Corporate Carbon Offsetting in 2026: What's Permitted, What's Banned — and What Science Recommends
By Dirk Roethig | CEO, VERDANTIS Impact Capital | March 20, 2026
"Climate neutral" was until recently a claim that marketing departments could formulate freely. From September 2026, the same claim can trigger an injunction. At the same time, mandatory costs for CO₂ emissions in the EU are rising to historic highs. Companies seeking to formulate a credible climate strategy in 2026 must understand three dimensions: what they are legally required to pay; what they are voluntarily permitted to offset; and what science actually recommends. Dirk Roethig provides the complete overview.
Tags: Carbon Offsets, EU ETS, CBAM, BEHG, ECGT, SBTi, ICVCM, CRCF, Carbon Farming, Paulownia
The Three-Part Framework: Obligation, Prohibition, Science
Considerable confusion prevails in public discourse on CO₂ compensation. "Offsetting" is a term that means entirely different things depending on context: a legally mandated surrender obligation under emissions trading, the voluntary purchase of carbon credits on the Voluntary Carbon Market, or the neutralization of residual emissions within science-based net-zero targets.
These three dimensions are fundamentally different — in their requirements, their credibility, and their legal consequences. Confusing them risks either compliance failures or greenwashing accusations. This article separates them systematically.
Part 1: Mandatory Obligations — What the Law Requires
EU ETS: Allowances Are Not Compensation, They Are a Legal Right
The EU Emissions Trading System does not operate on the logic of compensation, but on the logic of ownership: those who emit must hold the right to do so. Every tonne of CO₂ emitted by an installation covered by the ETS must be backed by an emission allowance (European Union Allowance, EUA).
By April of each year, ETS-regulated companies must surrender allowances equal to their prior-year emissions. Those who surrender insufficient allowances pay a penalty of EUR 100 per missing tonne — in addition to being required to purchase the missing allowances (Directive 2003/87/EC, as amended by 2023/959).
As of February 2026, the EUA price stands at approximately EUR 81 per tonne of CO₂ (EEX, 2026). This is not a compensation market — it is a mandatory market. The ETS covers approximately 10,500 stationary installations (power plants, steelworks, cement factories, chemical plants), aviation, and — new from 2026 — maritime shipping.
Aviation: From January 1, 2026, airlines must cover 100 percent of their emissions on intra-EEA routes with EUAs. Free allocation has been completely abolished (EU ETS Directive, Phase IV).
Maritime: From January 1, 2026, shipping companies must cover 100 percent of emissions on routes within the EEA, and 50 percent on routes into or out of the EEA, with EUAs (Regulation EU 2023/957).
CBAM: The New Carbon Price for Importers
Since January 1, 2026, the Carbon Border Adjustment Mechanism (CBAM) has been in its definitive phase (European Customs and Tax Office, January 14, 2026). Importers of cement, steel, aluminum, fertilizers, electricity, and hydrogen must purchase CBAM certificates priced at the weekly average of EU ETS certificates — currently approximately EUR 80 to 85 per tonne of CO₂ (European Commission, 2026).
The de minimis threshold is 50 tonnes per year. Those below it are exempt. Those above it must:
- Apply for Authorised CBAM Declarant status
- Purchase and hold certificates
- Submit the first complete CBAM annual declaration for reporting year 2026 by May 31, 2027
CBAM is not a voluntary market. There is no choice between "offsetting or not." For affected importers and sectors, it is a regulatory obligation — just as ETS surrenders are an obligation.
BEHG: Germany's Carbon Price for Buildings and Transport
The Fuel Emissions Trading Act (BEHG) requires fossil fuel traders in Germany to purchase certificates for heating oil, natural gas, petrol, and diesel. Since 2026, an auction system with a price corridor of EUR 55 to 65 per tonne of CO₂ applies (DEHSt, 2026).
The BEHG price is passed through to end customers via fuel and gas prices: approximately EUR 0.18 to 0.22 additional per liter of heating oil, and approximately EUR 0.0055 to 0.0065 per kilowatt-hour of natural gas. For companies with significant energy consumption — logistics, manufacturing, real estate operations — this represents a substantial cost item.
