What are carbon offsets and how do they work?

Carbon offsets are a way to mitigate the impact of our activities on the climate, by funding environmental projects that reduce, avoid or remove harmful carbon dioxide emissions. But not everyone’s convinced that they’re up to the job.

What are carbon offsets?

Carbon offsets are supposed to allow individuals or companies to compensate for their greenhouse gas emissions by investing in projects that reduce or remove an equivalent amount of emissions elsewhere.

You may have seen the ‘offset your carbon’ button when booking flights, letting you pay a small amount to compensate for the pollution that comes with flying. The idea is that the money is used to plant trees, buy solar panels to replace dirty energy sources, or something else that either absorbs carbon from the air or prevents it getting there in the first place – making up for the amount your flight emitted.

What is the difference between carbon offsets and carbon credits?

While the terms ‘carbon offsets’ and ‘carbon credits’ are often used interchangeably, there is a subtle difference between the two. As explained above, carbon offsets are typically created when individuals or companies finance projects that reduce or eliminate greenhouse gas elsewhere. Meanwhile, a carbon credit is a permit that allows the holder to emit a certain amount of carbon dioxide or other greenhouse gas. 

Carbon credits are typicall used by businesses, and exchanged in a carbon market, commonly referred to as the cap-and-trade market. Carbon trades are regulated by governments or international organizations responsible for setting a limit (or cap) on the amount of greenhouse gasses that can be released. Businesses are given a specific amount of carbon they can emit annually. If they exceed this limit, they have to purchase carbon credits. If they don’t exceed the limit, they can sell the unused carbon credits to businesses that need them.

In this way, carbon credits can become a financial asset for smaller polluters and encourage big polluters – so the thinking goes – to invest in energy efficiency and sustainable alternatives to fossil fuels.

Does carbon offsetting work?

Paying to fund tree planting or green energy is a good thing to do, but carbon offsets don’t get us off the hook on their own. There isn’t space on Earth for us all to plant trees and offset our impact. Even if there were, trees take years to grow. Furthermore, not all offsets really reduce emissions, and nobody’s strictly policing the multibillion dollar carbon offsets market. Done right, offsets are part of the solution. Done wrong, they give polluters a free pass. 

Another problem with carbon offsetting is its potential for greenwashing – when companies use offsetting as a way to appear environmentally friendly without actually making substantial efforts to reduce their emissions. Under new greenwashing rules in Europe, carbon offsetting can no longer be a default solution to compensate for a lack of action on real carbon reduction. It has to be the last resort. A company can still mention its offsetting investments, but only once it has made every effort to reduce emissions, and only if it has invested in an offsetting scheme certified under the Carbon Removals Certification Framework, or by Gold Standard. Otherwise, companies risk getting in trouble for greenwashing.

How to offset your carbon

If you’re interested in offsetting your own carbon emissions, there are several steps you can take. First, calculate your emissions by assessing your energy consumption, travel habits and other relevant factors. Next, find reputable organizations or projects that offer certified carbon offsets. 

By purchasing high-quality offsets from trustworthy sources, you can contribute to meaningful emission reductions beyond what you’re able to achieve individually. However, it’s important to remember that – despite the name – offsetting should be seen as a complementary measure to reducing emissions at their source, rather than a catch-all solution to climate change.