People and companies around the world are increasingly becoming aware of the impact that their carbon emissions are having on the planet. While there have been efforts to decrease energy usage and increase energy efficiency to reduce emissions, it is virtually impossible in the modern world to avoid emitting CO2 altogether. Fortunately, there are ways to capture and store carbon from the air in addition to reducing its production from fossil fuel sources. This is why carbon offsetting is an integral part of climate mitigation strategies across the planet.
What Is a Carbon Offset?
Carbon offsets are a means of reducing greenhouse gas (GHG) emissions, measured in carbon dioxide equivalents, or CO2e. They reduce emissions by capturing and storing CO2 through offsetting projects around the world, which are typically done by planting trees or utilizing renewable energy credits (RECs). These methods reduce the net amount of carbon emitted by removing it from the air or avoiding the emissions from occurring (in the case of RECs), allowing people and companies to purchase these offsets to remove their share of CO2. This can be done by individuals, companies, organizations, or any group interested in reducing the amount of CO2 emissions they create.
As a result of individuals and groups recognizing the global importance of reducing greenhouse gas emissions, carbon offsetting is growing in both popularity and availability. This has also led to reductions in emissions at the source of their creation by improving energy efficiency, implementing renewable or clean energy projects, or putting other carbon avoidance measures in place.
However, due to the intertwined nature of modern life and CO2 generation, it is virtually impossible to completely negate carbon emissions. This is why we need carbon offsets to meet emissions reduction targets and achieve carbon neutrality, at least for the foreseeable future. Carbon neutrality, or going carbon neutral, is where the total carbon output of an individual or company is net zero, taking into account emissions and offsets to compensate for them. Carbon markets, which administer and track offsets, are a flexible mechanism that allows reductions to be properly and accurately recorded. They ensure true neutralization of emissions by issuing and retiring carbon credits, which are generated by carbon offset projects.
There are several verification programs and carbon registries that are critical for verifying the reductions these projects claim to offer. Most of them involve tree planting or reforestation, especially in developing countries, but there are also some high-quality initiatives that utilize sustainable development to generate carbon credits, such as replacing wood fuel with methanol for cookstoves or developing wind farms rather than natural gas power plants.
Once offsetting projects are certified through a rigorous process that involves substantial requirements, tradable carbon credits (also called GHG credits) are issued to project administrators to sell to interested parties.
They can be sold on the open voluntary carbon market, which is different from the compliant market that exists in a cap and trade scheme. Cap and trade typically only applies to carbon-intensive industries that are only allowed to emit a set amount of CO2, binding them by law to purchase verified carbon credits from other companies within the same system, which could be the same industry or the same geographic area, depending on the jurisdiction.
Voluntary carbon credits are retired after they are bought, meaning that the carbon associated with each credit is effectively removed from the system and categorized as such to prevent being counted against someone else’s offsets. They are purchased by individuals or companies interested in lowering their carbon footprints because they want to improve their ecological impact, not because they are required to by law.
How Much Do Carbon Offsets Cost?
The price of typical carbon offsets varies significantly, from less than USD 10¢ per metric ton (also written as “tonne”) to more than USD $50 per metric ton. Prices depend heavily on the type of offset project, where it’s located, and how it’s run.
Although the price range is wide, the typical cost for carbon credits issued on the voluntary carbon market is between around USD $12 to USD $20 for each metric ton of CO2 offset. For the sake of convenience, most carbon credits are equal to one metric ton of carbon dioxide removed from the atmosphere, though some are equal to one kilogram or other related amounts.
At the current average market cost, carbon credits are largely considered to be priced unsustainably low, meaning they are too affordable and will not contribute to the necessary large scale changes needed to address climate change. However, as demand surges and supply struggles to catch up, the average carbon credit price could increase to more than USD $50 per metric ton of CO2 sequestration, also known as CO2 storage, as early as 2030.
Should You Buy Carbon Offsets?
It is important to measure and reduce emissions in every way possible, whether you are an individual or a business. Reducing emissions saves energy, thereby saving money, which is something most people and most companies want. It also benefits the environment, helping to keep atmospheric CO2 levels from increasing exponentially — giving the world a chance to make adjustments to avoid the worst of what global warming may bring.
While you can make every effort to reduce emissions from energy usage and other carbon intensive activities, there is no way to become completely carbon neutral without offsetting. Simply existing in the modern world comes with a carbon footprint — even eating food has a CO2e value associated with every fruit, vegetable, grain, and meat product.
If you are interested in reducing your footprint to contribute to climate action, you should buy carbon offsets. When you do, however, make sure that the ones you buy are verifiably reducing the associated carbon emissions they claim to negate. If carbon credits and the projects they are generated from are not properly verified, you could be spending your hard earned money on nothing but a false promise of removing greenhouse gases from the atmosphere.
