Carbon offsetting is a reduction of emissions of carbon dioxide (CO2) or other greenhouses gases (GHG) made in order to compensate for emissions made elsewhere (e.g. embodied carbon or operational carbon, for these definitions see our knowledge centre webpage on net-zero carbon).
Offsetting can occur through a variety of different processes and it should only be seen as a “last resort” employed by companies to “negate” the carbon emissions that are either impossible or too costly to remove. Offsets can be broken down into three main categories:
The “reduction” actions address the core issue of climate change and provide long-term cost cutting opportunities. Let’s analyse some of the pros and cons of the other two measures then.
Carbon Credits. These are purchased by organisations as a way of passing off excess emissions to other organisations that dedicated to tackling climate change. Usually we’re talking about Certified Emissions Reductions (compliance offsets that are verified under the rules of the Kyoto Protocol) and voluntary Verified Emissions Reductions (offsets exchanged in over-the-counter market that has been verified outside of the Kyoto Protocol, such as the Gold Standard Verified Emissions Reduction (GS VER) launched by WWF-UK in May 2006 as a simplified version of the CDM Golds Standard.
Reducing emissions from deforestation and forest degradation (REDD). This scheme allows companies to purchase offsets that combats deforestation by protecting existing forests. REDD schemes help forest owners calculate the carbon value of their forests, according to predefined criteria and sets out a system of rules by which forest owners can be compensated for avoiding deforestation.
DIY Offsets. These are unofficial projects that have a good chance of cutting GHG emissions ,such as supporting political or educational programs that contribute to the reduction of carbon emissions. They avoid the inefficiencies of official offsetting, however they cannot be clearly displayed by investors, as they don’t lead to official certification, and are often viewed as lesser, as they don’t promise to cut a quantifiable amount of emissions.