Climate Change

How do carbon offsets work? Carbon credits explained

CO2 greenhouse gas emissions from factory chimneys.

Many of us look for more ways to reduce our carbon footprints and our reliance on fossil fuels. As part of our efforts, carbon offsetting has become a popular option for those who want to give back easily with minimal lifestyle changes.

But just how effective is carbon offsetting? How do carbon credits work? Is there a better way to ensure a greener future?

Carbon offsets explained

Before analysing their effectiveness, we must first understand what carbon offsets are.

Carbon offsets generally refer to reducing or removing carbon dioxide emissions and other greenhouse gases (GHGs) to compensate for elsewhere emissions.
Although people refer to carbon offsets and carbon credits interchangeably, they differ slightly. A carbon credit is a transferrable certified instrument representing a CO2 emission reduction.

When someone purchases a carbon credit, they are permitted to emit a set amount of GHGs. Most importantly, they are measurable, verifiable emission reductions from certified climate action projects — this means only some companies can offer carbon credits.

What is the voluntary carbon market?

The voluntary carbon market (VCM) aims to hold carbon emitters responsible for their environmental impact.

Companies, governments, and individuals can enter the VCM by purchasing carbon credits emitted by projects that reduce or remove atmospheric greenhouse gases.

In its early beginnings, the VCM was primarily concerned with pioneering new ways to tackle climate change. It has since evolved into a more effective means by helping drive vital resources to projects that deliver independently verified emissions reductions globally.

Why do we need carbon offsets?

Carbon offsets help hold people accountable for their carbon emissions, offering a practical way to address climate change and manage the level of greenhouse gases.

By encouraging people to confront and pay for their carbon footprint, it’s hoped that they will re-evaluate their reliance on fossil fuels and seek alternative, renewable energy sources.

For those who can’t avoid using harmful greenhouse gases, carbon offsets allow businesses and individuals to contribute in a positive way to the environment and counteract their negative impact.

With increased funding to the voluntary carbon market, companies can assist those affected by the climate crisis, such as enhanced healthcare, improved economies, and better social care.

Can’t we just plant more trees?

Planting a tree. Close-up on young man planting the tree while working in the garden. Soil Planting and Seeding concept.

Although trees are one the best natural absorbers of harmful greenhouse gases such as carbon dioxide, planting trees alone won’t reverse climate change.

We are currently too far along in the climate crisis to solve the issue by planting trees — they won’t be able to absorb enough CO2 on their own to stop global warming.

While planting trees sounds nice, and we should continue to rewild our environment, other schemes like carbon offsets are also needed to provide crucial assistance and funding for companies seeking to address the ramifications of climate change.

There are limits on how much carbon trees can store — they aren’t just an endless CO2 sink. As a tree goes through its lifecycle, it becomes carbon neutral at stages and releases some CO2 back into the atmosphere to maintain the photosynthesis equilibrium. This process is heightened by stress or overheated environments and occurs from the decay of wood and bark, insects and animals consuming them, and the trees’ respiration.

At our current rate of fossil fuel consumption, deforestation, and CO2 release, just planting trees will not have the significant effect needed to tackle climate change properly.

What are the arguments for carbon credits?

There are several reasons why carbon offsets are considered an effective way to help address the climate crisis.

  • Anyone can purchase carbon credits, meaning more people can get involved and counteract their greenhouse gas emissions.
  • It encourages businesses and individuals to address their fossil fuel use, potentially leading to a more considered approach with fewer emissions.
  • The voluntary carbon market provides measurable and verifiable emission reductions from certified climate action projects, so you can see how the money benefits communities worldwide.
  • For companies, carbon offsetting can count towards internal reduction goals.

How to offset a carbon footprint

Carbon offsetting is relatively straightforward for businesses and individuals to implement.

Step 1: Calculate your carbon footprint

If you are an individual or small business, you can use a free online carbon footprint calculator to roughly estimate your greenhouse gas emissions. In the UK, one person’s average carbon footprint per year is 12.7 tonnes.

Calculators will ask you to provide details of your home energy usage, transport use, and how much you spend on other activities such as dining out, buying food, furniture, cosmetics, etc., and other recreational activities.

