A carbon offset is a name given to a carbon credit when it is retired by an organization to make the claim that it is compensating for its greenhouse gas (GHG) emissions.
A carbon credit represents one metric ton of carbon dioxide (CO2 ) avoided or removed from Earth’s atmosphere. This is where the term “carbon” in “carbon offsetting” comes from. It can also represent an equivalent amount of another GHG, measured in carbon dioxide equivalent (CO2e).
Importantly, a carbon credit is not necessarily a carbon offset. It is a tradeable unit that only becomes a carbon offset through the practice of carbon offsetting. To make a carbon offsetting claim, an organization must lay sole claim to the CO2 or CO2e avoided, reduced or removed by the carbon credit. Therefore, they must request for this tradeable unit to be retired on their behalf, meaning that the carbon credit is canceled and can never be traded again.
For carbon offsetting to be effective it must be a part of an organization’s broader climate action strategy. This must include reducing their own GHG emissions as the first step. As such, carbon offsetting cannot be used to replace GHG emission reduction activities but only to complement GHG emission reductions activities.
There are many climate action strategy frameworks. Some of these frameworks include best practice guides for the use of carbon offsetting. These guides may prescribe what type of carbon credits might be used to reach a target goal within a specific time frame. They might also include guidelines for how to clearly communicate how these carbon credits have been used in the practice of carbon offsetting.
Whether a carbon credit can validly be known as a carbon offset depends on the credibility of:
- The climate action strategy framework selected and the carbon offsetting best practices it outlines
- The claim that a specific carbon credit has reduced, avoided or removed one metric ton of CO2 or CO2e
Let’s unpack this.
What is the purpose of carbon offsetting?
The purpose of carbon offsetting is to help us collectively achieve our global climate action goals in time to avoid the worst outcomes of the climate crisis. Its purpose also includes supporting the adaptation of our societies to the harms already caused by the climate crisis and creating a better life for everyone on Earth now and in the future without depleting available resources.
We’ll now take a closer look at how carbon offsetting is designed to assist in achieving these broader climate action goals.
The climate crisis is caused by GHGs trapping heat in Earth’s atmosphere. The most common GHG released by human activities, such as burning fossil fuels or deforestation, is CO2.
The GHGs accumulating in the atmosphere impact the entire globe, though certain areas will experience more severe impacts sooner. Therefore, strategies for averting the climate crisis require globally aligned climate decisions and actions. One of the most important global decisions took place in 2015, when the parties of the United Nations Framework Convention on Climate Change (UNFCCC) agreed to “limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.” Because the conference took place in Paris, this goal is sometimes known as the Paris target.
Some impacts of the climate crisis, such as fires, droughts, flooding, fires and other extreme weather events, are being experienced now, especially in the Global South whose populations have contributed the least to the climate crisis. Therefore, taking climate action involves providing support for these communities who are experiencing the impacts of the climate crisis now and don’t have the funding necessary to adapt quickly. This vision is sometimes referred to as sustainable development and the United Nations have established specific goals aligned to this vision. These are known as the 17 Sustainable Development Goals (UN SDGs), some of which include No Poverty and Zero Hunger.
However, it is imperative that we reduce GHG emissions within a specific time frame. The 2021 Emissions Gap Report suggests that we need to “halve annual greenhouse gas emissions in the next eight years.” We must therefore act fast to reduce GHG emissions to avoid reaching environmental thresholds that, once passed, would likely result in the worst and irreversible impacts of the climate crisis coming to pass. These are sometimes referred to as tipping points and we are nearing many.
There are many activities that can be undertaken to reduce GHG emissions. Some of these include sourcing renewable energy or improving energy efficiency. However, it takes time to implement these GHG emission reduction activities, and, as we have seen, it is imperative to take climate action immediately.
Carbon offsetting allows an organization to take immediate action on the climate crisis. It is a specific, short-term climate action strategy. This strategy uses carbon credits of high environmental integrity, defined as its ability to actually reduce GHG emissions within a timeframe that will avert the worst impact of the climate crisis. It is complementary to a longer-term, more comprehensive climate action strategy aligned to global goals, such as the Paris target, that makes reducing GHG emissions rapidly and significantly a first priority.
Let’s now turn to how carbon offsetting works in practice.
How does carbon offsetting work?
Carbon offsetting works like this:
- An organization selects a climate action strategy framework and, following this framework, establishes their own short-, medium- and long-term targets. They then implement activities that reduce their GHG emissions according to this timeline.
- Some of these frameworks will allow carbon offsetting. This will involve the selection, purchase and retirement of specific types of carbon credits, to avoid, reduce or remove a metric ton of CO2 or CO2e equivalent to an organization’s GHG emissions.
We will now take a closer look at climate action strategy frameworks and carbon credits.
Climate action strategy frameworks
Climate action strategy frameworks are designed to provide guidance to organizations on how they can contribute to averting the worst impacts of the climate crisis and provide support for what has already come to pass or is all but inevitable, by aligning themselves with global climate goals, such as the below 1.5 degrees Celsius target.
Some examples are the Science Based Targets Initiative (SBTi) Corporate Net-Zero Standard and The Climate Pledge.
An option provided by some frameworks is the use of very specific kinds of carbon credits. In these cases, the framework provides carbon offsetting guidelines and best practices.
Credible climate action strategy frameworks will recommend that GHG emissions reduction must come as a first step and that carbon offsetting should only be used as a complementary strategy in parallel to GHG emissions reductions.
Therefore when looking to make a carbon offsetting claim it is essential to first select a credible climate action strategy framework.
Carbon credits are based on carbon projects, which are set up and run by carbon project owners. These owners partner with carbon project developers to get the project certified to issue carbon credits. All projects follow recognized methodologies developed or endorsed by carbon project certification bodies such as Verra or Gold Standard. An independent auditor issues these credits and the credits are then listed on the certifier’s registry.
Different types of climate action strategy frameworks will have different standards which will dictate which specific types of carbon credits the organization is allowed to use to make a carbon offsetting claim.
A commonly important distinction many carbon offsetting frameworks use is whether a carbon credit specifically represents the avoidance or the removal of CO2 or CO2e. Some carbon offsetting frameworks will favor one of these types of credits.
An example of a project that avoids GHG emissions is one that displaces fossil fuel energy with renewable energy on the grid. An example of a project that removes GHG emissions from the atmosphere is one that reforests an area because growing trees suck up CO2.
High-quality carbon projects are also designed to contribute to several UN SDGs such as improving biodiversity and health as well as reducing poverty, hunger and gender inequality.
The credibility of a carbon offset
In conclusion, the credibility of a carbon offset relies both on the particular climate action strategy framework selected as well as the specific carbon credits used to make the claim.
Importantly, the climate action strategy framework and carbon credit must each demonstrate its environmental integrity.
Here at Sylvera we assess the environmental integrity of carbon credits. We also investigate other qualities of the credits such as their impact on biodiversity and community-related UN SDGs such as gender equality. Read more about how we assess carbon credits here.