Carbon Offsets: How Do They Work?

carbon credits how do they work

Corporations everywhere are looking for a way out of significantly reducing their carbon emissions. Populations are demanding emission cut backs and during every political election new initiatives emerge that aim to cut big business' use of dirty fuels. Some companies have argued that environmental standards are too harsh, that the bar is set too high in too short of time. For those reasons, many governments have reverted to incorporating carbon offsets into their green initiatives. But does this method really help reduce overall carbon emissions?

Types of Carbon Offsets

“Carbon offsetting” implies investing is something that reduces carbon in the atmosphere elsewhere, the main idea is that burning one place and storing or reducing another ultimately evens out the emissions that one produces. 1 So, for example, a very large company may offset its carbon footprint by reforesting an entire jungle. Trees are seen as natural carbon sinks, so by planting trees the company can therefore pollute the amount of carbon the trees will hypothetically absorb, making the business' overall footprint an even zero. Reforesting is a common method, but the two other main methods are: 1) increasing overall energy efficiency, and 2) investing in renewable energy. 2 By increasing energy efficiency, a company can save energy that they may have otherwise wasted, therefore offsetting the carbon pollution by their own stringent electricity-use policy. Carbon offsets via renewable energy may entail helping the growth of a renewable energy project that converts something initially eco-bad into something eco-good—such as using a landfill as a source of methane—or simply supporting renewable energy through a company or via research. Overall, carbon offsets usually entails one of the following initiatives: reforesting, energy-efficiency, or renewable energy investment.

Nations Using

Currently the whole world is involved in this get-green-quick scheme thanks to the famous Kyoto Protocol, an intrepid global initiative that began in the early 90s that seeks to unite all nations in a comprehensive and effective plan to enervate the effects of global climate change. And carbon offsets fit perfectly into this plan, as BBC news said: “making the polluter start paying for climate change.” 3 So far the European Union has utilized carbon offsets most publicly, though many US businesses have also bought into it (no pun intended). Developing nations are also involved in this scheme, although they are usually at the receiving end of the deal: western (polluting) nations counteract their participation in climate change by paying developing countries to reduce their emissions instead through clean development projects. 4

How many trees does a ton go for?

When a corporation or an individual purchases a carbon offset, they have to go through a “Carbon Offset Provider,” a business that makes sure that money goes to the right people and places, though even those business can sometimes be

scams. And a ton of carbon may cost a different amount for each provider—hey this is still capitalism, just with a twist of eco. For example, e-Blue Horizons is a business that sells CO2 at $5.00 per metric ton, while charges double that much. 5 Both companies are certified by the Environmental Resource Trust, among others, but they vary in the methods of offsetting as well as the types of offsets they will sell (car, home, air, events, etc.). And before you go choosing the five-bucks-a-pop route, do your research. E-BlueHorizons says on their website's homepage that offsets can “sometimes be used as a license to pollute,” while CarbonFund says to “reduce what you can, offset what you can't.” 6.

To calculate the number of forests needed to combat your own lifestyle, a good tool is provided at where they have a carbon calculator showing the amount of trees needed and the tons of carbon you release annually based on your lifestyle. (For example, in my 20mpg car that I use 100 miles per month, for that one aspect of my life I would need to plant 3-4 trees per year.) The calculator can be found at:

So, Does Offsetting Work?

Whenever a political committee experiments with assigning a monetary value to something in the environment, there will always be miscalculation. How can you put a price on an ecosystem function, the existence of a species, or the millions of externalities caused by green house gases that we may or may not be aware of? Price-tagging nature many times leads to a false sense of good when the good is either neutral or not good enough. Currently, the EU and the United States are beginning to question the validity of this program. The EU's trading scheme has not placed a cap on the amount of offsets it can sell, meaning that money keeps pouring in and corporations continue to think the same about emissions. 7 Nations are more than happy to keep offsetting without limits as long as there is a noticeable change, which there has not yet been. Plus governments are mainly relying on offsets to reduce emissions, meaning no real progress has been made in the global effort to reduce emissions.

The Nature Conservancy says “yes”, offsets do work when using reliable programs that aim high. This means no leakages in carbon sinks, preservation of forests in no-touch forever zones, and constantly measuring and calculating. 8 Although the Nature Conservancy itself sells offsets, their opinion is none the less valid. The key to high performing purchases for people and companies is to know the ins and outs of the selling company. Economics could be the solutions to our environmental problems, but when not in check it can also muddy the waters.


Category: Credit

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