Larger businesses should use an accredited consultancy service to calculate their carbon footprint correctly. The services will verify your greenhouse gas emissions and appraise your carbon footprint.

Step 2: Reduce your emissions

After determining your carbon footprint, it’s time to reduce your emissions.

There are several ways to achieve this, from turning down your thermostat to eating a meat-free diet to spending less time in the shower — small changes can go a long way in minimising your environmental impact.

Sticking to this step means actively considering your contribution to greenhouse gases. By reducing your carbon footprint now, you’ll also have less to offset in the next stage, saving you money.

Step 3: Choose a carbon offset project

Once you’ve determined how much carbon you want to offset, you can choose a project to contribute to.

Make sure to choose an accredited project that focuses on high quality using Gold Standard Verified Emission Reductions (VERs) and Verified Carbon Standard (VCS) certified credits. It’s also best to pick a project that adheres to Quality Assurance Standard (QAS) for Carbon Offsetting so you know their work is beneficial and valid.

Carbon offset projects ultimately help reduce the amount of carbon in the atmosphere. However, some schemes also focus on the surrounding effects of climate change, such as lack of biodiversity, access to clean drinking water, education and jobs, and general health and well-being in countries more susceptible to the climate crisis.

Browsing a carbon offset project portfolio is an excellent way to get inspiration if you are still determining where to contribute.

How much do carbon offsets cost?

The cost of carbon offsets depends on the project you choose, the level of standard, the overall market, and how much carbon you need to offset.

You can find carbon credits for as low as $1 per tonne and as high as $100+ per tonne — greenhouse gases are usually measured in tonnes, so offsetting is calculated as such. However, it’s not as simple as a lower credit price equals a lower quality and vice versa.

For example, industrial gas destruction projects are cheap and efficient. Consulting external experts or using an accredited marketplace is recommended to determine the best price for carbon offsets.

Do carbon offsets work in practicality?

Climate change drought land. Global warming issue, cracked mud in the bottom of a river

While carbon credits are incredibly accessible and make sense in theory, there are some concerns surrounding the practicality of the voluntary carbon market.

Carbon offsetting projects are only truly effective if they are well-managed and last. These schemes usually generate cash quickly, but it takes time and attention to ensure the funds are used in the best possible way for maximum lasting impact.

Although some may re-evaluate their carbon usage while offsetting emissions, carbon offsetting alone doesn’t reduce the CO2 footprint, missing the core problem of minimising our reliance on fossil fuels.

Some companies also use carbon offsetting as a method of greenwashing — appearing to care about the environment and address their impact without undertaking impactful changes. By purchasing carbon credits, the responsibility is transferred elsewhere (e.g., a project), where it can take time to determine its effectiveness.

Finally, carbon credits are not accepted as a way to offset scope 1 or scope 2 emissions, which are direct and indirect greenhouse gas emissions generated by organisations in particular processes. This factor means companies won’t hit their environmental targets by carbon offsetting alone.

Is carbon offsetting just PR?

Recently, carbon offsetting has come under scrutiny for providing large companies with a way to swerve environmental accountability and continue producing greenhouse gases. Buying carbon credits gives businesses a good story, i.e., they can say they are aware of and are addressing their carbon footprint without changing anything in their daily emissions.

To be serious about tackling climate change, companies much prevent greenhouse gases from reaching the atmosphere in the first place, which carbon offsetting does not require them to do. Carbon offsetting gives businesses the freedom to operate as usual while, on the surface, appealing to more eco-conscious consumers.

This type of behaviour is also known as greenwashing — marketing that claims a company’s actions, policies, or products are environmentally friendly or positively impact the environment to deceive customers and increase profits.

Final thoughts

Carbon offsetting is an appealing approach to tackling climate change, thanks to its straightforward process and accessibility. Many projects that benefit from carbon offsetting also achieve life-changing benefits to the environment and communities impacted by climate change.

However, carbon offsetting should be approached with caution. Understand where and how your offsets are used and ensure the projects are accredited and sustainable.

We should also continue to investigate large businesses that use carbon offsetting, ensuring they are taking action to reduce their carbon footprint in other, more effective ways.

Carbon offsetting alone is not a cure-all for climate change, but it can help people rethink their fossil fuel usage and divert their money into meaningful causes.

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