Carbon Offset

Carbon Offset

Subject: Environment

Section: Climate change

Context: Offsets have come under fire as a way for companies to compensate for carbon emissions through eco projects elsewhere.

How does offsetting work?

• Buying offsets is a way to “compensate” for environmental damage. Companies make a financial contribution to projects that reduce the amount of carbon dioxide in the atmosphere, and in exchange can keep polluting themselves.
  • Examples of projects include planting trees and rewetting peatlands — which store huge amounts of carbon in their soil.
• In recent years, the carbon offset industry has boomed. It is worth $2 billion (€1.87 billion) annually and is expected to grow five times that size by the end of the decade.
• After the concept’s invention in 1987, some international treaties such as the Kyoto protocol have let industrialized countries use carbon credits, each of which is worth one ton of carbon, to keep within emissions limits. That market –— where carbon credits are traded to meet government regulations — is much bigger, about $261 billion a year.

Offsetting in practice

• Offset projects can be broadly split into two categories: removals and avoidances.
• Removal describes actions which actively take carbon out of the air and store it permanently, such as by planting trees or direct air capture — which is not a technology available at scale. Currently carbon dioxide removal represents just a small percentage of the carbon credits in circulation.
• Avoidance offsets are from projects that stop the release of greenhouse gases, such as protecting trees from being logged.

Problems with Carbon offsetting:

• Additionality: Additionality refers to the idea that carbon offset projects should only be considered legitimate if they result in reductions in greenhouse gas emissions that would not have occurred in the absence of the project. However, it is difficult to determine whether a project is truly additional and whether the emissions reductions would have occurred anyway without the offset project.
• Permanence: Carbon offsetting projects such as reforestation, afforestation, or carbon sequestration can be reversed if the trees are cut down, wildfires occur, or soil carbon is released. This means that carbon offsetting is not a permanent solution and cannot guarantee long-term emissions reductions.
• Leakage: Leakage refers to the situation where emissions are shifted from one location to another as a result of a carbon offsetting project. For example, a forestry project may lead to deforestation in another area, or a renewable energy project may lead to higher emissions from other energy sources due to increased demand.
• Verification: There is a lack of standardized and transparent verification mechanisms for carbon offsetting projects. It is difficult to ensure that the projects are genuinely reducing emissions and that the credits generated are not being double-counted or sold more than once.
• Ethical concerns: There are concerns about the ethics of carbon offsetting, particularly when it comes to projects that involve land acquisition or that may have negative impacts on local communities or biodiversity.