Do Carbon Offsets Make a Difference?

Carbon offsetting has been around for some years now but it’s only recently been boosted in popularity. Primarily targeted at companies and countries, carbon offsetting is a way to help reduce carbon emissions into the atmosphere.

It’s important to recognize that carbon offsetting isn’t a solution to climate change – reductions have to be made first.

Carbon offsetting makes a difference to communities and the pursuit of renewable energy but it isn’t designed to work on its own. Companies signing up for carbon offsetting programs need to commit to other sustainability policies like going plastic-free and reducing emissions in addition to offsetting unavoidable emissions.

What are carbon offsets?

Carbon offsetting is a reduction or removal of carbon dioxide (or other greenhouse gases) emissions to compensate for emissions generated somewhere else.

There are also carbon offset credits which are transferable instruments certified by governments or certification bodies that represent emission reductions of one metric tonne of CO2 or equivalent.

Carbon offsetting is used to take responsibility for carbon emissions that are unavoidable – there are processes that require the release of carbon emissions into the atmosphere.

By participating in carbon offsetting, companies can achieve carbon neutrality, because the emissions released are balanced out by the carbon offsetting.

Why is carbon offsetting important?

By participating in carbon offsetting programs, companies can neutralize their remaining carbon emissions and contribute to sustainable objectives.

Carbon neutrality is the ultimate goal, where companies and the world at large don’t emit more carbon into the atmosphere than is absorbed.

Do carbon offset programs work?

Carbon offsetting programs seek to invest in sustainable projects across the world, but not all of these make as big a difference as they seem. It’s why it’s important to find carbon offset programs that are transparent about what projects they support and how they help the environment.

There are many different types of carbon offset projects, with the most common projects focusing on planting trees or reforestation. There are many organizations seeking to increase the number of trees globally. If it was happening anyway, does it count as carbon offsetting?

The answer is mixed. As long as the program is helping fund the organization or project fairly, it’s safe to assume that the organization – especially nonprofits – can do more than they otherwise would have been able to.

Some companies believe that simply saying that they commit to going net or carbon zero and showing a carbon offsetting logo is enough. However, it’s definitely not enough.

If a company asks for customers to pay for carbon offsetting, chances are they’re either only carbon offsetting to greenwash their business or because they have to do the bare minimum.

Companies should always be looking for how they can become more eco-friendly and sustainable – that includes reducing their carbon usage, being 100% powered by renewable energy, and ensuring they don’t use more plastic than necessary.

How can a business offset its carbon footprint?

To offset a company’s carbon footprint, the business needs to measure its carbon footprint. This can be done by using protocols like the GHG Protocol.

It’s important to measure a company’s carbon footprint to know exactly what you need to reduce and how much needs to be offset.

Measurements of carbon footprint are expressed in tonnes of carbon dioxide equivalent (tCO2e). This measures all greenhouse gases, using carbon dioxide as the base amount as with GWP (Global Warming Potential).

Carbon footprints should be assessed annually to track emissions and how they change.

Once the company’s carbon footprint has been measured, steps can be taken to reduce it.

Measuring the carbon footprint allows the business to identify major sources of emissions, which provides data to help design a sustainability strategy.

Sustainability strategies look at emission reduction objectives based on the data provided and identify where reductions can take place.

Medium and long-term reduction targets help to keep the business on track to reduce carbon emissions over time, using reduction strategies that work for the business.

Every sector has different reduction strategies available, and individual businesses have different activities that need to be logged.

There are general guidelines available to follow, as well as initiatives like the Science Based Targets initiative. These help define pathways for companies to reduce their greenhouse gas emissions.

The sustainability strategy also identifies which carbon emissions can’t be reduced. This is where carbon offsetting comes in.

Once a company is aware of which emissions are unavoidable, residual, or persisting, the company can enroll in carbon offsetting programs. Companies can buy carbon credits which equal 1 tCO2e avoided or otherwise reduced.

Why do companies buy carbon credits?

