Are carbon offsets recession proof?

Leading figures within the UK carbon offsetting industry are confident that the emerging sector can weather the economic slowdown, despite concerns that some corporate customers may drop away if CSR budgets get cut.

Speaking at a roundtable event earlier this week hosted by offsetting trade group ICROA, Alice Chapple, director of sustainable financial markets at Forum for the Future predicted that some customers were likely scrap their offsetting plans as part of any corporate cost-cutting exercise. However, she insisted that this was unlikely to derail the sector's recent growth.

"The market tends to fall into two categories: those buying offsets in an ad hoc manner through their CSR budget may well drop away if budgets fall, but those who have made a big commitment to carbon neutrality will continue to find a way to fund offsetting."

Chris Shearlock, environment manager at the Co-operative Group, confirmed that his company fell into the later category, arguing that the environment in general and offsetting in particular were now central to the company's strategy. As a result there were no plans to abandon the purchasing of offsets in the face of an economic slowdown.

Jonathan Shopley, executive director at The CarbonNeutral Company, admitted that some businesses' carbon offsetting plans could fall foul of corporate cost-cutting measures. But he argued that any recession would also present opportunities for responsible offsetting providers.

"Those companies that aren't about to go bust and have some strategic freedom during recessions tend to see them as an opportunity to rethink their capital allocations – look at where they invest in R&D, where they can find cheap acquisition, that kind of thing," he said. "A lot of them will use this opportunity to bring carbon management closer to their core strategy and that has to be a good thing for offset providers."

Any falling away in the number of corporate customers buying offsets, could also stimulate a much needed "clear out" in the offsetting market, according to Shopley. "Some of the dilettantes operating in the market have already disappeared and we're likely to see more disappear," he said. "It will help challenge this Wild West impression of the market if there is a bit of a shake-out."

Experts agreed that despite a possible slowdown in the growth of the offsetting market it remained well positioned to continue to expand. "I have not heard any talk of the market contracting," said Shopley. "The market grew 240 per cent last year and with interest in the US expanding, and any post-Kyoto deal likely to raise the profile of carbon trading, the market is still well positioned to keep growing."

Edward Hanrihan of offsetting specialist Climate Care agreed the market was well positioned to cope with any downturn. "Some consumers and smaller businesses might stop buying offsets, but while that is a shame they are a relatively small part of the market," he observed. "The larger firms tend to see offsetting as part of a five year environmental strategy and as a result I don't see those investments changing or being cut."