What Is Carbon Offsetting? What to Know for 2022

Carbon offsetting is a massive industry, and it seems straightforward—when you participate in an activity that generates carbon emissions, you pay to remove the equivalent emissions elsewhere, balancing out your impact.

But under the surface, carbon offsetting is a little more complicated. When done responsibly, carbon offsetting is an effective part of a carbon reduction strategy; however, there are some aspects to consider carefully.

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Let’s start by gaining a better understanding of how carbon offsetting works.

How Carbon Offsetting Works

If you purchase a carbon offset, you’re buying credits that a project generated and sold that either works to prevent emissions from getting produced or removes carbon from the atmosphere. 

Many methods generate these offset credits, from peatland restoration and tree planting to high-tech renewable energy projects.

For every tonne of carbon prevented or removed, one carbon offset credit gets created to sell on the market. Whoever purchases that credit effectively retires it and claims the savings towards their carbon reduction target.

These credits are monitored and verified by third parties to ensure that:

  • They have additionally. The carbon prevented or saved is additional—meaning that it wouldn’t have occurred without the carbon offsetting project.
  • They are provable. There must be clear evidence, including an audit trail, showing the credit exists.
  • They are permanent. The carbon savings must be sustained over time. For example, if a tree is planted somewhere where it’s likely to be later destroyed, it would reverse the carbon savings.
  • There is no leakage. The carbon offsetting project must not simply move the emissions from one place to another.
  • They are not double-counted. Each carbon offset credit can only get claimed once—afterward, it’s retired forever.

When Carbon Offsets Are Effective

Carbon offsetting plays a crucial role in tackling climate change—without it, we cannot reach net-zero emissions.

Looking at it from a climate perspective, it’s not important where the emissions reductions happen—a tonne of carbon emitted in one area is equal to a tonne of carbon emitted elsewhere. That means, in theory, that organizations are free to pursue carbon reduction wherever it’s most appropriate and cost-effective.

For example, a company that produces emissions during its manufacturing processes may be too expensive to change right now—or it doesn’t have a proven alternative—can use carbon offsetting to balance out its impact until a more affordable or viable solution surfaces.

Carbon offsets are also helpful for neutralizing parts of your carbon footprint that you might have limited influence over (like Scope 3 emissions).

In addition, most high-quality offsetting projects provide other social and environmental benefits, like education and employment opportunities, and can contribute to a broader ESG commitment.

Why All Carbon Offsetting Isn’t the Same

While carbon offsetting is a necessity and inherently a good thing, like everything, there are some downsides.

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The carbon market is a free one. It encourages credit sellers to maximize profits while finding the cheapest ways to offset emissions rather than finding the best sustainable solutions in the future.

These cheap carbon credits can give companies (and even countries) excuses to continue harming the environment while claiming to be carbon neutral—all without changing their environmental practices.

Buying these carbon credits is typically cheaper than becoming a future-proof green organization—because of this, the carbon offset market, in a way, sets a financial incentive for some companies to continue polluting.

How to: Carbon Offsetting Without Making Things Worse

Ideally, everyone would emit less—especially corporations. Instead of using carbon offsets as a distraction from becoming more planet-friendly by doing things like generating renewable energy, they would use them to offset emissions that they cannot avoid (which wouldn’t be much). And they would go further by offsetting emissions they released in the past by doing things like planting trees—one of the only ways to truly recapture carbon at scale.

However, not all carbon offsetting is equal. They should be additional, timely, long-lasting, and avoid leakage—as we mentioned above.

Unfortunately, those standards aren’t always enforced. For example, some highly emitting airlines claim they are carbon-neutral because they buy cheap carbon offsets from the ‘90s that make no difference to the environment today. In general, if a carbon credit costs less than $15 per tonne, it’s unlikely to have a positive impact. Thankfully there are certificates like Plan Vivo and Gold Standard that assess carbon offset credit quality, making it easier to know how effective credit is.

Carbon Offsetting: Best Practices for 2022

Now, let’s talk about three best practices to follow when considering carbon offsets.

1. Before Carbon Offsetting: Prevent and Reduce

Minimizing your carbon footprint should usually take priority over offsetting your carbon emissions. As a general rule, focus first on resource efficiency to reduce your Scope 1 and Scope 2 emissions, and then explore additional ways to reduce those emissions further through renewable energy sources. You should use carbon offsets for the emissions you can’t eliminate elsewhere.

2. Choosing a Credit: Quality Over Price

Use low-risk and high-quality offsets that are verified by organizations like Gold Standard and Plan Vivo. Generally speaking, most overseas forestry projects are seen as high risk due to the uncertainty behind their permanence, but every type of offset has its benefits and disadvantages.

3. Carbon Disclosures: Be Honest and Transparent

When it comes to your carbon footprint, you should disclose your full footprint to stakeholders and explain to them how (and why) carbon offsets are part of your sustainability strategy. WWF has an exceptional example of how to do this in their guidance of how to purchase carbon credits.

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