A “carbon offset” is an emission reduction credit from another organization’s project that results in less carbon dioxide or other greenhouse gases in the atmosphere than would otherwise occur. 
Carbon offsets are typically measured in tons of CO2-equivalents (or 'CO2e') and are bought and sold through a number of international brokers, online retailers, and trading platforms.
For example, wind energy companies often sell carbon offsets. The wind energy company benefits because the carbon offsets it sells make such projects more economically viable. The buyers of the offsets benefit because they can claim that their purchase resulted in new non-polluting energy, which they can use to mitigate their own greenhouse gas emissions. The buyers may also save money as it may be less expensive for them to purchase offsets than to eliminate their own emissions.
Many types of activities can generate carbon offsets. Renewable energy such as the wind farm example above, or installations of solar, small hydro, geothermal, and biomass energy can all create carbon offsets by displacing fossil fuels. Other types of offsets available for sale on the market include those resulting from energy efficiency projects, methane capture from landfills or livestock, destruction of potent greenhouse gases such as halocarbons, and carbon sequestration projects (such as reforestation) that absorb carbon dioxide from the atmosphere.
Why some carbon offsets are better than others
As with any purchase, buyers need to choose their offsets carefully. For example, although quite popular, selling offsets from tree planting projects is particularly problematic for a number of reasons, including their lack of permanence and the fact that these projects do not address our dependence on fossil fuels.
Similarly, offset projects involving the destruction of halocarbon gases such as HFC-23 have sustained numerous criticisms, including the fact that they actually result in a perverse incentive (due to the sheer volume of offsets - and profits - that they generate) for more of the ozone-depleting gas to be created. The price of offsets from these projects is also so low (due to the very high global warming potential of the gas) that they tend to flood the market and squeeze out more sustainable offset projects, like solar and wind.
Another important issue to consider when purchasing offsets is 'additionality'. An offset project is considered additional if it isn't business as usual. Typically this means that the project wouldn't have happened without the extra funding from the sale of offsets. Additionality is extremely important, as the entire concept of offsetting - i.e. purchasing greenhouse gas reduction credits from a project elsewhere to neutralize one's own emissions - is based on the premise that those reductions wouldn't have happened otherwise. Only by buying offsets that have met additionality criteria can you be assured that your purchase is resulting in a net benefit for the climate.
Clean Air Cool Planet has published a Consumer's Guide to Carbon Offsets for Carbon Neutrality that lists some some questions that potential buyers can ask of offset vendors:
- Do your offsets result from specific projects?
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Do you use an objective standard to ensure the additionality and quality of the offsets you sell?
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How do you demonstrate that the projects in your portfolio would not have happened without the greenhouse gas offset market?
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Have your offsets been validated against a third-party standard by a credible source?
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Do you sell offsets that will actually accrue in the future? If so, how long into the future, and can you explain why you need to 'forward sell' the offsets?
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Can you demonstrate that your offsets are not sold to multiple buyers?
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What are you doing to educate your buyers about climate change and the need for climate change policy?
The Gold Standard for carbon offsets
Because of the above concerns, an international standard for carbon offsets was developed to differentiate high quality offsets. Known as The Gold Standard, it ensures that key environmental criteria have been met by offset projects that carry its label. Significantly, only offsets from energy efficiency and renewable energy projects qualify for the Gold Standard, as these projects encourage a shift away from fossil fuel use and carry inherently low environmental risks. Tree planting projects are explicitly excluded by The Gold Standard.
Gold Standard projects must meet very high additionality criteria to ensure that they contribute to the adoption of additional sustainable energy projects, rather than simply funding existing projects. The Gold Standard also includes social indicators to ensure the offset project contributes to sustainable development goals in the country where the project is based.
Finally, all Gold Standard projects have been independently verified by a third party to ensure integrity.
For a list of Gold Standard vendors, please see the Resources section under "Gold Standard Vendors".
More Information
The Climate Trust - What is an offset?
Evaluations and Recommendations of Voluntary Offset Companies - Tufts University
Consumer's Guide to Carbon Offsets for Carbon Neutrality - Clean Air, Cool Planet
Joint Statement by Greenpeace, WWF, and Friends of the Earth on Carbon Offsets
WWF Backgrounder on The Gold Standard
WWF FAQs on The Gold Standard
The Gold Standard
Sinks Watch
Air Travel
