Can travel be sustainable? For businesses, travel provides invaluable opportunities for connection and growth. However, in today’s corporate landscape, there are also lofty environmental goals that companies need to fulfil.
And for private travelers, travel offers almost limitless experiences, but comes at a cost – and not just the cost of the ticket. Rather, an environmental cost.
But these days, it’s easier than ever to compensate for these costs to the environment.
We’re talking about carbon offsetting.
Sustainable travel is now at the forefront of every business agenda.
And considering that from 2024 carbon reporting will be mandatory[1] for all large companies who do business in the EU, getting to grips with carbon offsetting is now more crucial than ever.
Join us as we delve deep into this trending topic to discover: Is carbon offsetting truly the answer to sustainable travel?
Before we get into the subject of carbon offsetting and how it works, we need to understand a bit about greenhouse gases as a whole.
Here's a very quick overview:
Greenhouse gases (GHGs) refer to gases – perhaps better described as pollutants – that produce the greenhouse effect. This is the phenomenon where gases trapped in the atmosphere influence the energy balance of the planet.
More specifically, they absorb and emit infrared energy that slowly heats the Earth.
According to data from our friends at myclimate,[2] the most common GHGs are Methane (CH4), Nitrous Oxide (N2O) and, you guessed it, Carbon Dioxide (CO2) .
Small amounts of these gases naturally occur in the atmosphere, but human activity is upsetting the delicate balance.
The main culprit? Carbon dioxide.
But the good news is, there’s a process in place to help tackle the issue: carbon offsetting.
With the race to carbon net zero now on, many businesses are using carbon offsetting as a way to reach carbon neutrality.
In fact, the carbon offset market is expected to reach $700.5 million by 2027.[3]
What are carbon offsets?
A carbon offset refers to the reduction, prevention or outright removal of carbon dioxide (or other GHGs) from the atmosphere. This involves using a process that measures, tracks and captures GHGs to balance out emissions released elsewhere.
The capture of these GHGs can be achieved by businesses (or individuals) investing in carbon offsetting projects.
What are carbon credits?
When a business invests in a carbon offsetting project, they will receive carbon credits – one credit for each ton of carbon dioxide they reduce or remove from the air. Then that business can use their carbon credit to mitigate the amount of carbon they release themselves.
An easy way to think about this is to imagine a carbon credit as a token. Each token represents a reduction in GHG emissions and the right to emit a set amount of carbon dioxide into the atmosphere.
Carbon credits should always be issued in a publicly available registry, to ensure total transparency.
Basically, businesses are using this system to offset their carbon emissions – usually those which cannot be avoided.
That last point is important as this ‘technique’ shouldn’t be seen as a means to completely write off any and all carbon emissions from a business.
Carbon offsetting is just one tool, and is better used alongside other decarbonization efforts.
Naturally, there are standards, certifications and groups that audit these projects and verify their integrity and true “green” value.
One more thing to note is that both mandatory and voluntary carbon markets exist. As their names suggest, mandatory schemes are a requirement under certain carbon reduction regimes, while voluntary carbon markets are just that – a choice made by the individual or company. We’ll be focusing on the latter today.
Carbon offset projects come in many different forms. Here are some of the key categories:
These projects harness the power of modern technology to capture carbon from the atmosphere (or from other sources such as power plants) and store it safely elsewhere.
Real-life project: The Sleipner CO2 Storage project in Norway. This project captures carbon dioxide from natural gas production and stores it in an underground reservoir in the North Sea.
These projects involve the switching of fuels from ‘dirty’ to ‘clean/renewable’ energy.
Real-life project: The Nakhodka Fertilizer Plant in Russia. This project switches the energy source for ammonia production from coal to natural gas, significantly reducing greenhouse gas emissions.
Energy efficiency projects focus on enhancing the efficiency of everyday use items.
Real-life project: The Geres Biomass Stove Project in Cambodia. This project promotes the use of efficient cookstoves, which use less wood and produce fewer emissions than traditional stoves.
This refers to the investment into renewable energy, whether that be development of new solutions or production of materials.
Real-life project: The Lake Turkana Wind Power Project in Kenya. This is Africa’s largest wind farm, generating clean energy and reducing reliance on fossil fuels.
