Global Charities Say Using Companies’ Carbon Offsets to Lower Emissions Undermines Climate Targets

More than 80 global charities and climate industry bodies are voicing their opposition to the use of carbon offsets by companies and countries to lower their carbon emissions, saying that implementing those projects only delays climate action.

Charities including Oxfam, Greenpeace and Amnesty International as well as industry bodies and pressure groups like the European Federation for Transport and Environment and NewClimate Institute signed a letter on Tuesday urging companies to stick to scientifically backed methods to lower carbon emissions and in particular for the Science Based Targets Initiative and the Greenhouse Gas Protocol to continue to exclude carbon offsets from their methodologies on how companies can lower emissions.

“Climate targets must focus primarily on reduction of greenhouse gas emissions within companies’ and countries’ own boundaries, including the phasing out of fossil fuel production, transport, sale and use,” the letter said.

“An urgent scale-up of financial support from both public and private actors is needed for this. But allowing companies and countries to meet climate commitments with carbon credits is likely to slow down global emission reductions while failing to provide anything like the scale of funds needed in the Global South, and reducing pressure to develop large-scale mechanisms such as ‘polluter pays’ fees on emission-intensive sectors,” it added.

Scrutiny of carbon offsets has grown in recent months after the SBTi, a nonprofit organisation that helps companies set targets for lowering emissions, said in April it was considering allowing carbon offsets to be part of the tool kit companies could use to reduce their impacts on the environment. That decision had been in opposition to its longstanding policy of excluding offsets, resulting in backlash from within the organisation itself as well as partner companies like Hennes & Mauritz , better known as H&M.

However, companies in industries from technology to mining argue that offsets are key to reducing private-sector emissions and moving to net zero. Microsoft for example has spent hundreds of millions on carbon offset projects, arguing that without doing so the company wouldn’t be able to move to net zero, especially over its indirect emissions.

“It is about creating a market for high-quality high-integrity durable carbon-removal assets,” said Melanie Nakagawa, Microsoft’s chief sustainability officer in a recent interview . “Think about sequestering carbon into the soils using enhanced rock weathering or rocks that are absorbing carbon that is being turned into concrete. Or Mombak, which is a large forestry project in Brazil. These are the ways that we think about applying it.”

In May, the U.S. government also gave its backing for the voluntary carbon market , saying that “high-integrity” voluntary carbon markets can play a role in reaching net-zero emissions globally.

The letter added that offsetting “at best, doesn’t reduce the concentration of GHGs in the atmosphere, it simply moves emission reductions from one place to another.” The charities also argued that allowing offsets to grow means that high-emitting activities are able to carry on.

To add to this, the charities and industry bodies said that there are only so many high-quality projects that can be used to reduce emissions, meaning that demand is likely to outstrip supply. They also questioned offsets’ effectiveness, saying that their use could just lead to deforestation in other areas or lead to social and environmental harm.

“The science clearly shows that offsets fail to deliver additional emissions reductions and are an unreliable tool for fighting the climate crisis,” the groups added.

A spokesperson for SBTi said that the organisation is still in the research phase of its policy revision. “The Corporate Net-Zero Standard hasn’t been changed, and it cannot and will not change until the Standard Operating Procedure for the revision of the Corporate Net-Zero Standard has been completed,” the spokesperson said.

Microsoft didn’t respond to a request for comment.

Chip makers are fighting to assure investors that the artificial-intelligence boom is racing forward. Wall Street might not believe it until Nvidia’s NVDA -0.98%decrease; down pointing triangle Jensen Huang says so.

When Huang steps up to the mic for his company’s earnings call Wednesday, he will have the world’s attention. What he says about Nvidia’s present will preview the future of AI, dictate the path forward for a tech-crazed stock market and influence an American economy increasingly tethered to hopes that the boom won’t go bust.

The $5 trillion chip maker has provided the key building blocks for AI since the launch of ChatGPT in 2022 set off a race for dominance among OpenAI, Anthropic and established Silicon Valley giants. Now, as Nvidia backstops sprawling data-center projects and an exotic money pipeline to boost chip demand, the company’s influence is arguably bigger than ever.

