What role do carbon credits play on the path to net-zero? 

In the race to net-zero, there are some greenhouse gas emissions that can’t but cut entirely. Building materials like cement, for example, emit carbon dioxide when they are produced – materials we need to keep using, for the time being at least. 

The voluntary carbon market 

To compensate for these kinds of emissions, companies, NGOs and private investors can purchase carbon credits on the voluntary carbon market. Each credit represents one tonne of carbon dioxide that has either been removed from the atmosphere, or which has been prevented from being emitted. When purchased and claimed as offsets, carbon credits are taken off the market to ensure they can only be used once. 

The market is supplied with credits by both nature-based and industrial removal and reduction methods. Nature-based removal includes things like reforestation, while an example of reduction would be rewetting peatland areas to limit the release of carbon dioxide. Industrial removal methods include bioenergy carbon capture and storage, while reduction could mean the installation of more renewable energy capacity. 

For those carrying out carbon reduction and removal activities, the voluntary carbon market helps finance these activities through the sale of carbon credits. For those buying carbon credits, the voluntary carbon market allows them to offset their residual emissions. 

The use of offsets must be limited 
According to the Science Based Targets Initiative (SBTI), offsetting must never come in place of reducing emissions. Companies should set climate targets that prioritise cutting emissions, and then only rely on offsets to compensate for the last, residual emissions – no more than 5-10 % of the total. This order of prioritisation is called the ‘mitigation hierarchy’. 

The role of carbon credits in Ørsted’s net-zero target 

Ørsted is the first energy company with a net-zero target validated by SBTI. Our highest priority is therefore reducing our emissions. We’re working to reach net-zero emissions across our entire value chain by 2040, offsetting the residual 1 % of emissions that are unavoidable by funding high-quality carbon removal projects, including a mangrove reforestation project in Gambia. 

We’re also working to create our own high-quality carbon credits which others can buy on the voluntary carbon market to compensate their own residual emissions. These will be based on bioenergy carbon capture and storage from our combined heat and power plants. We are developing this capacity at several plants that are fuelled by certified sustainable biomass, with 200,000 tonnes of carbon dioxide expected to be captured from Asnæs from 2025.