January 10, 2023

Carbon offsets? What it is?

What are carbon offsets?

The main idea behind a carbon offset is that it can replace the greenhouse gas emission reductions that an organization would have made on its own.

An offset is a credential that a person or organization can buy to reduce its carbon footprint. When the number of carbon credits obtained is equal to a person’s or organization’s carbon footprint, that person or organization is carbon neutral. The income generated from the purchase of carbon credits is often – but not always – invested in environmentally friendly projects, such as investments in green computer technology.

More generally, carbon offsetting is any reduction in greenhouse gas (GHG) emissions to offset emissions occurring elsewhere. Carbon offset credits demonstrate that an organization or individual has reduced its emissions. The term carbon offset is used to describe both the credit and the act of offsetting emissions.

A carbon offset credit is equivalent to reducing emissions by 1 metric ton of carbon dioxide. The goal of a carbon offset is to reduce all or part of the carbon footprint.

Offset credits are used to offset carbon emissions generated by a company, helping to reduce its carbon footprint to net zero.

Offset units are generated from projects that reduce, remove or capture CO2 emissions from the atmosphere, such as energy efficiency, renewable energy and reforestation.

Carbon offsets finance projects that reduce emissions elsewhere, such as by planting trees or generating renewable energy. Companies that purchase offsets contribute to these projects. Once purchased, a carbon offset is forever retired and cannot be sold again.

How do you use carbon offsets?

In order to use carbon offsets, one must first calculate how many metric tons of carbon dioxide are produced by a specific economic activity.

Responsible use of offset credits first requires a solid plan to reduce one’s own greenhouse gas emissions. Simply buying credits instead of taking more direct and aggressive action – for example, flying less or investing in improving the energy efficiency of one’s buildings, equipment and vehicles – is not defensible, given the strong need for firm action in all areas of human activity.

Responsible use also requires taking the time to understand and seek quality credits. Carbon offset programs provide the necessary level of assurance of the quality of the credits they issue; you should avoid offsets that have not been certified by a recognized program. But whether this guarantee is sufficient is another matter. Quality exists on a continuum that determines the level of confidence in the additionality of an offset project (first and foremost), as well as its quantification, sustainability, exclusive right to reduce emissions, and avoidance of social and environmental damage. The granting of an offset credit means – or should mean – that the project meets a minimum quality threshold. However, offset programs do not have a flawless track record. Meeting the minimum threshold should not be equated with high certainty of environmental integrity. It is important to understand the projects you are buying from, ask questions about key criteria (e.g., whether the project has other sources of revenue), and stick to the types of projects that are more likely to meet the basic quality requirements (as indicated in Sticking to lower-risk project types)

What characterizes a high-quality offset

  • No double counting: The project operates only in the voluntary carbon market and cannot be counted in compliance markets.
  • Additionality: The project would not have been implemented or sustained without carbon funding.
  • Scientific methodology: Scientists are on site to make sure the project is done right. For example, reforestation projects should plant native trees and have a diversity of trees planted. Also, emission reductions should be calculated based on scientifically proven methodologies.
  • Risk assessment and risk buffer: A risk assessment is part of the project documentation and must assess all potential risks during the project period and beyond. For example, will climate change cause wildfires or could political instability make it impossible to monitor the project in the future? In the case of high risk, the standard will not approve the project. In the case of low risk, the project will have to set aside some of the emission reduction credits anyway, so they won’t be sold as a risk buffer.
  • Sustainability: How long will carbon dioxide removal last per offset? This takes into account issues such as land ownership, natural disaster risk, etc.
  • No negative impacts: The project does not and will not have a negative impact on the local environment or community. Nature-based projects must also prove that the project complies with the Climate, Community, and Biodiversity Standards (CCBS).
  • Minimize leakage: Project implementation will not cause emissions-causing activities to “leak out” or move elsewhere. For example, a forest conservation project leading to deforestation in another area.
  • Baseline and annual monitoring: The project should be monitored annually to verify emission reductions compared to the baseline. The baseline is an estimate of how much carbon would have been removed if the project had not been implemented.
  • Third-party verification: Initial implementation and follow-up monitoring are verified by independent third parties.
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