How Do Carbon Offsets Work?

by | Dec 12, 2022 | Sustainable Finance, Trending

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What Are Carbon Offsets?

Carbon offsets work by allowing individuals, companies, businesses, and governments to balance their carbon footprint. Carbon offsets are environmental projects like solar and wind energy farms, afforestation, biodiesel production, etc. By investing in these projects, companies and individuals compensate for their own carbon emissions. Most of the offset projects are based in developing countries. Organizations design these activities to curb further carbon emissions.

People and businesses use carbon offsets in different ways. Some may offset their entire carbon footprint. Others may try to neutralize the emission from a particular activity. For example, taking a flight or driving a diesel-run car to work. To offset their footprint, the business person or ordinary individual will visit a carbon offset website. They will calculate their emissions using online tools and then pay the carbon offset project owner or owners to reduce carbon emissions in a different part of the world by the same amount. This neutralizes their footprint.

How Do Carbon Offsets Work?

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The University of California Case

In 2013, the University of California ambitiously declared that it would become carbon neutral by 2025 completely. The University partnered with a massive solar farm to provide energy to its ten campuses. Additionally, it replaced its conventional buses with electric vehicles. It also ran experiments on turning food waste into methane. By 2020, greenhouse gas emissions from the University were 15% lower than in 2013. This was a pretty significant change for such a large organization. The institution managed to reduce emissions equivalent to taking thousands of cars off roads for a year. But it was still far away from reaching ‘net zero.

According to a 2017 report, the University’s biggest challenge lies in its natural gas-powered plants. The plants were responsible for heating and cooling the campus. But, it produced 65% of the institution’s emissions. Getting rid of the plants could cost around 3 billion dollars. The University didn’t have this money. They did consider making the plants completely electric. But fossil fuels power most of California’s electric grid. So that wasn’t an option either.

That’s when the University of California turned toward carbon offsets.

Society needs systematic changes in its functioning. We need a food system that generates fewer greenhouse gases or an electric grid entirely powered by clean, renewable energy. Without them, it is pretty impossible for one individual or even a large organization to go completely carbon neutral.

The ultimate aim of investing in carbon offsets is to pay someone else in a different part of the world to reduce emissions. Their emission reduction activities cover the emissions you can’t reduce yourself.

Is Carbon Offsetting A Scam?

How Do Carbon Offsets Work?

There is no globally recognized cost of carbon. The projects that produce the offsets decide the price. They’re typically between 5 to 10 dollars per metric ton of carbon dioxide. This is cheaper than the cost of climate damage produced by every ton of carbon emissions.

Many believe that buying carbon offsets is counterproductive in combating climate change. They say that carbon offsets are a way for companies and individuals to buy political apathy and self-satisfaction. They’re a way for us to feel better about releasing carbon dioxide into the environment and appease our guilty consciences. We can then fill up our cars with fossil fuels and fly around the world without thinking about our impact on the planet.

The author of Green Gone Wrong, Heather Rogers, visited various carbon offset projects in India. She found that the scheme consisted of many irregularities. One biomass power plant refused to allow her to look around the facility. The facility staff reported that the plant was producing biomass from chopped trees. But, it was designed to run on agricultural waste.

Even if offset projects deliver on their promises, many environmentalists argue that they’re a terrible idea. If we collectively want to mitigate climate change, governments worldwide need to fund carbon offset projects while businesses and individuals directly reduce their emissions. Only by striving to minimize emissions everywhere does the world stand a chance of avoiding the impacts of climate change. We shouldn’t be polluting in one place and offsetting in another.

However, most carbon offset websites claim that their customers are taking steps to reduce their emissions directly.

Ultimately, the question boils down to the individual or business. Do they think that carbon offsets are valid? Of course, buying carbon offsets to make you feel better about flying to that exotic place for your vacation is wrong. But investing in offsets to genuinely cut down on your carbon footprint is not bad. The offsets might even offer bonuses such as reducing poverty in developing countries.

The Price of Carbon Offsetting

Many people wonder why carbon offset prices are so low. If flying is so bad for the environment, can just a few dollars be enough to counteract the impact? Here’s the answer: presently, there are many ways to reduce emissions inexpensively.

A single low-energy bulb can save around 250 kg of carbon emissions over the space of six years. Theoretically, if governments started taking serious notice of global warming or if enough people began offsetting, the price of carbon offsets would gradually rise. Costs would increase since the easiest and cheapest ways to reduce emissions would get used up.

Another topic of confusion is that different offset companies quote different costs for offsetting the same activity. There may be two reasons for this:

1. There are many ways to estimate the precise impact on the climate of a particular activity. For example, flying affects global temperatures in many different ways.

2. Different types of carbon offset projects will inevitably have different costs. This is because some projects don’t just reduce carbon impacts but also deliver broader social benefits.

Also Read: Women Driving Climate Action: A Force For Change


  • Dr. Emily Greenfield

    Dr. Emily Greenfield is a highly accomplished environmentalist with over 30 years of experience in writing, reviewing, and publishing content on various environmental topics. Hailing from the United States, she has dedicated her career to raising awareness about environmental issues and promoting sustainable practices.

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