TO CARBON OFFSETTING Carbon offsetting, is NOT the “One size fits all” solution for climate change. Unfortunately, it is too readily used for“greenwashing”. Indeed, the risk with carbon offsetting is that it could allow emission reductions to lose their order of priority and give the impression that offsetting removes all negative environmental impacts. • The term “Offsetting” implies that, if all emissions are offset, the result is zero (= carbon neutral), suggesting no further negative impacts on the climate. • The term “Credit” connotes a right to emit CO2 and could thus encourage the shirking of responsibilities to reduce emissions. For example: a company that purchases carbon credits equal to the amount of its emissions could declare itself to be “carbon neutral”. Yet, this says nothing about that company’s actual efforts to reduce emissions. It could even claim to be carbon neutral, even as its emissions increase over the years, just by buying more credits. Any company that enters into a carbon offset process without establishing an ambitious reduction of its own emissions is taking a path that lacks coherence. RECOMMENDATIONS ON CARBON OFFSETTING • Structure your carbon offset approacharound 3 actions – measure, reduce, offset – and implement ambitious, continual actions to reduce emissions. • Provide as much transparency as possible on the actions taken, to create trust rather than mistrust. • Word your communications carefully. The use of certain words can generate distorted messages that detract from the legitimacy of the action. Follow the best practices applicable to carbon offsetting communications •You should try go further by considering carbon offsetting as an accelerant for the ecological transition and not as a means to cancel your carbon footprint. From this perspective,we recommend using phrases such as “contribution to global carbon neutrality” or “helping the climate” rather than“carbon neutral” or “carbon offsetting”. Businesses most often see carbon offsetting, as a complement to the reduction of their emissions in achieving carbon neutrality. Yet, this concept of “neutrality” among companies cannot be the soleresponse to the carbon-neutrality challenge set by the Paris Agreement. That treaty defines carbon neutrality on a planetary scale. For a better understanding, we should revisit the issue of the climate and the notion of carbon neutrality. Science has rigorously defined only one type of carbon neutrality. It is collective and on a planetary scale, defined as a balance between: CO2 EMITTED BY HUMAN ACTIVITIES Reforestation, farming techniques,technology solutions that absorb and store carbon. CO2 emissions from fossil fuels and deforestation. CO2 REMOVED BY CARBON SINKS CLIMATE Removal of as much CO2 from the atmosphere as is emitted each year is the only way to avoid the accumulation of atmospheric CO2 and stabilise the planet’s temperatures. While forests have immense capabilities as the top terrestrial carbon sinks, they still have their limits. At a time when deforestation and forest degradation is gaining pace in the world, we are counting on forests to remove the increasing emissions of CO2. EMISSIONS OF CO2 Drop in CO2 removal capacity, of forests due to loss of forested areas (deforestation) and forest degradation. Increase in CO2 emissions from fossil fuels and deforestation. CAPACITY TO REMOVE CO2 CLIMATE To restore an acceptable balance between CO2 emissions and removal, the crucial and unavoidable step is to reduce our emissions in conjunction with expanding carbon sinks. It is not a choice of one over the other or one then the other; it must be one AND the other. RECONNECTING WITH THE GOAL OF GLOBAL CARBON NEUTRALITY Move from an “offset” framework to a “contribute” framework! This approach, supported by Magna Carbon, adapts global action to businesses. It invites every organisation to consider 3 pillars on which it must act. Pillar A: Reduce emissions Pillar B: Reduce others emissions Pillar C: Develop carbon hubs. Emissions avoided through the financing of carbon reduction projects.(e.g. tackling deforestation) • Reduce indirect emissions • Removals through the financing of carbon sequestration projects (e.g. forest restoration) REDUCE CO2 EMITTED BY HUMAN ACTIVITIES Through this approach, you do not offset, you contribute! The issue is no longer just a company being carbon neutral, it is a company contributing to a coherent and more inclusive principle—global carbon neutrality, which enables the issues of carbon emissions to be more accurately perceived. This approach encourages reflection on how to improve one’s own value chain. WHAT TYPES OF PROJECTS CONTRIBUTE TO GLOBAL CARBON NEUTRALITY? 1. Projects that reduce emissions >> carbon avoidance Implementation of projects that should avoid GHG emissions compared with a baseline of emissions that would have been emitted if the project had not been carried out. Example of a project that avoids deforestation: the cutting of forests releases stored CO2 into the atmosphere; through actions that preserve the forest, emissions are avoided. 2. Carbon sequestration projects >> removal or “negative emissions” Implementation of projects that should absorb CO2 and store it over the long term. Examples: • Reforestation/afforestation projects and use of wood in construction. • Agroforestry projects for increasing carbon storage capacity of agricultural land. • Restoration of coastal ecosystems and wetlands.

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