Offsets
I attended the first in-person Development Leadership Collective (DLC) event last week, kindly organised by John Guest and colleagues at Rockbourne. Not only was it great to chat to some fellow peers in the development world, but we got a quick-fire lesson on carbon offsets from guest speaker and expert Andy Haigh, who is doing great work on this topic at Grosvenor.
Here’s a summary…
Don’t forget Embodied Carbon
Embodied Carbon is playing a bit of catch-up in regulatory and policy terms. Whilst many local authorities require Operational Carbon calculations and associated payments as part of planning permissions, Embodied Carbon does not currently feature. If, like at Grosvenor, you do offset Embodied Carbon associated with development activity, this is probably linked to an internal corporate policy. If you don’t, then you need to be watching what is coming around the corner. Soon you might not have a choice if it becomes policy, a corporate requirement or a desirable certification…
Potential policy change - Part Z
Corporate commitments - The Net Zero Carbon Buildings Commitment
Certification - UK Net Zero Carbon Buildings Standard
By the way… a word of caution when calling payments to a local authority relating to Operational Carbon on a development an “offset payment”… you shouldn’t. It’s really just an Operational Carbon Tax as per planning policy - to claim it is an offset is a stretch, given the payment goes into a local authority black box and you don’t know how, when, where or on what the money is spent.
Why Offset
A development will almost always have some Embodied Carbon emissions. Whilst the first action should be to reduce as far as possible, there will always be a residual figure to offset. And with more and more companies stating their intentions and commitments to be carbon neutral or net zero carbon by milestone dates, the demand for offsets is only going to go up.
Carbon Neutral - carbon emissions are fully offset
Net Zero Carbon - carbon emissions are reduced in line with the Paris Agreement, and the residual is offset
Types of Offset
Not all offsets are equal. Here’s an image that Andy put on screen showing the vast range of interventions that could be behind an offset. We had a couple of questions in the room on what each of these are, but to keep this piece short I suggest you ask Google if you need to dive deeper on these. But let’s put it this way, we were told that CCS is not the answer!
Grosvenor have done an incredible amount of work and due diligence on this topic in the last 18 months and are right at the bleeding edge. To demonstrate this here’s a list of various emerging guidance documents that are all trying to add rigour to what is currently a pretty murky and opaque sector:
The Oxford Principles for Net Zero Aligned Carbon Offsetting
IC Draft Core Carbon Principles, Assessment Framework and Assessment Procedure
How to Buy an Offset
Spot - you just buy on the open market at market rate. This comes with risk because the market can be turbulent due to supply/demand changes.
Forward Purchases - you buy now but you need the offset in the future. This can de-risk your future exposure to price increase or availability issues on the spot market, but you need to be a more sophisticated purchaser, potentially in greater volume.
Investments - rather than buying the offset, you invest your money into the actual thing that an offset would have gone towards. When you need offsets, then you should have a ready supply of them and you are in control of the cost/price. Getting into this market is harder and you need the scale, plus capital is tied up in the investment and you might not want to be ‘all in’ on one type of offset.
Depending on what you are buying and the quantity, you might go via a broker, intermediary or direct. Diversity is good - this could be achieved by the variety of ways you have purchased or invested in offsets, and in the range of offset types themselves.
Evaluating an Offset
Did you know that offsets have a vintage too? And no it is not the same as wine, in fact it’s the opposite. Andy explained that because the sector is maturing so rapidly, an offset from five years ago might be considered not as good/valuable as a more recent, perhaps more robustly certified offset.
There are are many factors to consider in an offset. Hopefully the below is a useful introduction to key terms and a prompt to ask more questions when you make a purchase and undertake due diligence.