From 2028, the BEHG is expected to be replaced by EU-ETS 2, with fully market-based pricing for buildings and transport (European Commission, 2023).
Part 2: What Is Being Banned — The ECGT and the End of "Climate Neutral" Claims
The Green Claims Directive and ECGT in Context
Parallel to the tightening of mandatory markets, the EU is also regulating voluntary climate communication. Since May 2024, the Empowering Consumers for the Green Transition Directive (ECGT, Directive 2024/825) has been in force. It amends the Unfair Commercial Practices Directive (UCP Directive) and the Consumer Rights Directive.
The most important change for climate communication: from September 2026, the following statements in B2C communication are prohibited as misleading:
- "Climate neutral" — if the product/company has not actually reduced its emissions to net zero, but is claiming this solely through the purchase of offsetting certificates
- Unsubstantiated sustainability claims — general statements such as "eco-friendly," "green," "sustainable" without specific, verifiable evidence
- Climate claims based on future performance — "climate neutral by 2040" without a credible intermediate pathway and verification mechanism
Sanction mechanisms vary by member state, but can include fines of up to 4 percent of annual turnover (ECGT, Article 3d).
What This Means for Corporate Communication
Companies that previously purchased carbon credits and then called themselves "climate neutral" will be operating in a legally precarious or unlawful manner in the EU from September 2026 — unless this is based on fully reduced emissions neutralized only through high-quality permanent removal.
This does not mean that carbon offsetting is banned. It means that what one may claim based on it becomes more restricted. "We invest in certified climate protection projects" is permitted. "We are climate neutral because we purchased offsets" is no longer.
This distinction is relevant for all departments involved in climate claims: marketing, investor relations, sustainability communications, and product labeling.
Part 3: What Science Recommends
The SBTi Position: Reduction First, Always
The Science Based Targets initiative has defined a clear hierarchy in its Corporate Net-Zero Standard V1.3 and in the second consultation draft for V2.0 (SBTi, 2025):
- Direct emissions reduction (Scope 1, 2, 3) — this is the core of any credible climate target
- At least 90 percent reduction by 2050 at the latest against the base year
- Residual emissions (maximum 10 percent) — only these may be neutralized through high-quality carbon removal
- BVCM (Beyond Value Chain Mitigation) — voluntary climate actions beyond a company's own value chain are recognized as additional positive contributions, but do not substitute for genuine reduction
Carbon offsets are explicitly not a substitute for emissions reductions in SBTi targets. A company that emits 1 million tonnes of CO₂ and purchases 1 million tonnes of certificates has no validated SBTi target — it has merely a bookkeeping offset that is not recognized as a climate target under regulatory or scientific standards.
This position is accepted by 10,000 validated companies representing approximately 40 percent of global market capitalization (SBTi Progress Report, January 2026). This is no longer a niche standard.
The Scientific Logic: 90+ Percent Reduction, Then Neutralize
The scientific consensus underpinning SBTi is documented in the IPCC Sixth Assessment Report (AR6) and hundreds of primary studies (IPCC, 2021): to limit global warming to 1.5°C, worldwide CO₂ emissions must fall to net zero by 2050. This means:
- First: Implement all technically and economically feasible emissions reductions (energy sources, processes, logistics, procurement)
- Then: Neutralize unavoidable residual emissions (typically agriculture, high-temperature processes, aviation) through permanent, high-quality carbon removal
The sequence is not optional. Those who offset first and reduce sometime later are working against the temporal pathway required by the carbon budget.
Quality Standards for the Voluntary Market: ICVCM Core Carbon Principles
For companies seeking to implement voluntary climate actions (BVCM) or neutralize residual emissions, the Integrity Council for the Voluntary Carbon Market (ICVCM) defined the first global minimum standard in 2024: the Core Carbon Principles (CCPs).
Ten requirements must be met — including:
- Additionality: The action would not have taken place without credit financing
- Permanence: Robust risk management mechanisms for the event that stored carbon is re-released
- Transparency: Complete public documentation and registry entry
- No significant harm: No negative impacts on biodiversity, human rights, or local communities (ICVCM, 2024)
As of March 2025, five carbon crediting programs were confirmed as CCP-Eligible: ACR, ART, CAR, Gold Standard, and Verra VCS — together representing approximately 98 percent of market volume. CCP-labeled credits trade in the market at a price premium of approximately 25 percent over non-labeled credits (ICVCM, 2024).
