Alan Buckle

When people talk about climate change and reducing the carbon footprint of their home or business through offset schemes, one of the most common discussion points is the validity of these offsets.

Unlike emissions trading, which is regulated by a formal legal framework, carbon offsets generally refer to voluntary arrangements offered by commercial and not-for-profit carbon offsets providers. Offsetting involves calculating a person or entity's greenhouse gas emissions and then purchasing 'credits' from emission reduction projects.

In their haste to become carbon neutral, many companies have skipped the crucial first step of adopting reduction strategies. Offsetting may be a cheaper and quicker alternative to reducing fossil-fuel consumption, but it can discourage organisations from trying to reduce their own carbon footprints.

Typical examples of offset programmes include tree planting, projects that encourage renewable energy usage in developing countries and those which may help lower the carbon intensity of energy supply. Apart from discouraging a change in corporate behaviour, there are concerns over whether the offset payments get to the right place.

This doesn't mean that companies shouldn't offset. If a business cannot become carbon neutral without it, it can offset with one of the highly reputable offsetters available.

The market has suffered from problems of measurement standards. Take some airlines for example, who for an additional payment will offset the greenhouse gas emissions of your flight with an equivalent carbon dioxide saving elsewhere.

However, there is no agreed standard for measuring the emissions of a flight, say from London to New York. Without an agreed measurement methodology, a company cannot provide assurances around the impact on its carbon footprint.

In autumn 2007 the government will publish the voluntary code of best practice for the provision of carbon offsetting to UK customers. Organisations wishing to be accredited under this code will have to use carbon offset credits from the compliance market only and schemes will be audited annually.

Companies are looking for external assurance over offset schemes for increased market confidence and credibility of schemes. Without these assurances the message is buyer beware.

Alan Buckle is CEO Advisory of KPMG Europe