Carbon Offsets Types - Impact - Mechanism

A carbon offset is a reduction in emissions of carbon dioxide or greenhouse gases made in order to compensate for or to offset an emission made elsewhere.

Offsets are typically achieved through financial support of projects that reduce the emission of greenhouse gases in the short- or long-term. The most common project type is renewable energy, such as wind farms, biomass energy, or hydroelectric dams. Others include energy efficiency projects, the destruction of industrial pollutants or agricultural byproducts, destruction of landfill methane, and forestry projects. Some of the most popular carbon offset projects from a corporate perspective are energy efficiency and wind turbine projects. 

You buy yourself a clean conscience by paying someone else to undo the harm you are causing.

Carbon offsets are measured in metric tons of carbon dioxide-equivalent (CO2)

may represent six primary categories of greenhouse gases:

1. carbon dioxide (CO2),
2. methane (CH4),
3. nitrous oxide (N2O),
4. perfluorocarbons (PFCs),
5. hydrofluorocarbons (HFCs), and
6. sulfur hexafluoride (SF6).

 One carbon offset represents the reduction of one metric ton of carbon dioxide or its equivalent in other greenhouse gases.

Carbon Offset Market Types:

Compliance market:  Companies, governments, or other entities buy carbon offsets in order to comply with caps on the total amount of carbon dioxide they are allowed to emit. This market exists in order to achieve compliance with obligations of Annex 1 Parties under the Kyoto Protocol, and of liable entities under the EU Emission Trading Scheme.

Voluntary market:  individuals, companies, or governments purchase carbon offsets to mitigate their own greenhouse gas emissions from transportation, electricity use, and other sources. For example, an individual might purchase carbon offsets to compensate for the greenhouse gas emissions caused by personal air travel. Many companies offer carbon offsets as an up-sell during the sales process so that customers can mitigate the emissions related with their product or service purchase (such as offsetting emissions related to a vacation flight, car rental, hotel stay, consumer good, etc.)

How carbon offsets work?

Offsets are typically achieved through financial support of projects that reduce the emission of greenhouse gases in the short- or long-term. The most common project type is renewable energy, such as wind farms, biomass energy, or hydroelectric dams. Others include energy efficiency projects, the destruction of industrial pollutants or agricultural byproducts, destruction of landfill methane, and forestry projects.

Officially-backed carbon offset projects, where, under the Kyoto agreement, companies and countries can invest in emission reduction schemes in developing countries and economies in transition.

The Kyoto Protocol has sanctioned offsets as a way for governments and private companies to earn carbon credits that can be traded on a marketplace. The protocol established the Clean Development Mechanism (CDM), which validates and measures projects to ensure they produce authentic benefits and are genuinely "additional" activities that would not otherwise have been undertaken. Organizations that are unable to meet their emissions quota can offset their emissions by buying CDM-approved Certified Emissions Reductions.