Published

3 years ago

November 28, 2023

Alice Rush

The United States Climate Legislation

Climate legislation in the U.S. is highly susceptible to political agendas and varies among states depending on the scope of the legislation. The Biden/Harris Administration maintains climate policy as a key aspect of their political agenda and has proposed legislation to promote the transition to a clean energy future.

Here’s everything you need to know about U.S. Climate Legislation:

Federal

The Inflation Reduction Act

The Inflation Reduction Act is the most ambitious investment in combating the climate crisis, aiming to cut total U.S. greenhouse gas emissions by up to 41 percent below 2005 levels by 2030 and designating $369 billion in funding for climate- and energy-related purposes. The IRA provides financial incentives for consumers and corporations through subsidies to invest in clean energy alternatives, like electric vehicles and renewable energy (1). Tax provisions are a large aspect of the IRA, constructed to save families money on their energy bills and to accelerate the deployment of clean energy, clean vehicles, clean buildings, and clean manufacturing (2). The vast majority of this funding ($216 billion) is designated towards tax credits to corporations (3). It is intended to catalyze private investment in clean energy, transport, and manufacturing. A majority of the spending in the IRA is going to be offset by increasing government revenue through increasing the minimum tax on corporations by 15% (4).

What’s the Legislation Timeline?

Enacted in August of 2022

What Companies are Affected?

Eligibility for tax credits are dependent on the project undertaken by the corporation, more information can be found here

Federal Supplier Climate Risks and Resilience Rule (5)

The Federal Supplier Climate Risks and Resilience Rule was proposed by the Biden administration as an executive order to force federal contractors to publicly disclose their carbon emissions.

What’s the Legislation Timeline?

Proposed in November of 2022
Is currently being implemented

What Companies are Affected?

Federal contractors receiving more than $50 million in annual contracts will be subject to the following requirements
- Have to publicly disclose Scope 1, Scope 2, and relevant categories of Scope 3 emissions
- Disclose climate-related financial risks
- Set science-based emissions reduction targets
Federal contractors with more than $7.5 million in annual contracts but less than $50 million are only required to report Scope 1 and Scope 2 emissions

Financial Penalties for Non-Compliance?

No clear financial penalties, likely that the government would cease conducting business with the contractor

California

California’s Cap and Trade Program (6)

The cap-and-trade program in California has minimized greenhouse gas emissions in the state by setting a limit on major emitters through extending businesses carbon allowances. This program has been applied to emissions that account for around 80% of California’s GHG emissions. Each year, fewer allowances are created and the annual cap declines.

What’s the Legislation Timeline?

Launched in 2013
Carbon emission allowances have declined by 3% annually since 2013
Less and less offsets are able to be used to minimize allowances used
- Allowed for 8% of total compliance obligation through 2020; 4% between 2021 and 2025; 6% between 2026 and 2030. Beginning in 2021, at least half the offsets used for compliance must come from projects that directly benefit California.

What Companies are Affected?

Initially was applicable to electric power plants and industrial plants that emit 25,000 tons of carbon dioxide equivalent per year or more but since 2015, was extended to fuel distributors meeting the 25,000-metric ton threshold (7)

Financial Penalties for Non-Compliance?

If a deadline is missed or there is a shortfall, four allowances must be surrendered for every metric ton not covered in time (8)

California’s Corporate Data Accountability Act (9)

The CDAA is the first of its kind in the U.S., requiring that large corporations that do business in California publicly disclose their greenhouse gas emissions. This is incredibly significant legislation as California is the world’s fifth largest economy, so this act forces a significant amount of corporations to publicly report their carbon emissions.

What’s the Legislation Timeline?

Enacted October 7th, 2023
Corporations must provide annual disclosures for scope 1 and scope 2 emissions starting in 2026 and must report scope 3 emissions starting in 2027

What Companies are Affected?

Applicable to businesses that generate over $1 billion in annual revenue and either are engaging in any transaction for the purpose of financial gain within California, are organized or commercially domiciled in California, or have California sales exceeding the threshold amount for that year or 25% of total sales

Financial Penalties for Non-Compliance?

California Air Resources Board is authorized to seek administrative penalties of up to $500,000 for corporate noncompliance with CCDA (10)

New York

New York’s Climate Leadership and Community Protection Act (11)

The NY CLCPA is incredibly ambitious with the intention to reduce total GHG emissions in NY state by 40% by 2030 and 85% by 2050, using 1990 as a baseline. By 2030, 70% of the state’s electricity will be generated from renewable sources. The state is heavily incentivizing renewable energy and energy efficiency. Through the CLCPA, a cap-and-invest program has been advanced, similar to the cap-and-trade program in CA.