Can You Sell Carbon Offsets?
You can only sell an offset if you have created it directly through a project that generates carbon credits or through a similar verified offset scheme. Once an offset sells, it is retired, which means it’s counted toward the equivalent carbon reduction amount and cannot be counted again.
Part of verifying credits on the carbon market is to ensure there is no double counting of offsets. For this reason, offsets cannot be sold again. So, they can in fact be sold, but only once and only by the person who creates them, not by a buyer looking to hold credits to sell to a third party.
How Is Your Carbon Footprint Offset?
Offsetting your carbon footprint involves first calculating the total emissions that you are responsible for — both direct and indirect. After this, you need to purchase the equivalent amount of offsets in the form of carbon credits to remove this amount of CO2 from the air, effectively negating or “offsetting” your entire carbon footprint.
If you are able to offset your carbon footprint you have become carbon neutral, meaning your actions are not responsible for a net increase in CO2 emissions over the course of the given year. However, because each and every action in modern life is intertwined so deeply with carbon being emitted, it typically takes a significant amount of carbon credits to offset individual carbon footprints, let alone that of entire companies.
The best way to work toward offsetting your carbon footprint is to reduce emissions at the source, then offset the rest through carbon credits for any CO2 you cannot avoid. This is the path toward net-zero emissions where you release so little carbon that you can offset a small amount to make it as if you have emitted no CO2 at all throughout the entire supply chain associated with everything you consume or use.
How Does the Carbon Offset Market Work?
The voluntary carbon emissions market follows a rigorous certification process that is put in place by registries that award and track offsets generated by projects. These are issued in VERs, which stand for both “voluntary emissions reduction” and “verified emissions reduction.”
VERs are awarded for a diverse range of projects, including renewable energy (such as wind farms, hydroelectric, solar farms, or even hydrogen generation projects), reforestation (as well as the avoidance of deforestation through protection), and others.
In order to attain certification from one registry or another, projects must be independently audited by qualified third parties. This is in addition to the registries themselves, which look at robustness and methodological data to determine whether or not it is likely for the amount of carbon sequestered to be as accurate as the project predicts. There are several methodologies that can be applied with the most important aspect being how technically sound the emission reduction quantification process is.
Once the projects have been approved and are underway, all generated credits will be handled by the registry system the project uses. This is the central data storehouse for any registered project. It’s responsible for not only the generation, but also the retirement of all credits to ensure the proper amount of carbon reductions are being recorded.
In addition to privately run registries, governments are beginning to introduce more standardized policies and programs to ensure proper emissions mitigation within their jurisdictions. Perhaps the best example of this is the REDD+ program in the forestry sector, which stands for Reducing Emissions from Deforestation and forest Degradation in developing countries. This United Nations program has been adopted by governments around the world to ensure standardized emissions reductions using the techniques outlined in the framework proposed by the REDD+ standard.
Beware of Carbon Credit Trading Scams
As with many other forms of commodities trading, there are scams in carbon offsets. These usually involve people purporting to sell carbon credits but instead offering faked or nonexistent products. Potential investors for these scams are usually cold called with no prior contact, though solicitations may also be sent via email, regular mail, word of mouth, or even fraudulent seminars.
They usually offer a form of carbon credit certificates, VERs, CERs, or other opportunities to invest directly in an offsetting scheme that may seem legitimate on the surface. This is why it is extremely important to make sure your offsets are certified by trustworthy third parties and are purchased directly through one of the vetted registries that store credits on their database.
Another way scams can happen are through verified carbon credits and VERs that are truly certified but are sold to unsuspecting people who are told they can hold on to these credits to sell at a profit later. These people are misled to believe they can trade carbon credits like other commodities, not knowing that once a credit is purchased from a registry it is retired — this effectively offsets the associated amount of CO2, but it does not constitute an investment for the person buying it.
The prevalence of scams is why it’s important to understand what carbon offsetting really entails, what buying credits means, and how the carbon market works. It is not a place for investors to buy and hold credits to sell for profits down the road — it is a place to voluntarily offset your CO2 emissions associated with the actions of yourself or your company.
Get Involved With Carbon Offsetting
It is clear that carbon offsets are a major factor in reducing overall greenhouse gas concentrations in the atmosphere, helping us to continue our current standard of living while we adjust to implementing less carbon-intensive energy sources. If you would like to get involved in the voluntary carbon market and reduce your environmental impact, make sure you do some independent research and purchase offsets from trusted sources.
Terrapass has created and worked with verified, certified, and highly accredited projects for nearly 20 years, building trust and providing transparency along the way. If you would like to learn more about offsets, there is a plethora of information available from Terrapass and other trusted organizations that know carbon credits inside and out. Whatever you decide to do, as long as it is reducing emissions, it is helping the planet in a positive way.