Carbon credits are a representation of investing in carbon-neutral programs. By buying credits, companies can finance certified carbon-offsetting sustainability programs and show their commitment to carbon neutrality.

There are different types of carbon credits, broken into three primary project types: forestry and land use, household and community, and renewable energy.

At least 36% of S&P 500 companies bought carbon offsets in 2021.

Two of the biggest companies buying carbon credits are the Walt Disney Company and Microsoft Corporation, which together purchased over 1.3 million carbon credits in 2019.

Microsoft invested in all three project types in 2019, with Disney focusing on forestry and land use the most.

The choices for carbon offsetting projects, which can be either removal or reduction focused, include categories for:

  • Renewable energy
  • Forestry and land use
  • Energy efficiency/fuel
  • Waste disposal
  • Household devices
  • Chemical processes/industrial manufacturing
  • Transportation
  • Agriculture

The cheapest and most common removal project is forestry, with most forestry projects dedicated to reforestation or afforestation. This removes carbon dioxide from the atmosphere through the planting of trees and forests.

Households and communities projects are largely reduction projects, which often focus on education around energy-efficiency methods, like EcoAct’s cookstove project in Sudan.

Renewable energy is also a form of reduction, as it develops alternatives to carbon-based energy instead of removing carbon.

How much do companies spend on carbon offsets?

The amount of money spent on carbon offsets varies greatly by the kind of program chosen or what country the company works in, as well as how much carbon needs to be offset.

There are several types of carbon offset programs, from international or governmental regulatory bodies to independent NGOs.

Most governmental regulatory bodies are compliance programs, which are used for companies to meet greenhouse gas emission reduction guidelines.

Voluntary offset programs, like those run by independent NGOs, are used most by companies who genuinely want to achieve carbon neutrality or care about the environment. Though some greenwashing companies might also voluntarily buy into voluntary offset programs.

If you’re looking into carbon offsetting, your best choice is voluntary offset programs that offer you choice or show which projects they’re offering.

Some of these types of programs like Paying.Green are transparent about the projects they support and will include reports.

How much does it cost to offset 1 ton of carbon?

According to an article on S&P Global, the cost of offsetting 1 ton of carbon can vary between different programs and countries, from as much as “a few cents per metric ton of CO2 emissions to $15/mtCO2e or even $20/mtCO2e for afforestation or reforestation projects to $100 or even $300/mtCO2e for tech-based removal projects such as CCS”.

The California Compliance Offset Program covers the United States and costs, as of January 2022 auctions, approximately $28.26 per ton for each allowance.

An allowance is an emissions permit issued by the government as part of their cap-and-trade regulatory program.

The Regional Greenhouse Gas Initiative covers the northeast United States. Their allowance auctions have a minimum reserve price of $2.44 per CO2 allowance in 2022, with trigger prices set between $6.42-$13.91 per CO2 allowance.

The Gold Standard is an international voluntary offset program where you can select the projects you want to support. Some projects cost $10 per ton of carbon emissions while others are as much as $47 per ton.

Another great international voluntary offset program is Paying.Green’s Carbon Easy, a subscription-based carbon offsetting program for companies.

They offer packages based on how many employees you have, with the smallest package costing $50/month and the largest $950/month for up to 250 employees.

Frequently asked questions about carbon offsets

Carbon offset programs are not effective at reducing carbon emissions alone. They should be used to make up for carbon emissions that can’t be eliminated in addition to science-based targets for reducing carbon emissions and other sustainability policies.

Always make sure to support projects that are verified by third-party certification bodies to ensure they’re upheld to standards and monitored. If they aren’t, you may be getting scammed. Transparency is one of the most important aspects of carbon offsetting, so always look for what information the program gives.

Carbon offsets last as long as you commit to the program. Because carbon offsetting is measured in metric tons of carbon emission equivalent, the amount of offsetting your business requires will vary year after year.

While carbon offsetting itself doesn’t expire, carbon offset certificates and credits do expire after a few years. There’s a tricky market involving carbon trading which handles this, but you’re best off directly contributing to a carbon offsetting program or subscription which handles everything for you.

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