What’s the Legislation Timeline?

The CCLCPA was enacted in 2019 but the cap-and-invest program is still in pre-proposal stages

What Companies are Affected?

It is anticipated that corporations with large greenhouse gas emissions will be required to purchase emissions allowances (12)
Specifically, electricity sector, industrial sources, other stationary sources such as large refrigerant utilization facilities, waste sector, and transportation and heating fuel suppliers sector (13)

Financial Penalties for Non-Compliance?

Compliance regulations are still being debated as the cap-and-invest program has yet to be enacted

Recent legislation in the U.S., the Federal Supplier Climate Risks and Resilience Rule and California’s Corporate Data Accountability Act, has required that many corporations publicly disclose their carbon emissions. Other climate related legislation in the U.S. has placed caps on carbon emissions through the creation of emissions allowances, specifically in California and New York. Understanding Scope 3 emissions through having data on your partners and suppliers is essential to remain compliant. At DitchCarbon, we extract, normalize, and make actionable emissions data from all of your suppliers. We help you understand your emissions then reduce your carbon footprint to maintain compliance with U.S. legislation.

https://www.epi.org/blog/the-inflation-reduction-act-finally-gave-the-u-s-a-real-climate-change-policy/
https://www.whitehouse.gov/wp-content/uploads/2022/12/Inflation-Reduction-Act-Guidebook.pdf
https://www.mckinsey.com/industries/public-sector/our-insights/the-inflation-reduction-act-heres-whats-in-it
https://www.mckinsey.com/industries/public-sector/our-insights/the-inflation-reduction-act-heres-whats-in-it
https://www.sustainability.gov/federalsustainabilityplan/fed-supplier-rule.html
https://ww2.arb.ca.gov/our-work/programs/cap-and-trade-program/about
https://www.c2es.org/content/california-cap-and-trade/
https://www.c2es.org/content/california-cap-and-trade/
https://ghgprotocol.org/blog/statement-californias-climate-corporate-data-accountability-act-requires-companies-disclose
https://www.crowell.com/en/insights/client-alerts/california-raises-the-bar-for-corporate-accountability-as-newsom-signs-the-most-sweeping-climate-disclosure-laws-in-the-nation#:~:text=On%20Saturday%2C%20October%207%2C%202023,California%20to%20comply%20with%20sweeping
https://www.suny.edu/sustainability/goals/clcpa/
https://capandinvest.ny.gov/

Carbon Footprint

Insetting vs Offsetting: Which Actually Counts Toward Your Scope 3 Targets

Published

7 days ago

August 12, 2026

Alice Rush

The accounting differences that decide whether your nature investment shows up in inventory, in BVCM, or nowhere at all.

The question reaches a procurement team about three weeks before the next sustainability committee meeting. Someone has read about insetting. Someone else has just signed off on an offset purchase. The CSO wants to know if the two are interchangeable. The answer is no, and the GHG Protocol Land Sector and Removals Standard is the reason why.

This article walks through what each term means at audit-grade specificity, what the standards actually say about how each gets counted, and how to decide which tool fits which target. The insetting vs offsetting question is one of the most-searched in corporate climate strategy, and one of the most poorly answered. By the end of this piece, you should be able to brief a committee on the difference without notes.

The two definitions, in plain English

Offsetting means buying carbon credits generated outside your value chain and retiring them against your residual emissions. The reduction happens somewhere else, financed by you, and the credit is the receipt.

Insetting means investing in emission reductions or removals inside your own value chain, typically with suppliers, where the reduction is directly linked to the products and services you buy. The reduction happens inside the boundary of your Scope 3 inventory, and the accounting treatment is fundamentally different.

The shorthand from the University of Oxford’s Nature-based Insetting Initiative is useful: insetting is what you do with the supply chain you have; offsetting is what you do with the supply chain you do not have.

What the GHG Protocol Land Sector Standard actually says

The GHG Protocol Land Sector and Removals Standard, finalised in 2024 after a multi-year pilot, sets the rules for how land-based emission reductions and removals enter corporate inventories. The Standard distinguishes between inventory accounting (Scope 1, 2, and 3) and project or intervention accounting (a separate methodology for crediting).

