Carbon Offsets 101: Why We Can’t Offset Our Way Out of the Climate Crisis

What Are Carbon Offsets?

Carbon offsets are in theory a way to cancel out greenhouse gas emissions by funding an activity that will remove a supposedly equal amount of carbon dioxide from the atmosphere or prevent an equal amount of carbon pollution. They can be purchased by everyone from major companies pursuing net-zero emissions goals to individuals looking to compensate for high-carbon activities like flying. Typically, an institution or individual will purchase a certain amount of carbon credits, with one credit usually standing in for one metric ton of carbon dioxide — or what is typically emitted by driving 2,513 miles in a gas car — removed from the atmosphere. (That’s roughly the distance between San Francisco and Atlanta). Whoever buys the carbon credit is essentially buying the right to count the emissions reduction as theirs even if it’s being performed by a tree-planting or renewable energy project on the other side of the globe.

Carbon offsets usually come in two forms: voluntary or compliance. Voluntary offsets are those that companies or individuals chose to purchase as part of self-assigned emission reduction goals. The voluntary carbon market quadrupled in value from 2020 to the end of 2021 to reach nearly $2 billion. Compliance offsets are those that are part of legally-binding cap-and-trade arrangements. One example is the European Union Emissions Trading System, in which a cap is set on total carbon emissions and reduced over time. Individual emitters like power plants either buy or receive emission allowances that they can then trade with other plants or factories. California also has a cap-and-trade system. In most such systems, an allowance, like a credit, is equal to one metric ton of carbon dioxide or other greenhouse gas. The global compliance market covers around 30 trading systems and is worth $270 billion. The total value of carbon credits traded on the compliance market in 2021 rose 164 percent from 2020 to reach $851 billion. 

While carbon offsets have been growing in popularity as more companies announce net-zero emissions pledges, they have also faced growing criticism. Ultimately, the fact remains that in order to avoid the worst impacts of the climate crisis and limit greenhouse gas emissions to 1.5 degrees Celsius above pre-industrial levels, wealthy countries and corporations must stop spewing carbon dioxide into the atmosphere. Carbon offsets allow companies or individuals to feel better about polluting without actually doing anything about those emissions, and that assumes the offset one purchases actually corresponds to real carbon removal or pollution prevention. Author George Monbiot compared buying carbon offsets to the early modern practice of paying the church for the redemption of sins. “[T]oday you can live exactly as you please as long as you give your ducats to one of the companies selling indulgences. It is pernicious and destructive nonsense,” he wrote in The Guardian. 

Quick Facts

• One carbon credit usually equals one metric ton of carbon dioxide supposedly removed from the atmosphere, or the equivalent of driving 2,513 miles in a gas-powered car.
• The voluntary carbon market quadrupled in value between 2020 and 2021 to reach nearly $2 billion. 
• The average tree absorbs 20 pounds of carbon dioxide each year during the first 20 years of its life.
• Only four percent of carbon offset projects actively remove carbon dioxide from the atmosphere, as opposed to preventing additional emissions. 
• More than 170 climate, environmental and Indigenous rights groups signed an open letter opposing carbon offsets. 
• At least 52 percent of carbon-offset generating wind projects in India would have been built anyway.
• California’s forest carbon offsets program likely overestimated its emissions reductions by at least 80 percent. 
• A Ryanair program to offer passengers €1 carbon offsets only actually offset the company’s emissions by 0.01 percent. 
• Sixty-six percent of highly-polluting companies studied relied on carbon offsets to meet their net zero targets.
• There are only around 500 million hectares of land available for tree-planting carbon offset projects and Shell wants to claim 10 percent of it.

What Does a Carbon Offset Have to Do to Actually Work?

The voluntary and compliance carbon markets only work if every metric ton of carbon dioxide or equivalent emitted is actually being removed or forestalled through an equal and opposite action. However, ensuring this is the case is predictably difficult in a far-reaching system with many moving parts. There are four key things that any carbon offset must do if it is to be an effective tool of overall emissions reduction or even neutrality. 

Additionality: Additionality is the idea that purchasing an offset must remove carbon dioxide from the atmosphere that would not have been removed otherwise. If you pay someone to preserve forested land or replace a coal plant with wind or solar power, but they were planning on doing so anyway, then your actions have not led to additional carbon dioxide being removed from the atmosphere. You may have lent extra support to a valuable project or you may have lined the pockets of a grifter, but, in either case, you haven’t actually compensated for your own emissions. 

Permanence: Permanence is the idea that the emissions you pay to remove should stay removed. Otherwise, you are just delaying a net increase in emissions, not preventing it. For example, if you pay to plant trees or preserve a forested area, but then the trees burn in a wildfire, the carbon dioxide stored by the torched trees has now entered the atmosphere where it will contribute to the climate crisis. 

Avoid Double Counting: Double counting is what happens when carbon credits from the same project are sold to more than one buyer. If this happens, then the atmospheric balance tips towards more emissions, because two individuals or companies are emitting based on the assumption that their pollution has been canceled out by the same offset. 

