Carbon offsets or carbon credits are mechanisms by which greenhouse gas emissions by individuals and/or companies, or even countries, can be “offset” against activities that reduce emissions.
Carbon offsets are measured in metric tons of carbon dioxide-equivalent (CO2e) and may represent six primary categories of greenhouse gases. One carbon offset represents the reduction of one metric ton of carbon dioxide or its equivalent in other greenhouse gases.
The concept revolves around buying an “offset” in the form of a certificate or credit, which is associated with activity that is linked to tangible carbon emission reductions.
A wide variety of offset methods are in use. Examples include:
- Energy efficiency projects to reduce the consumption of power and fossil fuels.
- Renewable energy projects such as wind power, solar power and methane capture to produce zero emissions energy. Carbon credits based on the installation of new clean renewable energy generation can be linked directly to carbon emission reductions
- The establishment of tree plantations, noting that these credits do not have a guaranteed or direct link to carbon emission reductions.
Types of carbon offsets
Compliance markets for carbon offsets
Carbon offsets are part of large compliance markets such as the proposed Australian Carbon Pollution Reduction Scheme, in which 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.
Compliance markets can also allow the purchase and withdrawal of emissions trading credits, which can create a connection between the voluntary and regulated carbon markets where they exist.
Voluntary carbon offsets
Smaller voluntary markets are also in existence. These provide individuals, companies, or governments with the opportunity to 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.
Carbon credits, also know as carbon offsets are used to mitigate (“offset”) greenhouse gas emissions. An example is the purchase of carbon offsets to compensate for the greenhouse gas emissions caused by personal air travel. A wide variety of offset methods are in use. While tree planting was initially a mainstay of carbon offsetting, renewable energy, energy conservation and methane capture offsets have become popular.
Australian Government National Carbon Offset Program
The Australian government is currently in a consultation period on the regulation of Carbon Offsets. The standard will provide guidance on what constitutes a genuine, additional voluntary offset credit, set requirements for the verification and retirement of such credits, and provide principles for calculating the emissions of an organisation, product or service which could be offset.
Carbon offsets and the Kyoto Protocol
The Kyoto Protocol has sanctioned offsets as a way for governments and private companies to earn carbon credits which 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. Organisations that are unable to meet their emissions quota can offset their emissions by buying CDM-approved Certified Emissions Reductions.
Protecting native forests from logging across the globe would be an effective means of avoiding greenhouse gas emissions, although this is not currently classified as an offset under the Kyoto Protocol.
Criticisms of carbon offsets
Emission reductions from some offsets may not be guaranteed. For example, tree plantations could be burnt in a bushfire, resulting in their carbon stores being released to the atmosphere. Carbon credits based on tree plantations do not have a guaranteed or direct link to carbon emission reductions.
There is no single (or mandatory) accreditation for suppliers of carbon credits. Not all suppliers are accredited.
International carbon offset mechanisms do not take into account all factors associated with emission reductions and can produce perverse outcomes. For example, under the Kyoto Protocol, emission reductions are associated with avoiding land clearing, but do not count the emissions associated with the destruction of native forests. This is leading to the perverse practice of destroying carbon-rich native forests and replacing them with monoculture tree plantations to provide carbon offsets.
Carbon offsets can also be used by countries and individuals to avoid making tangible emission reductions associated with their economies and lifestyles respectively, and meet obligations that are imposed on them.
Many voluntary carbon offset schemes are also often not subject to stringent regulations.
Buying carbon offsets to alleviate the damage done to the environment by fossil-fuel-driven cars, air travel and electric appliances is not regarded as a sustainable long-term strategy.
Some companies claim to be “carbon neutral” through purchasing carbon credits.
However, such claims should take into account the following points:
- There are no mandatory standards for what carbon neutrality actually entails. As a result, claims by companies that they are carbon neutral might be meaningless and misleading.
- Many activities are overlooked when companies calculate their carbon emissions. Businesses, for example, can start by calculating their direct operational emissions from electricity, gas and transport use. However, many fail to do an audit calculating emissions from other sources such as paper, waste generated and outsourced activities.
- Australian Government National Carbon Offset Australian Government, 9 February 2009