FEBRUARY 25, 2025 – A chimney at a power station emits treated exhaust gas to meet standards in Binzhou city, Shandong province, China, February 25, 2025. (Photo credit CFOTO/Future Publishing via Getty Images)
CFOTO/Future Publishing via Getty Images
There’s a weird dissonance in climate right now. In politics and boardrooms alike, the heat has moved off “sustainability.” Corporate net-zero pages get fewer clicks than quarterly AI updates. If you judged by vibes alone, you’d think carbon markets were a relic of the last cycle.
And yet, a new peer-reviewed study lands with a clarifying thud: carbon offsets—the centerpiece of countless corporate climate pages—aren’t as impactful as many hoped. Research published in Nature Communications analyzed 89 multinationals across airlines, oil and gas, and autos—companies that collectively retired roughly a quarter of all voluntary carbon credits in 2022. Their finding is stark in its simplicity: companies that buy offsets don’t, on average, decarbonize faster than their peers. Not in historical performance. Not in the ambition of their targets.
Do carbon offsets matter?
This is not the scandal many will want, nor the vindication some will claim. It’s something subtler, and in a way more important: offsets have been largely irrelevant to corporate decarbonization trajectories. For most firms, they’re a side-budget, a comms lever, a checkout box you can pass to customers. Researchers estimated that even the biggest voluntary buyers typically spend around one percent of capital expenditures on credits. One percent. That’s not a decarbonization strategy; that’s a rounding error.
The exceptions prove the rule. Two airlines—Delta and easyJet—ran big offsetting campaigns and, crucially, set budgets where offsets competed with internal investments. When easyJet stopped offsetting, it said it would redirect those funds into operational decarbonization. Delta created a $1 billion decarbonization envelope and spent so much of it on credits that relatively little remained for actual emissions-cutting projects. It has since pivoted away from offsets and towards cutting operational emissions. This is the “investment effect”: if offsets and real upgrades share the same pot, offsets can crowd out the hard real stuff.
There’s also a “target effect.” Some oil and gas companies built offsets right into their emissions goals—hit the number with project finance in a forest rather than cement in a factory. That doesn’t make the goal meaningless, but it does make it cheaper to declare success without changing the core of the business.
What does move the needle?
If you’re looking for what does move corporate behavior, this paper points to something hiding in plain sight: compliance markets beat voluntary markets. In Europe, companies spend far more on the EU and UK emissions trading systems than on voluntary credits, because the former are mandatory and the prices are higher. Price signal plus enforcement plus persistence beats vibes every time. The lesson for policymakers is not subtle: if you want decarbonization, build rules and prices that endure. The lesson for investors is similarly direct: watch capex and policy exposure, not offset press releases.
So what should we conclude in this moment when corporate attention is drifting? First, we should stop asking voluntary offsets to do a job they were never built to do. They can help channel money into real climate projects, and some credits are high-quality. But the market, on average, has been too cheap, too inconsistent, and too easy to exit. Companies routinely passed the cost to customers (the airline checkout box) and changed strategies when budgets tightened or headlines shifted. Offsets were a garnish on the plate, not the meal.
Second, we should focus on the machinery that does change trajectories: standards and spend. That means compliance carbon markets with credible scarcity. It means production tax credits and contracts-for-difference that make clean processes pencil. It means procurement—governments and big buyers locking in offtake for low-carbon cement, steel, fuels, and power. It means disclosure that forces comparability of real-world emissions, not just the creativity of claims.
From “Net Zero by Swipe” to “Net Zero by Build”
For companies, the to-do list is not glamorous, but it is actionable:
- Treat carbon as a capital allocation problem. If “net zero” isn’t visible in your capex plan, it isn’t real.
- Prioritize internal levers with measurable intensity reductions: process heat electrification, fuel switching, power-purchase agreements that actually add clean megawatt-hours, supply-chain contracts that demand verified cuts.
- Use offsets only for narrow, residual emissions—and disclose them as such. A clean claim is a humble claim.
For investors, retire the “offset-inclusive” net-zero slide. Ask for three things: (1) a five-year capex map tied to emissions outcomes, (2) sensitivity to policy price paths (ETS, carbon border adjustments), and (3) auditable progress in scopes 1 and 2, with a credible plan for material scope 3 categories. If a company’s carbon narrative doesn’t survive the removal of offsets, it’s not investment-grade climate strategy.
And for policymakers navigating a backlash era: don’t confuse quieter rhetoric for weaker demand. Industrial firms still need durable rules of the road. Give them fewer slogans and more certainty—permitting that moves in months, standards that ratchet, markets that price scarcity and resist political whiplash. If you want voluntary capital to help, set floors for quality and truth in advertising so we stop rewarding the cheapest story rather than the deepest cut.
The research doesn’t argue offsets are evil. It argues they’re mostly orthogonal. That should be liberating. We don’t need a perfect voluntary market to make real progress. We need sustained investment, credible policy, and the discipline to judge climate plans by the tonne and the dollar, not the tagline.
The era of “net zero by swipe” was always going to end. The era of “net zero by build”—electrons, molecules, materials—is the one that counts.