Avoid Leakage: Leakage is what happens when a carbon offset project actually causes emissions to be released somewhere else. This can happen when buying an offset merely shifts where the emissions take place, i.e. if you pay one landowner not to sell their trees to loggers, but then the landowner’s neighbor sells instead. In compliance markets, leakage can occur when a polluting industry simply moves outside the borders of a cap-and-trade system. 

What Are Some Carbon Offset Strategies?

There are several types of projects that people can fund to offset their carbon dioxide emissions. Here are some of the most common.

Tree Planting / Restoring Natural Carbon Sinks: One of the most popular types of carbon offset project involves either planting trees or restoring or preserving natural carbon sinks like forests or wetlands. The average tree absorbs 22 pounds of carbon dioxide each year during the first 20 years after it is planted, so the argument is that planting more trees can absorb more carbon dioxide. Many efforts also focus on preventing forests from being cut down and releasing their emissions. One example of a large-scale forest preservation offset program is the UN’s REDD+ framework, which stands for “reduc[ing] emissions from deforestation and forest degradation, as well as the sustainable management of forests and the conservation and enhancement of forest carbon stocks,” and is a mechanism for wealthier countries to pay lower-and middle-income countries to reduce their emissions for deforestation and forest degradation. Another nature-based solution example is Delta Airlines‘ decision to fund $30 million worth of forest protection in Cambodia and Indonesia. The Cambodia project has also secured land tenure rights for the Indigenous Bunong people.

Destroying Atmosphere-Heating Gases From Industrial Production: Another way to generate carbon offsets is to directly remove greenhouse gases from a certain industrial or agricultural process. This could mean destroying potent greenhouse gases like hydrofluorocarbons or nitrous oxide that are the waste products of processes like the manufacturing of nitric acid or removing methane directly from a factory farm. For example, the voluntary carbon market has been used to fund the removal and destruction of old chlorofluorocarbon canisters found in Ghana. 

Supporting Renewable Energy Projects: Emissions are also offset by funding renewable energy projects, but this is tricky because the installation must actually replace a fossil-fuel based one. One project from offset nonprofit Cool Effect provides cheap solar energy to rural households in India so that they do not need to burn kerosene for light. Public benefit corporation Native uses offsets to fund several renewable energy projects including 108 wind turbines in South Dakota that replace fossil-fuel-based electricity from the grid to the tune of keeping more than 430,000 metric tonnes of carbon dioxide out of the atmosphere every year.

Removing C02 From the Atmosphere: An emerging type of carbon offset is to directly remove carbon dioxide from the atmosphere using carbon capture technology. For example, Bill Gates has invested in both the Canadian company Carbon Engineering that offers offsets for directly removing carbon dioxide from the air and the Icelandic company CarbFix that transforms carbon dioxide into rocks and stores it underground. Currently, only four percent of offset projects actually remove carbon dioxide from the atmosphere as opposed to avoiding emissions from activities like cutting down trees.

What’s the Problem With Carbon Offsets? 

Carbon offsets sound reasonable on paper, but increasingly environmentalists are criticizing the practice for distracting from reducing emissions at best and being an outright scam at worst. Greenpeace, for example, has called offsets “the next big thing in greenwashing.” More than 170 climate advocacy groups wrote an open letter opposing offsets in 2021. So what’s wrong with carbon offsets? 

They’re a Scam: One of the main criticisms of carbon offsets is that many projects don’t really do what they say they are going to do, namely, prevent additional emissions. A major ProPublica report published in 2019 reviewed 20 years of forest-preservation-based offset projects and found that “In case after case […] carbon credits hadn’t offset the amount of pollution they were supposed to, or they had brought gains that were quickly reversed or that couldn’t be accurately measured to begin with.” A 2021 study of wind farms in India found that at least 52 percent of the projects used to back offsets would have been constructed regardless and that therefore the selling of the offsets to polluting industries actually increased emissions. Two studies of California’s forest carbon offsets program found that it overestimated its emissions reductions by at least 80 percent. The dubious nature of many carbon-offset projects leads to charges of greenwashing, because fossil fuel or airline companies can use their purchasing of offsets to market themselves as being more sustainable than they really are. For example, a Ryanair program to charge its customers €1 to offset their flight only lowered the company’s emissions by 0.01 percent.

There are third-party entities known as carbon registries that are supposed to vouch for the legitimacy of offset projects, but these are themselves under-regulated. For example, J.P. Morgan claimed to have reached net-zero emissions by 2020, in part by buying $1 million worth of offsets to protect a forested area in Pennsylvania called the Hawk Mountain Preserve. As the woodland’s name would suggest, however, it was never actually in danger of being cut down so did not meet the criteria of additionality. However, the offset was still verified by the American Carbon Registry. To show how easy the registry system is to game, Last Week Tonight host John Oliver even established his own registry called Oliver’s Offsets in which he sold offsets to his audience to prevent him from cutting down trees planted in his studio.  

