Adding Water to the Nexus: A Systematic Review of Carbon, Biodiversity, and Water Offsetting

Offsetting has become an increasingly prominent instrument in climate and environmental policy. The focus here is primarily on carbon and biodiversity offsetting, with water being added as a new type of offset. In the discussions to date, these three offsetting types have largely been considered in isolation. This could lead to new externalities caused by the individual offset types that are not taken into account, such as neglecting the impact on biodiversity when planting tree monocultures for a carbon offsetting project. To enable multi-dimensional environmental policy, a nexus approach is needed to assess carbon, biodiversity and water offsetting and identify potential synergies and trade-offs. The aim of this work is twofold: to introduce water as a new offsetting type and to illustrate the intersection between the different offsetting types. This contribution aims to facilitate such a nexus approach, with a systematic literature review, using the AI-aided open source systematic review software AS Reviewer to support an efficient evidence synthesis. The results provide a comparison of the three offsetting types alongside multiple offsetting characteristics including mitigation hierarchy, net-discourse, and project types. In this way, we can outline the commonalities of offset types along with the mitigation hierarchies and contrast them with a discussion of their differences using the discourses of carbon neutrality, no-net loss, and water neutrality. The results additionally indicate that publications dealing with at least two offsetting types are still scarce. Publications that meet this criterion, for example, discuss ways of pooling different types of offsets (credit stacking and bundling) or propose carbon credits as a financing mechanism for water offsetting. With this systematic literature review, we give insights into the complex relationships between carbon, biodiversity, and water offsetting. The results serve as a building block to develop comprehensive and multi-dimensional environmental policies.