UK businesses are increasingly investing in carbon credits, with an average spending of £20 million (~$25.7 million) per company. Despite concerns about the market and the integrity of carbon credits, many businesses still view offsetting as a necessary tool to achieve their decarbonization goals.
Research conducted by risk management firm Gallagher found a strong corporate appetite for carbon credits, even amidst associated risks.
The study revealed that large UK businesses could be relying on carbon credit purchases to achieve nearly two-thirds of their sustainability targets.
Over 88% of surveyed sustainability executives at UK firms with over 250 staff have previously bought carbon credits, with an average spending of £2 million per firm.
Additionally, 96% of these businesses plan to purchase more carbon offset, avoidance, or removal credits through the voluntary carbon market (VCM).
The survey found that 85% of respondents consider carbon credits a reliable way to meet their sustainability targets, while 90% believe they will play a crucial role in helping the UK achieve its net zero by 2050 goal.
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Respondents purchased carbon credits issued by various projects, including energy efficiency, renewable energy, waste management, fuel switching, and enhanced weathering or carbon mineralisation schemes.
James Bosley, Gallagher’s head of climate strategy, carbon insurance, and parametric solutions, stated: “UK businesses clearly see carbon credits as a vital tool, alongside existing decarbonisation initiatives, in meeting their climate and decarbonisation targets.”
However, the research also revealed that while 63% of respondents are purchasing carbon credits to meet their sustainability goals, a significant portion (27%) lack a backup plan to achieve their green targets if the projects supported by their carbon credit investments fail to deliver promised emissions benefits.
Carbon insurance
Moreover, only half of the respondents purchasing carbon credits reported having carbon credit insurance, raising concerns about potential investment risks.
Gallagher warned that billions of pounds of investment may be at risk due to the low levels of insurance cover, despite 44% of respondents acknowledging concerns about the reliability of carbon credits as a key barrier to investing in the voluntary carbon market.
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The poll findings come amidst intense scrutiny and uncertainty surrounding the voluntary carbon market, following allegations of “junk” carbon credits and potential environmental and social harm caused by some projects.
However, many businesses and green groups believe that high integrity carbon credits remain crucial for achieving emissions targets and supporting climate action initiatives.
Bosley urged businesses to avoid complacency regarding the use of carbon offsets and consider carbon credit insurance to protect their investments.