These wholesome projects include activities such as tree planting and forest protection, as well as the creation, restoration and sustainable management of ecosystems.
Real-life project: The Kasigau Corridor REDD+ Project in Kenya. This project aims at protecting over 200,000 hectares of forest, reducing emissions from deforestation, and promoting sustainable community development.
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Did you know? The AirPlus Company Account, our centralized payment solution, helped support the planting of around 1,600 trees as part of a community reforestation project in Nicaragua. |
How much is the carbon credit market worth?
In 2023, the carbon credit market was valued at approximately $479.41 billion [4],compared to $364.03 billion in 2022.
And according to Carbon Market Watch, up to 2.8 billion carbon credits [5] could potentially be issued by 2026.
Are the projects making a difference to the planet?
Since many of the projects are more long term in outlook, there isn’t too much data available to show the difference they’ve made from carbon offsetting. However, if implemented correctly, the impact could be huge.
Ultimately, it shouldn’t really matter the form in which the project operates.
What really matters, as outlined by offsetguide,[6] is that the projects meet their carbon reduction targets and are associated with reductions or removals that are:
Thankfully, it is getting easier to make a difference, with carbon offsetting now going mainstream. This can best be seen in the airline industry.
As of 2023, commercial aviation is responsible for 3.8% of global carbon dioxide (CO₂) emissions[7].
In order to reduce that, many airlines are starting to take action.The International Air Transport Association (IATA) is helping to lead this change with its very own carbon offset program. This program is standardizing the process and implementing the best practices for the more than 30 member airlines who have integrated into their web-sales engines or to a third party offset provider.
It’s also worth noting that the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) was introduced in 2021, a mandatory carbon offsetting scheme for airlines that fly internationally.
Ever wondered what those white trails are which appear behind planes? These 'contrails' are actually condensation caused by water vapor – a by-product of jet fuel combustion.
In recent times, airlines have come to the forefront of consumer-level carbon offset offerings, making it easier for travelers to get involved themselves. This started with making an option to pay a carbon offset fee available during the booking process.
Enthusiasm has been a bit mixed, however.
One poll asking whether individuals in America would pay a carbon offset fee for their air travel found: that 38% said yes, with 8% of that group having already done so. In contrast, 35% said they definitely would not do so. [8]
There is still a lot to be done in terms of education and transparency, it seems. Another potential issue is the lack of seamless integration into the booking process.
That’s one of the many reasons why the all-inclusive green fare has come about.
Green fares are essentially a separate fare category where full compensation for carbon emissions are priced into the ticket.
In the case of Lufthansa, that ‘extra cost’ on top of the basic fare includes investment in carbon offsetting projects as well as a contribution towards the use of sustainable aviation fuel (SAF). [9]
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Did you know? According to IATA, SAF is estimated to reduce emissions by up to 80% throughout its lifecycle, making it a key element for the aviation industry to achieve its climate goals. [10] |
The knock-on effect of the Lufthansa Green Fare is that it helps subsidize the cost of the SAF. This is important as it enables the SAF market to ramp up and scale production and infrastructure, eventually making it even cheaper in the long run. This will increase its adoption and ultimately help reduce the environmental burden of air travel.
The main driver behind the rise of green fares is their ease of use. Rather than paying separately for the carbon offset credit after booking, the credit is included in the price when booked.
That’s a win for the user experience as it’s in line with the sort of frictionless payment that consumers are expecting which should hopefully lead to a higher uptake.
Naturally, businesses will also welcome green fares and ease of access to carbon offset opportunities.
According to the 2023 Deloitte report[11], four in 10 European companies surveyed say they need to reduce travel per employee by more than 20% to meet sustainability targets.
In light of this we’re seeing a trend in business travelers taking longer trips and fewer domestic flights.
This is a great first step in adjusting to sustainability goals, as is the growth of bleisure travel. But thanks to the rise of the carbon offset market, they can now do more. In fact, carbon offset credits could be just what businesses need to achieve carbon neutrality.
Regulations are getting stricter, and so more action will need to be taken by businesses on this front. As we’ve discussed before, the Paris Agreement and the Glasgow Climate Pact have set a stringent timeline for meeting certain milestones.
This already puts a lot of pressure on businesses to be more sustainable, while also leading to increased costs for travelers.
