What are Carbon Offsets?
Global warming is a subject that has elicited heated and endless debates. It is one of the biggest threat facing humans right now. Some thought global warming was a hoax manufactured by some leaders to prevent further extraction and use of fossil fuels. However, the effects have become apparent today, including changing weather patterns, leading to massive crop failures, occurrence of more killer storms, rising sea levels that threaten to submerge many islands and displace millions of people, widespread extinction of plant and animal species and disappearance of coral reefs. The major contributor to global warming is burning of fossil fuels, which emit vast amounts of greenhouse gasses. Examples of greenhouse gasses include Carbon dioxide, methane, nitrous oxide and fluorinated gasses such as perfluorocarbons, nitrogen trifluoride, sulfur hexafluoride and hydrofluorocarbons.
For life to be sustained on planet earth, the right balance of carbon dioxide must be maintained in the atmosphere. This is achieved by neutralizing the excess carbon dioxide disseminated into the atmosphere through human activities such as burning fossil fuels, driving automobiles, using home appliances, and heating and cooling homes. However, no matter the level of commitment we put, it’s almost impossible to dodge all emissions that contribute to our carbon footprint. This is where carbon offsets come in.
Carbon offsets are programs designed to counterbalance or green our unavoidable footprint by buying carbon credits from carbon credits trading exchange companies. Simply stated, carbon offsets are credits for greenhouse gas cutbacks garnered by one individual or entity that are able to be purchased and utilized to offset(compensate) the emissions contributed by another individual or entity. Carbon offsets are normally measured in tons of CO2-equivalents, commonly abbreviated as CO2e. A single carbon offset resembles a decrease of one metric ton of carbon dioxide. They are purchased and sold through traditional platforms, international brokers and online retailers.
In other words, carbon offset is nothing but investing in projects that reduce or avoid CO2 emissions or greenhouse gases to reduce their carbon footprint in a bid to save the world from drastic climate changes. Carbon offsetting is a kind of damage control. In order to compensate for the deadly carbon emissions, individuals or businesses purchase carbon offsets which means the emissions of Carbon-dioxide and the other harmful greenhouse gases are controlled and reduced elsewhere. You can calculate your carbon footprint here.
Carbon Offsetting projects are aimed at reducing the carbon dioxide or greenhouse gases (GHG) emitted in the atmosphere. The results of these projects may be immediate or long term depending on the nature of the project. Let us take unconventional sources of energy or for that matter renewable sources. When we look at the investments in wind farms or hydro-power plants installed at dams they are nothing but investments to reduce carbon emissions via carbon offsetting. More examples of carbon offsetting would include afforestation, solar energy models, disposal of industrial and agricultural by products etc.
- How do Carbon Offsets Work?
- Pros of Carbon Offsetting
- Sends a clear statement of intent
- Makes old businesses relevant in the modern day
- Aids rapid expansion of renewable energy technologies
- Quantifies the actual damage done by greenhouse gas emissions
- Helps identify hot spots in the supply chain
- Enables business owners to learn more about their own company
- Helps business owners spend their money wisely
- Cons of Carbon Offsetting
- Let us take a look at various Carbon offset projects.
How do Carbon Offsets Work?
In a layman’s language, carbon offsets are aimed at minimizing greenhouse gas emissions in order to compensate excess greenhouse gas emissions generated somewhere else. Carbon offsets operate in two major ways; the compliance or cap-and-trade market and voluntary market.
In the compliance market, a government agency puts a cap on greenhouse gas emissions for specific entities. Entities are required by law to strictly abide by the greenhouse gas limit. They accomplish this by cutting back emissions from their own operations. They can realize these emission cutbacks by adding accessories to their facilities that increase efficiency, while minimizing emissions, or replacing their old vehicles with new generation, cleaner-burning automobiles. If an entity manages to cut back on its emissions below the requirement level required by law, it is allowed to sell credits for these additional cutbacks to other entities that have difficulties minimizing their emissions in order for them to comply with minimum emission requirement.
The voluntary market, on the other hand, lets any person or entity balance out their carbon emission by bankrolling projects that spearhead campaigns geared towards reducing greenhouse gas emissions. Carbon offset projects may confine and store these gasses, preventing any release into the atmosphere. Carbon offset projects may include planting and maintaining forests, or investing in renewable energy resources such as solar wind and geothermal, alleviating the need to generate power using fossil fuels that mightily contribute to emissions. A carbon offset project may also include destroying greenhouse gasses already in the atmosphere by capturing and neutralizing methane gas in landfills.
Pros of Carbon Offsetting
Governments alone cannot comprehensively deal with the climate change crisis. The only surefire way is to coordinate with the private sector, investors and businesses through the carbon offsetting scheme. With that in mind, let’s look at the pros of carbon offsetting in detail:
Sends a clear statement of intent
Carbon offsetting gives a solid statement and credibility in the efforts to minimize greenhouse gas emissions. It’s practical as it goes beyond the usual talk and target setting associated with policy making. This is pretty evident by the number of businesses and individuals flocking this demographic to ensure a clean and safer world.
Makes old businesses relevant in the modern day
Most governments are taking steps to limit businesses and companies that contribute a lot to the emission of greenhouse gasses. Carbon offsetting will save most old businesses from closure. How? Well, carbon offsetting programs require that businesses that emit more greenhouse gasses than the minimum set limit add accessories or fine tune their operations to achieve higher efficiency, while at the same time reducing emissions. This will greatly help to reduce greenhouse gas emissions now and in the future.