Agroforestry as a CRCF-Qualified Instrument
What the EU CRCF Means for Carbon Farming
Regulation (EU) 2024/3012 — the Carbon Removal Certification Framework — classifies Carbon Farming (agroforestry, peatland restoration, afforestation) as a standalone certification category. The delegated acts for agroforestry and other carbon farming practices are expected for Summer 2026 (European Commission, 2025).
This means: agroforestry systems developed from 2026/2027 onwards according to CRCF methodologies can generate EU-certified carbon removal units — with full regulatory legal certainty and protection against greenwashing accusations.
Paulownia Agroforestry: Scientific and Regulatory Classification
Paulownia (Empress Tree) is one of the fastest-growing tree species in the world and is increasingly prominent in the carbon farming discussion. Precise differentiation is required here:
Mandatory Facts for Regulatory Classification:
Sterile hybrid varieties: For CRCF-compliant carbon farming projects and for planting in the EU, exclusively sterile Paulownia hybrid varieties with a germination rate of 0 percent must be used. Only sterile varieties prevent uncontrolled spread.
Not invasive (EU law): Paulownia tomentosa (Common Princess Tree) is listed on the EU list of invasive alien species (Regulation EU 1143/2014). Paulownia hybrids from sterile crosses (e.g., Paulownia elongata × fortunei) are not listed and are considered ecologically unproblematic when sterile varieties are used (European Commission, Invasive Species Database, 2024).
EU Green List: Sterile Paulownia hybrids are on the EU positive list for forestry planting material and are actively recommended for afforestation and agroforestry programs in several EU member states. The requirement for EUFORGEN-compliant seed provenance documentation is present and must be considered in project planning.
CO₂ Sequestration Potential: Scientific studies document that Paulownia stands can sequester between 10 and 25 tonnes of CO₂ per hectare per year under optimal conditions and rotation management — depending on location, soil quality, precipitation, and management intensity (Liu et al., 2020; Pude et al., 2021). This range is significant and must be verified on a site-specific basis.
CRCF Requirements: Carbon farming units under CRCF require robust measurement (QU — Quantification), additionality evidence (A — Additionality), minimum permanence of more than five years with monitoring obligations (L — Long-term storage), and evidence of biodiversity and soil co-benefits (I — Sustainability). Concrete methodologies will be specified in 2026 through delegated acts.
VERDANTIS and Carbon Farming
VERDANTIS Impact Capital develops agroforestry projects aligned with CRCF certification. The focus is on systems that simultaneously pursue agricultural yields, CO₂ sequestration, and biodiversity goals — a triple-benefit approach of increasing relevance for institutional investors and corporate clients.
Dirk Roethig, CEO of VERDANTIS: "Carbon farming under CRCF is not the same as the voluntary carbon market of the past, which was characterized by quality problems. The EU certification system with its QU.A.L.ITY criteria sets a quality standard that structurally prevents greenwashing. This is the framework within which serious carbon farming projects will operate."
The Complete Architecture of a Credible Climate Strategy
Science and regulatory development point in the same direction:
Step 1: Emissions Inventory
Complete GHG inventory according to the GHG Protocol (Scope 1, 2, and Scope 3 for all material categories). Without data, there is no strategy.
Step 2: Reduction Pathway (>90% by 2050)
Science-based reduction targets following SBTi methodology: near-term at least approximately 42–50 percent by 2030, long-term at least 90 percent by 2050. This includes Scope 3 emissions in the supply chain.
Step 3: Meet Compliance Obligations
ETS obligations (purchase and surrender EUAs), CBAM obligations (certificates for imports), BEHG obligations (passed through fuel prices). This is not a voluntary climate action — it is a legal obligation.
Step 4: BVCM (voluntary, while reduction pathway runs)
Parallel to own decarbonization: voluntary support for high-quality climate protection projects, explicitly communicated as "climate contribution beyond our own value chain" — not as "climate neutrality." Standards: ICVCM Core Carbon Principles or CRCF certification (from 2027).
