Electricity demand in the United States is rising faster than it has in decades. For years, power use remained steady due to efficiency improvements and shifts in industrial activity. However, recent changes have increased demand significantly.
More people are using electric vehicles (EVs), new factories are opening, and artificial intelligence (AI) is expanding. These factors require more electricity, putting pressure on the U.S. power grid.
One of the biggest drivers of power demand is the rapid growth of data centers. These facilities store and process massive amounts of digital information. Cloud computing, AI, and streaming services all rely on data centers, which require a steady and reliable power supply.
Many power companies have raised their peak electricity demand forecasts by over 50% in just three years, according to a paper by Carbon Direct.
Natural Gas and the Challenge of Lowering Emissions
Currently, natural gas supplies about 40% of the electricity in the U.S. It is the largest energy source for power generation. While renewable energy like wind and solar is expanding, natural gas remains important because it provides steady power, unlike solar panels or wind turbines, which depend on weather conditions.
The downside of natural gas is that burning it releases carbon dioxide (CO₂), a greenhouse gas that contributes to climate change. To meet energy needs while reducing emissions, power companies are looking at carbon capture and storage (CCS). This technology captures CO₂ before it enters the atmosphere and stores it underground.
- CCS can reduce carbon emissions from natural gas plants by 90-95%.
How Carbon Capture Works
Carbon capture technology uses chemical reactions to separate CO₂ from power plant emissions. The captured CO₂ is then compressed and transported to a storage site. It is injected deep underground into rock formations, where it stays permanently. If a storage site is not nearby, the CO₂ must be transported by pipeline, truck, or rail.
Not all power plants are suitable for carbon capture. The technology works best on large power plants that operate continuously. Smaller or backup plants that only run occasionally are not good candidates for CCS because the capture process is expensive and requires steady operation.
The Cost of Carbon Capture
Adding CCS to a power plant increases costs. The price of electricity from a natural gas plant without CCS is estimated at $40–$70 per megawatt-hour (MWh). With CCS, the cost rises to $65–$100 per MWh. These costs come from the capture equipment, extra fuel needed for the process, and the expense of transporting and storing CO₂.
However, tax credits can help reduce the cost. In the U.S., a program called 45Q offers financial incentives for capturing and storing carbon. These incentives make CCS more affordable and encourage companies to invest in clean energy solutions.
Capturing the advantages of natural gas plant with CCS, the Carbon Direct paper noted:
“Natural gas-fired power generation can be built in locations that do not have enough land area available for renewable forms of power generation like wind and solar. They can often be sited conveniently close to electricity transmission infrastructure and end users. Natural gas-fired power generation with CCS is competitive with both geothermal and nuclear electricity in terms of providing enough baseload power. Further, it offers cost advantages and is speedier to bring to market.”
Tech Giants in Trouble: How Carbon Capture and Carbon Credits Can help
Tech companies like Google and Microsoft are under pressure to reduce emissions from their data centers. AI computing requires huge amounts of power, and companies need clean energy solutions. Many large tech firms have set goals to cut their carbon footprints, but their emissions are rising due to energy demand.
For example, Google’s emissions increased by 13% in 2023 because of higher energy use in data centers. Microsoft has also highlighted the need to clean up its supply chains.
Since data centers need constant power, natural gas plants with CCS could be a solution for providing clean, reliable electricity.
The Role of Carbon Credits
Carbon credits are an important part of reducing emissions. A carbon credit represents one metric ton of CO₂ that is either reduced or removed from the atmosphere. Companies that emit CO₂ can buy carbon credits to offset their emissions.
With CCS, power plants can earn carbon credits by capturing and storing emissions. These credits can be sold to companies needing to meet their climate goals. This system helps create a financial incentive for reducing carbon pollution.
By combining CCS with carbon credits, power producers can reduce costs while helping businesses achieve net-zero targets.
Future Outlook: The Need for More Investment
Experts agree that carbon capture must expand if the U.S. wants to lower emissions while maintaining a reliable power supply. The International Energy Agency (IEA) warns that current investments in CCS are not enough.
Without new projects, carbon emissions from power generation will remain high. The supply gap could reach 1.2 billion metric tons of CO₂ per year by 2050, making it much harder for industries like power generation to reduce their emissions.
Companies planning new power plants should consider making them “capture-ready.” This means designing them so CCS can be added later. However, delaying CCS for too long could increase emissions and make it harder to meet climate goals.
This shortfall highlights the urgent need for increased investment in CCS technology and infrastructure to ensure a significant reduction in carbon emissions from natural gas power plants and other high-emission sectors.
According to the IEA, achieving net-zero greenhouse gas emissions by 2050 requires scaling up CO₂ capture capacity to 1.7 gigatons annually by 2030. This ambitious target requires a substantial financial commitment.
Estimates indicate that capital investments ranging from $665 billion to $1.28 trillion are required by 2050 to scale CCUS. Per McKinsey & Company, annual investment in this technology will hit up to $150 billion after 2035.
Challenges of Carbon Capture
While CCS has benefits, it also faces challenges:
- High Costs: The technology is still expensive, although tax incentives help.
- Infrastructure Needs: Transporting CO₂ requires pipelines, which can take years to build.
- Public Concerns: Some communities worry about storing CO₂ underground.
- Energy Use: CCS requires extra energy, which slightly reduces power plant efficiency.
Despite these challenges, many experts believe that CCS is necessary for reducing emissions in industries that cannot fully switch to renewables, such as steel, cement, and natural gas power.
The demand for electricity is growing, especially due to AI and data centers. While renewable energy is expanding, natural gas remains essential for providing steady power. To reduce emissions, carbon capture technology can be used to trap and store CO₂ from power plants.
CCS can cut emissions by up to 95% and provide low-carbon electricity. Although it is expensive, tax credits and carbon credits can help make it more affordable. As businesses and governments work toward cleaner energy, investing in CCS will be crucial for balancing energy demand with climate goals.
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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.
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