But there are signs of trouble ahead. Political pushback to AI is growing. A bond selloff propelled borrowing costs to their highest levels in years. The hyperscalers that include some of Nvidia’s key customers—once cash-printing machines—are relying more on debt. OpenAI recently told investors its revenue rose by a tepid 18% in the second quarter while its losses deepened.

Nvidia is increasingly stepping in to shore up potential weak points across the market. Earlier this month, the company teamed up with six of Wall Street’s biggest firms on a $500 billion AI-financing plan, pledging to backstop lending to customers that can’t afford its chips otherwise. The chip maker last week also took a stake in Cloverleaf Infrastructure, which arranges power for data centers, and struck a $6 billion deal with startup Poolside aimed at developing a powerful open-weight AI model.

After watching shares in other chip makers and the so-called Magnificent Seven tech companies swing wildly in recent months, Wall Street is hoping Nvidia can beat expectations—again. The countdown is on.

“It’s kind of becoming more and more like the World Cup final than the Super Bowl at this point,” said Brian Mulberry, chief market strategist at Zacks Investment Management. “It’s just gotten to be that big.”

The company has smashed analysts’ earnings estimates for each of the 14 quarters since the AI boom kicked into high gear. Nvidia posted 210% annual growth in net income in its last three-month period, according to FactSet, making Wall Street’s 126% projection look pedestrian.

Expectations for a blowout second quarter have risen rapidly over the course of this year. All Nvidia will have to do to beat this target: outrun 95% annual earnings growth to more than $51.5 billion. Analysts project the chip maker will report record sales of $92 billion for the period, up from a forecast of $78 billion at the start of this year.

In July, big-tech earnings sparked volatility. Concerns about runaway capital spending spread across the sector after Alphabet’s and Tesla’s results, driving a $890 billion wipeout that contributed to the unwind of hedge fund Situational Awareness. Microsoft posted the largest one-day gain in market capitalization by any company, ever, after a quarter proving that it could still show investors the money. SpaceX rocketed higher after a record-breaking initial public offering, only to see $1 trillion in value evaporate.

Surging memory prices and borrowing costs have fueled fears that those and other companies will be unable to keep plowing more money into supplies including Nvidia chips. Shaia Hosseinzadeh, founder of OnyxPoint Global Management, has recently bought dips in AI-infrastructure stocks when Wall Street has strained to absorb massive debt issued by Silicon Valley.

“The macro data is really quite robust,” he said. “Of course, there’s a level at which everything breaks.”

Investors have kept pumping money into the AI trade despite concerns around chip consumers—and to the benefit of chip producers. That is why Nvidia’s outlook for semiconductor demand could send ripples through counterparts such as Micron Technology and Sandisk, developers of the data centers in which their chips reside, and a supply chain of power producers, contractors and other specialists that underpin the globe-spanning AI build-out.

“We joke internally that we’re all Nvidia analysts now,” said David Lefkowitz, head of U.S. equities at UBS Global Wealth Management.

The irony is that investors have tended to sell Nvidia stock immediately after blockbuster earnings, with shares falling each trading session after its four past quarterly reports. Some are betting that will be the case this time around, too.

The options market is pricing in a 5.3% swing, higher or lower, in Nvidia shares during the session following earnings, according to Option Research & Technology Services. That is higher than the 4.8% average move in Nvidia’s stock over the last 12 months after the company reports quarterly results.

In recent days, some of the most actively traded Nvidia options have been put contracts tied to the stock falling from its Friday value of $214.75 to $205 and $210 apiece, according to Cboe Global Markets data. Put options give the right to sell a stock by a set price and typically represent a bearish wager.

Many analysts remain optimistic. Frank Lee, global head of tech hardware and semiconductor research at HSBC Global Investment Research, recently raised his price target for Nvidia shares to $360 from $325, citing, among other things, Nvidia’s strategic partnerships with suppliers and its role as a top contributor to open-source AI.

Global Charities Say Using Companies’ Carbon Offsets to Lower Emissions Undermines Climate Targets

Greenpeace, Amnesty International and Oxfam are among over 80 charities arguing that using carbon offsets delays climate action

Nvidia’s earnings will test Wall Street’s confidence in the AI boom.