For insetting, the practical implication is that supplier-level interventions, when properly measured and attributed, can reduce your Scope 3 category 1 (purchased goods and services) emissions in your inventory. The reduction is not a credit retired against the inventory; it is a lower inventory number, period.

For offsetting, the credit is retired separately. It can be reported as a contribution toward a net-zero claim under the SBTi Beyond Value Chain Mitigation framework or as part of a VCMI Carbon Integrity claim, but it does not lower the inventory number.

A practical consequence: if your Science Based Target requires a 50% absolute reduction in Scope 3 emissions by 2030, insetting moves you toward the target. Offsetting does not. This single point of difference reshapes the procurement decision.

When insetting counts toward Scope 3 (and when it does not)

Insetting counts toward Scope 3 only when several conditions are met:

The intervention must occur with an entity in your value chain.
The emissions reduction or removal must be measured against a defensible baseline.
The reduction must be attributed to your share of that supplier’s output, not double-counted with other buyers.
It must follow the inventory accounting rules in the GHG Protocol Land Sector Standard, not the project accounting rules used to generate credits.

The most common failure mode is double counting. If your supplier sells the same reduction as a credit on the voluntary market and also reports it to you as a Scope 3 reduction, the math breaks. The Standard requires you to address this risk, typically by purchasing and retiring the supplier-issued credit as part of your inventory or by contractual provisions that prevent the supplier from selling the reduction twice.

When insetting does not count toward Scope 3: when the intervention sits with a supplier you do not buy from, when the baseline is not defensible, when the attribution is unclear, or when the documentation does not survive audit. Those cases default to Beyond Value Chain Mitigation, which is still useful but operates on a different ledger.

The procurement and supplier engagement question

Insetting is harder than offsetting. That is the unfashionable truth most buyers eventually confront. Offsetting is a transaction; insetting is a relationship.

To run an insetting program, you need supplier mapping precise enough to know which farms or facilities sit at which Scope 3 boundary. You need an engagement model that gets suppliers to participate, which usually requires multi-year commitments and shared economics. You need an MRV architecture that measures the right things and produces audit-ready documentation. And you need a contractual structure that prevents double counting and protects both sides.

The trade-off you receive in return is significant. Reductions count against your inventory rather than your residual. Supplier relationships deepen, which protects sourcing continuity. Yield and quality improvements often follow regenerative interventions, which reduces your input cost over time. And the regulatory file, under CSRD, CSDDD, EUDR, and the SBTi FLAG Guidance, is materially stronger.

Choosing the right tool for the right target

A practical decision rule. If your target is a science-based Scope 3 reduction and you operate in a FLAG sector or source FLAG commodities, insetting is the structurally correct tool. If your target is a net-zero claim that includes neutralising hard-to-abate residual emissions outside your value chain, BVCM via high-integrity offsets is the structurally correct tool. Most companies with material Scope 3 exposure need both, in different proportions, sequenced over time.

The sequencing matters. Insetting takes longer to stand up but produces a permanent reduction in the inventory. Offsetting can be transacted faster but does not change the inventory and now sits under tighter claim restrictions. Treat them as complementary tools with different jobs, not as substitutes. The Accountability Framework Initiative and the IUCN Global Standard for Nature-based Solutions both provide useful guardrails for the insetting side, with biodiversity, human rights, and benefit-sharing requirements that go beyond carbon math.

If you are mapping a Scope 3 reduction roadmap and need to scope which interventions count toward your inventory versus which sit in Beyond Value Chain Mitigation, the carbon and sustainability experts at Carbon Credit Capital can help you structure a nature-based supply chain investment program that fits your FLAG exposure, your target architecture, and your audit horizon. Schedule a consultation.

Carbon Footprint

Net zero needs nature: a carbon credit guide

Published

1 week ago

August 11, 2026

Alice Rush

Net zero is often described as a balancing act: cut what you can, account for the rest, and reach zero on the ledger. That framing is useful, but it leaves something out. It treats every tonne of carbon as interchangeable and every route to zero as equally sound, while the science tells a more specific story.

Carbon Footprint

Deforestation in Malawi: causes and solutions

Published

1 week ago

August 10, 2026

Alice Rush

Malawi has lost a striking share of its forests over the past three decades. Woodlands that once covered well over a third of the country now cover less than a quarter, and the pressure on what remains is increasing. Behind those figures sit two practical questions: what is driving the loss, and what reverses it?