Net-zero pledges may fuel cheap offsets, critics warn

A new paper from the Searchlight Institute argues that corporate net-zero goals can push companies toward the least impactful climate actions—particularly carbon credits and renewable energy certificates that may not reduce emissions in the real world. The cri

For years, “net zero by 2050” has been the shorthand companies use for seriousness on climate change. The problem, critics say, is that for many firms the math works better on paper than in the atmosphere.

A new paper from the Searchlight Institute argues that instead of treating a voluntary net-zero target as the end goal. companies should focus on actions that lead to “more clean energy and climate-related infrastructure to get built than would otherwise exist.” The paper’s author. Jane Flegal. senior fellow at the centrist Democratic think tank and author of “Beyond Carbon Accounting. ” says the incentive structure behind net-zero commitments often pushes businesses toward the cheapest options—“which is often the least impactful.”.

That critique is landing at a moment when corporate climate strategies are colliding with the fast-growing AI data center boom. Already, emissions connected to some companies have increased as data center projects expand. Research has found carbon offsets don’t meaningfully reduce emissions. and the concern is that companies may simply buy even more offsets to cancel out new emissions on their balance sheets.

Flegal describes a pattern in which tech companies launch data center projects powered by new gas infrastructure and then purchase additional carbon credits to offset the emissions increase tied to those operations. For her. this is what a net-zero goal can reward: not a real shift in what gets built or how energy is produced. but a bookkeeping exercise that keeps the company’s “net” claim intact.

Forest credits are a central example. The logic is straightforward: a company invests in forest management or reforestation. then claims the carbon those trees will absorb as offsets for the emissions the company produces. But this carbon removal often isn’t permanent. Forests can burn in wildfires or suffer drought, releasing back the carbon that was stored.

There’s another issue as well. In some cases, those credits aren’t additive—meaning the forest would have removed carbon anyway. If that’s true, a company purchasing the credits doesn’t do much to reduce emissions at the planetary level, even though it can still report progress toward net zero.

The complaint doesn’t end with offsets. Companies also use renewable energy certificates to reach their net-zero goals, including for data centers. In one common setup. a company could build a data center in a location powered by gas. while buying renewable energy certificates for a wind farm in another state.

Flegal argues that renewables like wind and solar have grown so quickly and become so cheap that the relevant projects would likely be financed and built anyway. She also points out that certificates don’t address the local pollution from gas turbines at the data center’s physical location.

“You haven’t done anything meaningful to change the physical reality of the grid or of the energy system in terms of advancing climate [action],” Flegal says to those purchasers.

Her skepticism is not new. Flegal previously worked at Stripe and helped launch Frontier. a coalition of companies including Stripe. Google. and H&M. aimed at making carbon removal a viable. affordable technology. Carbon removal is still described as nascent and extremely expensive. While nature naturally removes carbon. experts have been working on direct air capture technology to pull carbon out of the atmosphere and create a carbon removal industry.

Direct air capture can cost about $1,000 per ton of carbon. Frontier’s idea was to get companies to buy that removal at scale so that it would get cheaper.

But Flegal says she encountered companies with net-zero targets asking for a different kind of deal. She tells the story of explaining why $1. 000 per ton carbon removal might matter. only to hear the question: why pay that price if a company can claim the same benefit and pay $4 a ton for a forest offset that is not permanent.

For Flegal, that moment exposed how the incentive structure of corporate net-zero goals can steer firms away from expensive removals and toward the cheapest claims.

As the AI-driven data center surge intensifies the pressure on corporate net-zero strategies, the broader political and macroeconomic environment is described as also impeding climate action. Flegal says companies’ pressure to make corporate-level net-zero commitments is “coming undone.”

Some companies are already responding in different ways. In some instances, firms have scrubbed certain climate commitments from their web pages touting sustainability. For others, it has become clear that their net-zero goals are drifting further out of reach.

Flegal warns that the worst outcome would be for companies to walk away entirely—because their targets aren’t feasible. She stresses that the risk is rooted in a second core issue: corporate net-zero goals are voluntary. There is no compliance framework forcing businesses to meaningfully reduce their emissions.

She also argues that net-zero goals can be siloed from other corporate behavior. A company can commit to net zero while joining a trade association that lobbies against climate action.

In place of the current model. Flegal says companies can still take voluntary climate actions that would help the planet and advance global removal of carbon. Those could include policy work—such as advocating for transmission-permitting reform to upgrade the electricity grid—or creating expenditure-based goals that drive investments in climate technology.

She is not alone. Raz Godelnik. a professor at Parsons School of Design who explores sustainable business models. wrote an article in February calling on business leaders to be honest and acknowledge that their net-zero goals are insufficient. In addition. hundreds of climate groups have called net-zero pledges—by both corporations and countries—a “dangerous distraction from real climate action.”.

Flegal is careful to draw a line. She is not advocating against carbon accounting broadly. Tracking and inventorying emissions, she says, still matters because it allows for future policymaking and helps quantify emissions embedded in products.

But her argument is that the goal should not be to balance that number in a sustainability report using credits and certificates that don’t translate into real-world emissions reductions. Her core point is blunt: “It just is not the case that optimizing for netting out your own personal ledger as a company is going to be the maximally effective thing for global decarbonization.”.

net-zero goals carbon offsets renewable energy certificates direct air capture Frontier coalition Jane Flegal Stripe Google H&M AI data centers climate policy transmission permitting reform