Step 5: Neutralize Residual Emissions (from approximately 2045–2050)
Neutralize unavoidable, non-reducible residual emissions (maximum 10 percent of base year) through high-quality, permanent carbon removal. Only then is "climate neutral" or "net zero" a scientifically defensible statement.
Quick Reference: What Is Permitted, What Is Banned?
| Statement / Practice | Status 2026 | Basis |
|---|---|---|
| "We purchase EUAs for ETS compliance" | Mandatory | Legal obligation, not voluntary |
| "We purchase CBAM certificates" | Mandatory | Legal obligation for importers |
| "We invest in ICVCM-certified climate projects" | Permitted | Transparent presentation as BVCM contribution |
| "We are climate neutral (via offsets)" | Banned from Sep. 2026 | ECGT; misleading if not actually net zero |
| "Our product is carbon neutral" | Banned from Sep. 2026 | ECGT; misleading without full reduction |
| "We have SBTi-validated 1.5°C targets" | Permitted + market standard | 10,000+ companies, 40% market cap |
| "We neutralize residual emissions through CRCF carbon farming" | Possible from 2027 | CRCF methodologies expected Summer 2026 |
References (Harvard Citation)
DEHSt — Deutsche Emissionshandelsstelle (2026) nEHS from 2026: Amendment of the Fuel Emissions Trading Regulation. Umweltbundesamt. Available at: https://www.dehst.de/SharedDocs/news/DE/behv-nehs-ets2-aenderung-verabschiedet.html
EEX — European Energy Exchange (2026) EUA Spot Price February 2026. Leipzig: EEX. Available at: https://www.eex.com
European Commission (2023) EU Emissions Trading System (EU ETS): Phase IV 2021–2030. Brussels: European Commission. Available at: https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets_en
European Commission (2024) Carbon Removal Certification Framework — Regulation (EU) 2024/3012. Official Journal of the European Union, December 26, 2024. Available at: https://eur-lex.europa.eu/eli/reg/2024/3012/oj/eng
European Customs and Tax Office (2026) CBAM definitively entered into force on 1 January 2026. Luxembourg, January 14, 2026. Available at: https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
European Parliament / Council of the European Union (2024) Directive (EU) 2024/825 — Empowering Consumers for the Green Transition (ECGT). Official Journal of the European Union, May 2024.
ICVCM — Integrity Council for the Voluntary Carbon Market (2024) Core Carbon Principles — Assessment Framework. London: ICVCM. Available at: https://icvcm.org/core-carbon-principles/
IPCC (2021) Sixth Assessment Report — Working Group I: The Physical Science Basis. Cambridge University Press. Available at: https://www.ipcc.ch/report/ar6/wg1/
Liu, Y. et al. (2020) 'Carbon storage and sequestration by Paulownia plantations in China', Forest Ecology and Management, 461, pp. 117–129.
Pude, R. et al. (2021) 'Paulownia — a perspective for Central European forestry?', Allgemeine Forst- und Jagdzeitung, 192(1–2), pp. 14–23.
SBTi — Science Based Targets initiative (2025) Corporate Net-Zero Standard Version 1.3. London: SBTi. Available at: https://sciencebasedtargets.org/net-zero
SBTi — Science Based Targets initiative (2026) Progress Report Q1 2026: 10,000 Companies Validated. London: SBTi.
About the Author
Dirk Roethig is CEO of VERDANTIS Impact Capital, a platform for nature-based climate investment headquartered in Cham, Switzerland. He regularly analyzes the intersections of EU climate regulation, the voluntary carbon market, and science-based corporate strategies. VERDANTIS develops CRCF-compliant carbon farming projects, including Paulownia agroforestry systems in Europe.
Contact: verdantis.capital | Fabrikstrasse 5, 6330 Cham, Switzerland
Über den Autor: Dirk Röthig ist CEO von VERDANTIS Impact Capital, einem Unternehmen das in nachhaltige Agrar- und Technologieinnovationen investiert. Mehr Artikel auf dirkroethig.com.
Top comments (0)