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What on Earth is a ‘carbon offset’?

© Charlie Shoemaker

Editor’s note: From “climate adaptation” to “blue carbon,” from “landscape approach” to “ecosystem services,” environmental jargon is everywhere these days. Conservation International’s blog looks to make sense of it in an occasional explainer series we’re calling “What on Earth?”

In this installment, we break down carbon offsets, a way to help reduce greenhouse gas emissions that contribute to climate change.

This post was updated on April 14, 2021.

So: What is a ‘carbon offset’?

Put simply, it’s a reduction in greenhouse gas emissions to compensate for emissions made somewhere else.

Why do we need them?

To prevent climate catastrophe, we need to use every tool at our disposal. This includes carbon offsets, which generate financing to protect nature and its ability to regulate the climate. In some cases, the revenue from carbon offsets can go toward supporting carbon capture and storage — an as-yet underdeveloped technology to remove carbon from the atmosphere and store it, usually underground.

But many, if not most, carbon offsets are linked to the protection of forests.

How do forest-carbon offsets work?

The idea is that companies or individuals dedicated to taking climate action can buy and trade credits — each representing a metric ton of carbon — to supplement other actions they are taking to reduce their emissions. Revenues are paid to local communities as an incentive to protect forests on their lands. The result: Forests remain standing and absorb more climate-warming carbon from the atmosphere while supporting local livelihoods — and buyers neutralize a portion of their carbon footprint.

With only a decade to prevent the worst impacts of climate change, protecting and restoring forests is critical to flattening the carbon curve. In fact, research shows that these and other “natural climate solutions” can contribute at least 30 percent of the carbon emissions reductions necessary to keep average global temperature rise below 2 degrees Celsius (3.7 degrees Fahrenheit).

Lucky for us, the benefits of forest-based offsets go beyond just fighting climate change — they can also help bolster local economies, protect wildlife habitats and conserve watersheds.

Aren’t these offsets controversial? I heard that they allow companies to simply keep polluting.

That’s a common criticism of offsets — and it’s false. Here is how it actually works: Carbon credits are expressly designed as a “bridge” for companies already working to reduce their emissions, not a free pass for business as usual. In fact, companies that invest in carbon projects are climate leaders, not laggards: A 2016 survey found that companies that bought voluntary carbon credits had more ambitious emissions reduction targets and did more across the board to cut emissions compared with companies that did not. Many countries and regulators set a limit on the number of credits that emitters may purchase to ensure that companies are not using carbon offsets as their only path toward reducing their emissions.

And once a carbon credit is used it becomes “retired,” meaning it cannot be traded again, assuring that only the buyer can claim to have cut emissions associated with that credit.

What about a carbon tax — is that the same thing as a carbon offset?

Not exactly. A carbon tax is essentially a vice tax (a tax on something deemed harmful to people and society as a whole, such as cigarettes) that aims to shift production and consumption away from fossil fuels and towards more renewable forms of energy. Carbon taxes function by including the environmental cost of goods and services that are produced using fossil fuels in the total cost that companies and consumers have to pay.

The revenues from carbon taxes usually go to general budget expenditures, since earmarking tax revenues for specific purposes isn’t allowed in most countries. However, in some countries, carbon tax revenues have been used for health, education, clean energy research and development and conservation initiatives.

So, carbon offsets and carbon taxes are both ways that people and companies can “pay” for the carbon emissions they create. While they function differently, they both help to decrease humanity’s carbon footprint.

What exactly is my ‘carbon footprint’ again?

Your daily actions — from heating and cooling your home to binge-watching Netflix to sending text messages and email attachments — consume energy and produce greenhouse gas emissions like carbon dioxide. The energy and materials used to source and produce the products you buy also create carbon emissions.

Add in transit — including driving a car, flying, even using public transportation — and you have your carbon footprint: an estimated sum of your annual greenhouse gas emissions. (Use Conservation International’s calculator to measure your carbon footprint.)

Okay, I calculated my footprint. What do I have to do to offset it?

It’s pretty simple: Numerous online platforms make it as easy as a few clicks. Let’s say you determine your annual greenhouse gas emissions are 16.16 metric tons (the average per person in the U.S.). You can balance your impact by offsetting the equivalent amount — or more, to go “negative” — through an online service. Do your research, though, and choose a trusted, transparent entity — such as Conservation International — that only supplies offsets which meet rigorous standards verified by an independent third party.

What standards?

Let’s bring in an expert to answer that one.

