Carbon insetting is the new cool kid on the net zero block, and is gaining serious traction in logistics and agricultural industries. But what does carbon insetting mean? What are the benefits of insetting? How do insets compare to offsets? Which companies are doing it? 

Many sustainability leads see insetting as an opportunity to reclaim control of their company’s carbon emissions. In the race to net zero, carbon insetting is another lever we can pull.

The logistics sector is driving insetting. With climate disruption regularly creating mass maritime traffic jams along the Panama Canal, the need to curb climate change is felt throughout the industry. Coupled with ambitious EU carbon reduction targets to cut emissions by 55% (vs. 1990), it has less than a decade to sort it out.

To learn more about the push and pull factors of green supply chains, download our free guide.

So how can carbon insetting help? Let’s start at the beginning. 

What does carbon insetting mean?

Carbon insetting means funding an emissions reduction that takes place within a company's value chain. However, nowadays the more widely accepted definition is to fund emission reductions within your company’s sector. This accelerates climate action through industry cross-pollination. 

While this is different from carbon offsetting, it’s measured in the same way: one carbon inset is one tonne of carbon avoided.

An example of carbon insetting in logistics might mean financing the use of marine biofuels to transport shipments. While the carbon inset buyer’s shipments may not be transported using said biofuels, maritime emissions have still been avoided. Through industry collaboration, we still contribute to our collective net zero goal. 

Another popular example of carbon insets could be sustainable aviation fuel (SAF), or regenerative farming in agriculture.

What companies are doing carbon insetting?

Major freight forwarders are already on board with carbon insetting, including names like, JAS Worldwide, DHL and CH Robinson. They are setting a benchmark in the logistics industry by integrating insetting strategies into their operations.

Are carbon insets voluntary or mandatory? 

Today, insets are a choice, not an obligation. 

Voluntary: Book and Claim

The Smart Freight Center (SFC) has collaborated with the World Economic Forum to launch the “Book and Claim” framework for insetting. This innovative system allows companies to claim emissions reductions for sustainable actions, such as investing in biofuels. 

It allows both the logistic service provider (seller), and shipper (buyer) to report a lower emissions inventory. How is best explained using a renewable energy analogy.

Energy producers "book" the renewable energy they generate, marking it as a reduction in emissions. Customers then "claim" this green energy as if they had consumed the actual green energy themselves. Thus, increasing the overall use of renewable energy, even if it's not directly powering their homes.

Here’s what the SFC said when we asked them why Book and Claim will be critical for accelerating net zero goals:

Does the EU ETS scheme count as carbon insetting?

No. The EU ETS (EU Emissions Trading Scheme) is a ‘cap and trade’ scheme established in 2005 to accelerate decarbonisation of carbon intensive industries. As of January 2024, maritime has become one of these industries, shortly followed by road transport in 2027. 

Affected industries must cover the “cost” of their emissions by purchasing allowances (EUAs). Effectively it’s a tax, not an inset. 

Learn more about EU ETS.

What’s the difference between carbon insets vs. offsets?

Carbon offsetting means compensating for carbon emissions by funding projects that make an equivalent emission reduction or removal of carbon emissions. These projects, like reforestation, direct air capture (DAC), or biochar, all take place outside a company's value chain. 

If offsets are external, insets are internal. 

Insets reduce emissions inside a company’s value chain. They help scale green solutions within a sector. 

Do carbon insets cost the same as carbon offsets?

Aside from where the impact takes place, price can also differentiate insets from offsets. While insets are generally more expensive than most nature-based credits such as reforestation, they can be more affordable than innovative carbon removal credits such as DAC. 

However, as we scale and invest in technologies such as Sustainable Aviation Fuel (SAF), the price could drop by benefitting from economies of scale.

What are the benefits of insetting?

Both the issuer and the buyer of carbon insets benefit from carbon reduction. If a shipper decides to issue insets they can increase the ROI and recover costs from decarbonising their fleet, for example. 

On the flip side, low carbon options are now accessible to the inset buyer. By helping its sector transition smoothly to a low carbon economy, the buyer is futureproofing its business from transition risk. Examples of transition risk include litigation costs, stranded assets, and client attrition.

To learn more about the push and pull factors of green supply chains, download our free guide.

SFC: Making logistics emission reduction claims using insets, confidently

In the short term, the buyer can benefit from making emission reduction claims. They can report a reduction of their own carbon footprint even if their freight was not physically transported on the low-emission transport funded by their inset. 

According to the Smart Freight Centre (SFC), they can make these claims based on the following main conditions:

• Mode of transport restriction: The reduction of the company’s GHG footprint can only happen when linked to the same mode of transport. For example, if you purchase a marine biofuel inset, you can only use this to reduce your scope 3 sea-trade-related emissions.
• Additionality: Only low-emissions transportation service not mandated by law can contribute towards emission reduction targets.
• No erroneous double counting: the environmental benefits can only flow through the supply chain once, i.e. insets are single-use.
• Vintage or durability limitation: Insets created by Low-emission Transportation Services (LETS) must be booked (issued) within one year of generation, and claimed (bought) within two years of the booking date. 

Maximising your climate impact by funding carbon insets

Carbon insetting makes collective climate action accessible. By funding emission reductions within their own sector, companies can maximise their climate impact while enhancing their reputation as a climate leader. 

However, not all carbon insets are created equal. Only high quality carbon insets can advance GHG reductions and global climate goals. 

Fund high quality carbon insetting with Lune

Out of the hundreds of climate projects Lune vets, only the top 10-20% make the cut. To deliver measurable impact and peace of mind, the carbon insets featured in Lune’s curated project library are validated by external assurance partners using ISO 14083, 17029, and 14065. 

To learn more about greening supply chains, download Lune’s free guide.