ESG is another important factor to consider. The implementation of ESG scores will mean that businesses will not only need to have a better overview of carbon footprint but also how to quantify it to outside parties. You can learn more about ESG finance and its role in sustainability here.
Even with all these challenges to consider, the good news is: it's working. Businesses are now helping create a more sustainable aviation industry through bulk purchases of SAFs as part of their carbon offset strategy. This is great news, especially considering how SAF purchasing comes at a premium (three to five times the cost) compared to purchasing standard emission offsets. [12]
As mentioned earlier, carbon offsetting follows three steps: measuring, reducing, and offsetting emissions. Let’s take a look at each of these a bit closer in the context of businesses.
Measure
Without the necessary data, it would be impossible to take the appropriate action. That’s why businesses need to measure their carbon footprint in a quantifiable way.
There are many solutions out there to help with this. For example, when it comes to measuring the carbon output of specific flights taken by travelers, our Green Reports (as part of the AirPlus Company Account) can be especially useful.
Reduce
With the carbon footprint measured, businesses must then start to look internally at ways to reduce their carbon output.
Looking specifically at travel, there are a couple of different ways businesses can reduce their carbon footprint. A simple change to the travel policy could make a big difference. For example, many businesses are now choosing to opt for rail over domestic flights for business trips.
Offset
After taking all other steps to reduce their carbon footprint, businesses can now start to look at carbon offsetting.
We have already discussed the ways in which businesses can offset their remaining carbon emissions. Choosing green fares is one example when it comes to business travel.
Another area to consider is the payment process. The products and services a business uses can make a difference – but this doesn’t need to be done all internally.
Payment providers (like us) offer a Green Company Account which provides carbon neutral payment solutions designed around procurement, business travel and other corporate payment needs.
The point is that there are plenty of areas where offsetting can be utilized. And based on current trends, more will be coming in the future.
The supply for carbon offset credits is there. It’s now a case of getting more people on board.
Many people are already reducing their air travel to lower their carbon footprint. And green fares are surely set to help boost those numbers further, especially if Lufthansa’s rollout of the program continues to new markets.
On the other hand, travel is not cheap – and it is only likely to get more expensive.
Needing to pay additional amounts to purchase carbon offset credits may lead to some reconsidering when and for what reasons they travel.
However, we also know the value of business travel.
In Germany, we found that despite the rise of virtual meetings, business travel remains an important resource with 84% agreeing that face-to-face meetings are essential. [13]
Carbon offsetting plays an important role in the race to reduce global CO2 emissions. It offers a tool for those looking to go carbon neutral with a means to offset unavoidable emissions.
And while it’s not a perfect system, it is making a big difference.
When it comes to business travel and reducing carbon emissions, air travel is the major hurdle that springs to mind.And airlines have taken notice, making changes to their approach to sustainability while also providing ever more seamless means for customers to get involved.
After all, aviation is a critical infrastructure and driving force for the modern global economy, and travel is a necessity for many individuals to execute their job in the most effective way.
Purchasing carbon credits is enabling these people to cut down on their environmental impact while also investing in other sustainability ventures, such as the introduction of SAF.
Add in the many external pressures from regulation and overall public image companies need to maintain, and it’s clear that travel will evolve to become more sustainable.
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[1] https://normative.io/insight/csrd-explained/
[2] https://www.myclimate.org/en/information/faq/faq-detail/what-are-greenhouse-gases/
[5] https://carbonmarketwatch.org/2022/11/02/cop27-faq-article-6-of-the-paris-agreement-explained/
[6] https://www.offsetguide.org/high-quality-offsets/
[7] https://www.businesstravelnewseurope.com/ESG-in-Business-Travel/Air-travel-Cutting-to-the-chase
[8] https://www.nationalgeographic.com/travel/article/should-you-buy-carbon-offsets-for-your-air-travel
[9] https://www.forbes.com/sites/davidnikel/2022/08/04/lufthansa-to-trial-green-fare-in-scandinavia/
[10] https://www.iata.org/en/programs/environment/sustainable-aviation-fuels/
[11] https://www2.deloitte.com/xe/en/insights/focus/transportation/corporate-travel-study-2023.html
[13]https://www.airplus.com/corporate/en/media-relations/press/press-releases/2022/cxo-kit.html