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A carbon offset balances out or “neutralizes” a given amount (typically one ton per offset) of carbon dioxide emitted in one place by preventing the release or sequestering a ton of carbon dioxide (or an equivalent amount of another greenhouse gas, such as methane) in another place. Voluntary offset companies and organizations offer individuals and businesses the opportunity to reduce their climate impact by purchasing carbon offsets.
Because greenhouse gases, such as carbon dioxide (CO2), mix in the atmosphere and spread across the entire globe, it is largely unimportant (in terms of their climate impact) precisely where emissions are created or reduced.
Typically, individuals or businesses calculate the carbon emissions they are personally responsible for and then purchase an offset for that amount. The offset company or organization in turn uses those funds to carry out projects that avoid, reduce or absorb greenhouse gases through forestry, methane capture, renewable energy, energy efficiency or other projects.
Offset transactions can be grouped into two general categories, allowance based transactions and project based transactions:
- Allowance-based transactions occur under cap-and-trade regulations, in which emission “allowances” are set by regulators or through binding voluntary agreements. If a company or organization reduces emissions by more than required by their allowance, they can sell those avoided emissions to another company or individual.
- Project-based transactions take place when an individual or organization purchases emission credits from a project that can demonstrate verifiably that it reduces GHG emissions compared with what would have happened otherwise.
Carbon offsets are generally measured in tons of CO2-equivalent, and can be bought and sold through a number of international brokers, online retailers, and trading platforms.
Next: The Case for Offsets
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