What Are Carbon Offsets and Do They Work?

What Is A Carbon Offset?

A carbon offset is a type of environmental mitigation that allows individuals or organizations to compensate for their carbon emissions (CO2) by supporting projects that reduce the amount of CO2 in the atmosphere.

Carbon offsets, and the process of carbon offsetting, are becoming increasingly popular among companies and organizations looking to reduce their greenhouse gas emissions and limit their carbon footprint. This is especially pertinent when Greenhouse gas emissions continue to rise when they should be falling. Globally, emissions increased by 4.6% in 2021, according to estimates by research group Rhodium.

What Is Carbon Offsetting?

Carbon offsetting means paying others to reduce or remove the same amounts of emissions one has spewed into the atmosphere. It is an approach that polluting sectors have used to “green” their processes and improve their reputations.

Companies worldwide are turning to carbon offsets to meet their emission reduction targets as pressure to reduce carbon emissions grows.

Carbon offsetting represents the reduction or removal of one tonne of carbon dioxide (CO2) or its equivalent in other greenhouse gases. This could involve preventing a tonne of CO2 from entering the atmosphere or removing what is already in the air.

Various activities can produce carbon offsets credits, from renewable energy and waste-to-energy projects to reforestation and conservation.

When Did Carbon Offset Trading Start?

Carbon trading first started as part of the 1997 UN Kyoto Protocol, the first international agreement to cut carbon emissions. Its Clean Development Mechanism allowed industrialised nations to reduce emissions abroad by planting trees in tropical countries.

However, it wasn’t until 2017 that the voluntary carbon market took off. Today, according to the advisory body Climate Focus, there are 3,959 carbon offset projects worldwide. Together, these carbon offset projects reportedly generate 1.3 billion tonnes in emission reductions and removals. This is the same as the average yearly emissions produced by about 911 coal plants.

The Taskforce on Scaling Voluntary Carbon Markets forecasts that global demand for carbon credits will increase fifteenfold by 2030. As emissions reduction efforts continue, the market could grow from USD 300 million in 2020 to exceed USD 50 billion in 2030.

The Problem With Carbon Offsets

Voluntary carbon markets remain unregulated despite their potential to slow down climate change, as governments have yet to agree on trading rules. As such, there is no government oversight over these markets and no unified standards. Instead, there are a number of voluntary offset standards through which projects are developed.

Major concerns have also persisted over the true impact of offset projects as well as their integrity, measurability and accountability.

Carbon Offset Examples

Reforestation

One of the most controversial offsetting activities that produce carbon offset credits, has been reforestation, as trees take decades to grow. It could take more than 100 years to add enough mature forests to get sufficient carbon reduction levels. By then, it may be too late.

Moreover, from a biodiversity perspective, monoculture plantation trees cannot replace old-growth, ancient forests. Regarding carbon sequestration, subtropical forests rich in species can sequester, on average, twice as much carbon as monocultures. They are also less vulnerable to diseases or extreme weather events, which are becoming increasingly frequent due to climate change.

What Could Go Wrong With Carbon Offsets?

A 2021 investigation by The Guardian and Unearthed found that the carbon offsets that major airlines use are based on a flawed system. The investigation looked into 10 forest-protection schemes that airlines used before the pandemic, which carbon credit provider Verra had accredited.

The investigation found that deforestation and land clearing predictions were often inconsistent with the previous levels of deforestation. Not only that, but in some cases, the threat to the trees may have been overstated.

Companies trying to reach their net-zero goals may also end up buying offsets from carbon projects that don’t provide “additionality”. This means that they don’t offset emissions beyond business-as-usual. For example, companies may buy offset credits to protect trees that were never in danger of being cut down. Or, they may invest in projects that are financially viable on their own and would have been built anyway.

Such carbon offsets do not reduce emissions beyond business-as-usual. Therefore, including them in net-zero goals can be risky.

Are Carbon Offsets Taking Place in the Right Places?

In 2022, an Australian National University report revealed that up to 80% of issued carbon credits were low in integrity. Environmental law expert Andrew Macintosh, a professor at the university, claimed that many offset projects were happening in the wrong places, such as arid zones.

“Payments are being made to people not to chop down forests that were never going to be chopped down, to grow forests that are already there, to grow forests in places that will never sustain permanent forests,” Macintosh told ABC Australia.

A study by the Finnish nonprofit Compensate found that 90% of carbon capture projects were ineffective. Of the offsets which the study deemed to have failed, 52% were guilty of lacking additionality. This means that the projects did not contribute to achieving any climate benefits compared to if they hadn’t existed.

Carbon Dioxide Emissions Need Stronger Action

While initiatives are underway to help bring transparency to voluntary carbon markets, the process has so far failed to make an impact on emissions and greenhouse gas pollution. The biggest concern is that carbon offsets have become a license or excuse to pollute.

In reality, the system is flawed, allowing polluters to continue as usual without fundamentally changing business practices. Furthermore, the fact that participation in the voluntary carbon market is optional is a problem.

A more effective approach would be to focus on the real goal of stopping burning fossil fuels and keeping them in the ground. Governments can encourage polluting industries to change old habits and become carbon neutral by eliminating subsidies or putting a price on carbon-based fuels.

Unlike carbon offsets, fossil-fuel phaseouts are easy to monitor and verify, and their positive impact on climate change is guaranteed.