“In order to ensure that the offsets are robust, credible and precise, projects must demonstrate that the emissions reductions meet a specific set of measurement and verification criteria,” explains Natasha Calderwood, director of projects for Conservation International’s Carbon Fund. “This includes showing that the reductions would not have been generated without the project — meaning that they are ‘additional’ to a business-as-usual scenario.”

She adds, “Projects are also monitored on an ongoing basis with independent verification of results. Once carbon offsets are purchased, they are then retired on a public registry, thereby ensuring that they cannot be used or sold again.”

Conservation International’s projects, for instance, are in compliance with the most widely recognized and rigorous voluntary carbon market standards: the Verified Carbon Standard to certify the emissions reductions, and the Climate, Community & Biodiversity Standards to ensure that the projects deliver social and environmental benefits.

What kind of benefits are we talking about?

When you offset your emissions through Conservation International’s platform, for example, you will contribute to protecting forests in Peru and Kenya that store carbon dioxide absorbed from the atmosphere — a critical part of the solution to climate change.

Protecting forests means protecting habitats as well — and people benefit, too. For example, in Kenya’s Chyulu Hills, revenue generated through the purchase of carbon offsets supports employment of forest or game rangers; safeguards a critical water source for thousands of people, livestock and wildlife; and provides improved social services like health and education.

What about larger emitters, like companies and governments? Shouldn’t they offset their carbon footprints, too?

Individuals who choose to offset their carbon footprint are operating in what is called the “voluntary carbon marketplace” – meaning you decide on your own that you want to take responsibility for your own emissions. There is no law regulating you to do so.

Some companies operate in this voluntary marketplace as well, namely for corporate social responsibility or reputational reasons.

On a larger scale, companies and governments often buy carbon offsets in the “compliance carbon marketplace” to fulfill mandated caps on greenhouse gas emissions. For example, in the European Union, companies that emit greenhouse gases are required to cut their emissions or buy offsets from the market.

Is any of this really going to make a difference?

Let’s go to the expert again.

“Climate change is a global, complex issue, and it often feels like there is little room for individual action,” Calderwood says. “Offsetting alone is clearly not the ultimate means to tackle climate change. It’s one piece of the puzzle, but it’s a piece that people and businesses can put in place right now to be part of the solution.”

While it’s critical for people and businesses to do what they can to reduce their emissions, it’s difficult for most to reduce down to zero. Offsetting enables climate action to take place in parts of the world that might otherwise not have the means to do so.

“We must move to a low-carbon development pathway as quickly as possible, and individuals, governments, businesses and NGOs all have a role to play in helping achieve that,” Calderwood explains. “But offsetting unavoidable emissions is also a critical step.”

But are people and businesses actually taking this step?

According to a 2020 Forest Trends report, 1.22 billion metric tons of carbon offsets have been purchased in the voluntary marketplace since 2005. In 2019 alone, voluntary buyers paid US$ 320 million to offset 104 million metric tons of carbon dioxide emissions — equivalent to removing 22 million cars from the road for one year.

A few developments point to a potential uptick in offset purchases. In a historic announcement last November, the International Civil Aviation Organization, an agency of the UN that sets global aviation standards, approved two forest-carbon programs from which airlines can buy carbon credits. This decision could pave the way for airlines to help neutralize their climate footprint by protecting nature.

Additionally, more than 170 companies and 110 countries — including Japan, the United Kingdom and South Korea — have pledged to become carbon neutral by 2050. To do this, they are going to need the entire suite of available climate mitigation strategies, including carbon offsets.

So you’re saying that carbon offsets could help countries and businesses reach their climate goals?

Absolutely. Despite economic losses during the COVID-19 pandemic, the broader corporate demand for voluntary carbon offsets actually increased in 2020, according to the Forest Trends report.

This uptick in demand indicates the private sector’s growing recognition that climate change is not only bad for the planet, it is also bad for the economy. The World Economic Forum’s 2021 Global Risk Report ranks climate change as one of the top threats facing the global economy — and experts say that countries and businesses must drastically reduce their greenhouse gas emissions to avoid massive losses to their supply chains over the next century.

While carbon projects alone are not going to solve climate change — doing so will require a transformation of the global economy to one powered by renewable energy — they are an effective tool for helping bend the climate curve.

“Offsetting is an opportunity for countries, businesses and individuals to come together and scale up climate mitigation efforts,” Calderwood says. “Supporting projects that deliver social and environmental benefits alongside reducing carbon emissions can have an immediate positive impact on the ground — and, more crucially, help emitters bridge that gap between internal reductions and meeting meaningful commitments.”

Calculate your carbon footprint — and offset your emissions — here.

Cassandra Kane is the communications manager for CI’s Conservation Finance Division.

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