Until a few years back, carbon offsets were hardly heard of. Their cousins, carbon credits were more in the news but even they were not quite in the limelight for a while after the expiry of the Kyoto Protocol in 2012 which led to the collapse of the mandated market for carbon credits.
Carbon offsets, unlike carbon credits are involuntary, and not too many in the industrial sector worldwide bothered much about them until recently as most of them could get away with all sorts of vague schemes, some of which were or bordered on greenwashing. But with climate action becoming a central theme of responsibility for most businesses, decarbonization is fast becoming a must-do rather than nice-to-do. But most corporates cannot quickly decarbonize many portions of their value chain.
So what can they do? The best is to invest in decarbonization projects elsewhere. This time round, the good news is, technologies and processes have developed so well that the projects they invest in have a much higher chance of actually producing decarbonization benefits - afforestation, development of other large scale carbon sinks such as soil sequestration, greenfield renewable energy projects etc.
Not surprisingly, worldwide and in India, a number of startups have sprung up to cater to the carbon offset markets. Fairly established firms (perhaps we could call them adult startups) such as Enking (which had a fairly successful IPO recently) or startups such as Climes have attracted significant investor interest.
The question some of my colleagues from the venture capital sector have asked me is: How effective and sustainable are carbon offsets?
It is not an easy question to answer and I have spent quite a few words in answering this in my Ask Narsi section, but in summary, I can say that carbon offsetting is likely to be a sector with fairly important decarbonization benefits for the short and medium term, let us say until 2035.