They’re a Distraction From Reducing Emissions: Even if every carbon offset project worked exactly as advertised, however, it wouldn’t be an effective tool for fighting climate change. That’s because the climate crisis is caused by pumping greenhouse gas emissions into the atmosphere and will only be halted if emissions actually stop as well. Yet a 2021 study looking at net-zero pledges from the sectors responsible for 64 percent of greenhouse gas emissions found that 66 percent of them relied on carbon offsets. Oil, gas and mining companies were especially dependent on offsets for their net zero plans. 

However, it’s simply not possible to offset away the climate crisis and continue to burn fossil fuels as usual. For one thing, emissions from fossil fuels linger in the atmosphere for hundreds to thousands of years, while a tree or other nature-based solution may release its sequestered emissions again within decades. In some instances, forests preserved as part of offset programs have actually burned down in wildfires. Further, it would take more land than exists to plant enough trees to compensate for existing emissions. One report found that only around 500 million hectares of land on Earth is available to plant new forests to offset greenhouse gas emissions and Shell has already pledged to plant on 10 percent of that land. Another study found that planting trees on all available land would only offset around 10 years of emissions. 

They Can Displace Indigenous People: If powerful companies like Shell want land to generate carbon offsets, it’s easy to see how they would have the ability to run roughshod over the rights and needs of people who might already be there. There have been several instances of offsetting programs actually displacing Indigenous people or local communities, despite the fact that Indigenous communities tend to be the best protectors of forest and caretakers of biodiversity. For example, thousands of people in Uganda were displaced to make way for a Green Resources tree plantation. Yet monoculture plantations are typically as or less effective at storing carbon than natural forests while also being worse for biodiversity. Further, three Indigenous people in Honduras were actually murdered in 2015 for opposing a dam that had been funded as a renewable offset project. 

Indigenous groups like the Indigenous Environmental Network are vocally opposed to carbon offsets and protested them at the COP26 climate conference in Glasgow in November of 2021. Indigeneous Environmental Network executive director Tom Goldtooth called offsets “a new form of colonialism.” “In our traditional knowledge we know that we cannot own the sky, we cannot trade Mother Earth in a market system,” he said. From a climate justice perspective, there’s also a concern that offsets allow wealthy countries to continue to pollute while shifting the burden of preserving forests or developing renewable energy to developing countries. 

What’s the Relationship Between Carbon Offsets and Net Zero?

A goal of reaching net-zero emissions means not that absolute emissions will be zero but that any excess emissions will then be removed to reach a balance of zero. Because of this, Vox called carbon offsets the “net” in net zero, and they form a part of many corporate net-zero commitments. Because of the association between net-zero and offsets, some climate advocates have called for the end of the net-zero goal altogether. Greenpeace, for example, wants it replaced with a Real Zero goal.

Others are pushing to divorce offsets from the net zero goal. The UN-backed Science-Based Targets initiative, which gives a stamp of approval for corporate net-zero plans in line with the Paris agreement, only accepts plans that reach net-zero through direct action in the company’s one supply chain and only accepts offsets as additional action beyond the company’s net-zero goal. Companies need to directly reduce 90 to 95 percent of their emissions before 2050 and then can turn to “high-quality carbon removals” for the remaining five to 10 percent. So far, more than 1,800 companies have set Science-Based Targets. The UK-based Climate Change Committee also found that offsets as they are currently applied are actually harming net-zero goals because businesses rely on them over actually reducing emissions and the offsets don’t necessarily work as advertised. 

Are There Any Valid Arguments in Favor of Carbon Offsets?

Several climate and environmental groups do argue that carbon offsets can have a role to play in reducing emissions worldwide if they are better regulated. The Climate Change Committee, for example, did not call for the abolition of voluntary carbon markets but instead for a great emphasis on reducing internal emissions first and better oversight for offset projects. The Natural Resources Defense Council argued that it’s better on an individual level to buy high-quality offsets than not if you are going to fly, for example, but better still to focus on reducing your emissions on a daily basis. University of California Davis economics professor James Bushnell told Vox that offset projects could still build momentum for nature-based solutions and renewable energy even if the system doesn’t work perfectly. 

Takeaway

What everyone in the climate space can agree on is that the emphasis needs to move away from purchasing offsets and towards actually reducing fossil fuel emissions. At their best, offsets could be a stop-gap measure to fund beneficial projects and counteract emissions that there is not yet a technologically feasible way to reduce directly. At their worst, carbon offsets risk giving polluters an easy way to greenwash their image while continuing business as usual, actually increasing emissions through miscounting and reproducing the injustices underlying the climate crisis. Given that the current system tips more towards the latter than the former, it’s important for governments, companies and individuals to focus on not putting greenhouse gas emissions in the atmosphere in the first place. 

Correction: A previous version of this article inaccurately stated that there were 500 hectares of space left for tree planting. It is 500 million hectares. The article has been updated to reflect the accurate figure.