The negligible role of carbon offsetting in corporate climate strategies

Carbon credits feature prominently in corporate climate strategies and have sparked public debate about their potential to delay companies' internal decarbonisation. While industry reports claim that credit purchasers decarbonise faster, rigorous evidence is missing. Here, we provide an in-depth analysis of 89 multinational companies’ historical emissions reductions and climate target ambitions. Based on self-reported sustainability data and more than 400 sustainability reports, we find no significant difference between companies that purchased credits and those that did not. Voluntary offsetting is not a central part of most companies’ climate strategies, and many pass these credits' costs and purchase decisions directly onto their customers. While the companies within our sample retired 1/4th of all carbon credits in 2022, the top five offsetters' expenditures on voluntary emission offsetting are, on average, only 1 percent relative to their capital expenditures. For most companies, carbon credits are, therefore, unlikely to crowd out internal decarbonisation measures. Yet, we document that for large-scale offsetters like Delta Air Lines or easyJet, carbon credit purchases competed with financing internal decarbonisation efforts.