Aids rapid expansion of renewable energy technologies
With respect to how carbon offsetting works, the voluntary market allows individuals or entities to balance out their carbon footprint by funding projects aimed at reducing emission of greenhouse gasses. These projects include installation of solar panels, wind turbines and setting up geothermal energy systems and plants. This funding will help drive up the pace of renewable energy development.
Quantifies the actual damage done by greenhouse gas emissions
Paying for carbon offsets can quantify the real cost of damage done to the environment by greenhouse gasses. Governments and other institutions can use this data to formulate accurate budgets around carbon neutrality.
Helps identify hot spots in the supply chain
Carbon offsetting requirements will push business to invest a lot on inspection programs in order to identify hot spots (areas that mightily contribute to greenhouse gas emissions), allowing maintenance and sealing off of those hot spots. This saves the business a lot of money to buy carbon credits when it emits more greenhouse gasses than the minimum requirement by law.
Enables business owners to learn more about their own company
Carbon offsetting allows the owner to get to grips with the company’s carbon footprint. The carbon footprint is measured to determine the actual figures and measures are taken to reduce them before any offsetting is initiated. The owner also gets the opportunity to engage with offset project developers and learn the ins and outs of carbon emission and reduction.
Helps business owners spend their money wisely
As you engage in carbon offsetting, you’ll be faced with challenges relating to how you spend your budget. Carbon offsetting will help you determine if it’s worth spending your money on paying for carbon offsets or plow it into the business to reduce carbon emissions internally. The bottom-line is: they all knit together as it’s virtually impossible to reduce your emissions completely.
Cons of Carbon Offsetting
Investment in cleaner and carbon-free processes could be overlooked
Buying carbon credits could be leveraged as a means to dodge the need to minimize emissions by simply purchasing credits with zero investment in clean, renewable energy.
It’s a sophisticated scheme
Carbon offsetting is a complicated process. First, you need to get individuals and entities on board and get them to pledge their commitment to reducing carbon emissions. Then, there is the logistics involved in buying the carbon credits, which may require third party involvement. Payout systems are also complicated. On top of that, the fact that it involves invisible commodities, the chance of being gamed is high.
The main beneficiaries of carbon offset schemes are the traders, NGOs, and lawyers. Project developers don’t benefit a lot, yet they are the brains behind the project.
Complex red tape
Project developers have to go through the complex red tape to get the necessary permits. This could take months. This aspect also means that only large projects stand a chance to fund development costs.
All the carbon offset projects should be:
Real: These carbon offset projects should not displace emissions elsewhere.
Permanent: They should aim at reducing or avoiding emissions permanently
Verifiable: The emissions that are reduced by these projects should be verifiable by third party to ensure that emissions have actually been reduced.
There are two levels at which carbon offsetting is conducted. Let us begin by understanding the large scale compliance market. In the large scale compliance market, the participants are national governments, corporate companies, non-governmental organizations, international organizations etc. They invest carbon offsets as a part of their social responsibility as well as to keep a tab on the total permissible amount of green house gas emissions. The need to invest in the same is also in order to adhere with the several guidelines that they are expected to follow like under the Kyoto Protocol Annex 1 parties. One can usually see a corporate company invest in wind farms or an energy efficiency model as their choice of a carbon offset project.
As per the Carbon offsets daily’s observation in their 2008 piece ‘Brands and carbon offsets‘, in this smaller market also called the voluntary market, approximately $705 million carbon offsets were sold. When calculated this amounts to approximately 123.4 million metric tons of carbon reductions. This level for carbon offsetting exists at a much smaller level as compared to the first. However it is an integral part. Herein individuals or companies etc invest in employing carbon offsets to battle greenhouse gases on a more smaller and personal level. They try to control and curb the emissions from the greenhouse gases emitted while using modes of transport, electricity, combustion of fuels on a domestic level among other smaller chores.
The measurement scale of carbon offsets is metric tons of carbon dioxide-equivalents abbreviated as CO2e. These include the major greenhouse gases viz. carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), perfluorocarbons (PFCs), hydrofluorocarbons (HFCs), and sulfur hexafluoride(SF6). So when we say one carbon offset, we are referring to the reduction of one metric ton of either carbon dioxide or any of the green house gases in the same measure.
Let us take a look at various Carbon offset projects.
Renewable energy offsets usually include solar, wind and hydro energy projects. Bio fuel can also be considered under renewable energy.
Methane collection and combustion is the next type of carbon offsetting project. This includes the collection and combustion of methane generated by anaerobic sources, industrial waste and the methane generated from landfills.
Land use and forestry, look to create natural carbon sinks in forests and using the soil. The sub projects in these include reforestation which means restoring a forest where it previously existed, afforestation which means creating a new forest space and no deforestation.
Carbon offsetting in energy efficiency projects include co generation plants. Co generation plants create electricity and heat from a singular power source. This betters energy efficiency of most power plants, which otherwise usually waste the generated heat energy.
Under Fuel efficiency projects a combustion device is replaced by one utilizing less fuel per unit of provided energy. This is believing that the energy demand does not change.
Energy-efficient buildings help control the energy wasted in buildings. They employ efficient heating, cooling and/or lighting systems. A good example of the same would be the the replacement of light bulbs with fluorescent lamps. This can curb energy consumption to a great extent.
There are several controversies related to carbon offsetting, however it is seen as a worthy eradication to the harm done.
Image credit: pixabay
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