Carbon Insetting vs. Carbon Offsetting: 5 Ways Energy Companies Can Drive Real Impact

By Tina Olivero
For TheOGM.com

In the rapidly evolving energy sector, sustainability is no longer a distant goal—it’s a present-day necessity. Among the strategies to mitigate carbon emissions, two important concepts stand out: carbon offsetting and carbon insetting. While these terms are often used interchangeably, they represent distinct approaches to reducing environmental impact, and both offer unique opportunities for energy companies to enhance their sustainability goals.

In this article, we’ll explore the key differences between carbon insetting and offsetting, and outline five ways energy companies can incorporate both strategies into their operations to drive meaningful change.

Carbon Offsetting: Reducing Carbon Through External Projects

Carbon offsetting involves compensating for a company’s emissions by investing in projects outside of its direct value chain. These projects typically reduce or remove carbon from the atmosphere, balancing out the emissions the company is unable to eliminate within its operations. Offsetting can involve initiatives such as reforestation, renewable energy projects, or carbon capture and storage (CCS).

While offsetting has gained popularity, it faces criticism for allowing companies to “buy” environmental good deeds without making substantial internal changes. It’s often seen as a short-term solution, useful but insufficient if not paired with deeper transformations within the company.

Carbon Insetting: Emission Reductions Within the Supply Chain

Carbon insetting, on the other hand, focuses on reducing emissions within a company’s value chain, integrating sustainability into its core operations. This approach involves investing in emissions reductions directly tied to a company’s supply chain, from energy production to transportation and resource management. Insetting addresses emissions at the source, fostering a long-term and sustainable shift toward greener business practices.

Unlike offsetting, carbon insetting requires companies to take accountability for their emissions, offering a more holistic approach to decarbonization. It also tends to foster innovation, as companies look for new ways to lower their carbon footprint through operational changes.

5 Ways Energy Companies Can Use Carbon Insetting and Offsetting

Energy companies, particularly those involved in oil, gas, and renewables, are uniquely positioned to incorporate both insetting and offsetting into their sustainability strategies. Below are five practical ways energy companies can engage in both carbon insetting and offsetting to meet their environmental goals.

1. Develop Low-Carbon Energy Infrastructure (Insetting)

Energy companies can reduce their carbon footprint by investing in the development of low-carbon or zero-carbon energy infrastructure. This can involve upgrading equipment, integrating energy-efficient technology, or adopting renewable energy sources such as wind, solar, and hydrogen power for their operations. By doing this, companies can cut emissions directly at the source and set themselves on a long-term path toward decarbonization.

Example: Shell’s investment in solar farms and offshore wind installations within their operational ecosystem directly reduces their emissions while promoting renewable energy.

2. Support Global Reforestation Projects (Offsetting)

Reforestation and afforestation projects are popular carbon offsetting strategies, as they help absorb CO2 from the atmosphere. Energy companies can invest in or partner with reforestation initiatives in developing countries, supporting the restoration of vital ecosystems. Such projects provide a natural carbon sink, contributing to carbon neutrality for emissions that cannot be eliminated internally.

Example: BP partners with conservation groups to fund reforestation projects in South America, offsetting emissions from their remaining fossil fuel operations.

3. Electrify Fleet and Supply Chain Transport (Insetting)

One of the highest sources of carbon emissions in the energy sector comes from transportation. By electrifying their fleets and encouraging supply chain partners to adopt electric or hydrogen-powered vehicles, energy companies can significantly reduce their carbon footprint within their value chain. This also contributes to a shift toward green logistics, a crucial aspect of carbon insetting.

Example: TotalEnergies’ initiative to convert a portion of its logistical fleet to electric trucks reduces the emissions of transporting crude oil and other resources to and from facilities.

4. Invest in Carbon Capture and Storage (Offsetting & Insetting)

Carbon capture and storage (CCS) is a pivotal technology in reducing greenhouse gases. While it is often regarded as an offsetting technique when applied externally, CCS can also be considered insetting when incorporated within a company’s operations. By capturing CO2 emissions at the source and storing them underground, energy companies can offset their emissions while also directly improving the sustainability of their production processes.

Example: ExxonMobil’s investments in developing CCS technology both for its facilities and for external projects in industrial sectors like cement and steel can count as both offsetting and insetting efforts.

5. Switch to Sustainable Energy for Operations (Insetting)

Energy companies can integrate renewable energy sources into their operational facilities, such as using solar or wind power to fuel extraction sites, refineries, and administrative offices. This reduces dependency on fossil fuels, making core operations more sustainable and aligned with global decarbonization goals.

Example: Chevron’s pivot toward renewable energy generation at its refineries and operational hubs reduces emissions and exemplifies carbon insetting by transforming internal energy use.

Combining Strategies for Maximum Impact

For energy companies, balancing both carbon insetting and offsetting can lead to a comprehensive decarbonization strategy. By focusing on insetting, they work to minimize their emissions where they matter most—within their value chain. Offsetting, meanwhile, provides a safety net, ensuring that unavoidable emissions are mitigated by supporting external sustainability efforts.

However, as scrutiny around offsetting increases, the industry must prioritize transparency and innovation. Both strategies are needed, but true leadership in the energy sector will come from those companies that drive deep operational change through insetting.

The Future of Carbon Responsibility in the Energy Sector

As climate change pressures mount, energy companies have a pivotal role to play in decarbonizing the global economy. By embracing both carbon insetting and offsetting, companies can chart a clear path toward sustainability, reducing their carbon footprint while supporting vital environmental projects worldwide. The transition is underway, and the energy sector has the power to lead the way to a cleaner, more sustainable future.