Carbon Offsets

Carbon offsets describe units of greenhouse gas emissions that are reduced or avoided to compensate for CO2 emissions elsewhere. They thus constitute an alternative way to reaching emission goals, not involving fixed limits or an emission trading scheme.

There are some commonly agreed-upon characteristics of carbon offsets. Offsets should be 
  • real (they offset the required amount of CO2)
  • permanent (the offset has a permanent impact)
  • additional (the project is done as a result of the funding provided by the offset and would not be done otherwise)
  • verifiable (the impact can be objectively assessed by a third party) 
  • enforceable (it is guaranteed that one unit of offsets is never counted twice). 
If, for example, a carbon offset goes towards a project that replaces kerosene lamps by solar panels in rural Kenya, managed and tracked by a credible organization, fulfills all of the above criteria. (Note that while these projects often have a social impact, it is not a requirement for qualifying as a valid carbon offset.)

The total market for carbon offsets can be subdivided into two parts. Within the compliance market, companies, governments, and organizations offset part of their emissions to meet certain regulations or caps like the Kyoto protocol of the EU ETS. This market is estimated to be between $40 billion and $120 billion large and growing substantially.


On a much smaller scale, voluntary offsets can be used by both individuals and companies to compensate for the emissions caused by their activities/lifestyles. Companies like EasyJet, Lyft, or Kering (the company behind labels like Gucci) already voluntarily offset the emissions caused by their operations. Others, like Microsoft, take it even further and plan to offset all the emissions generated in the company’s entire history, archiving net-zero emissions.

Other airlines like Jetstar or SriLankan Airlines don’t offset emissions directly but allow their customers to offset emissions by checking a box within the booking process. For companies that don’t offer offsets, several organizations and startups are providing convenient solutions for consumers. The Swiss NGO myclimate, for example, has a carbon calculator, allowing you to offset emissions for your recent flights. “Flygreen” is a flight search engine that goes one step further by offering you free offsets with flights booked over their page, financed by a commission by the respective airline.

It should be made clear, however, that carbon offsets are not a panacea to all evils. Common criticisms are that carbon offsets are often used for green washing or that they create reversed incentive for people to pollute more or to stick with high-carbon infrastructure for a longer time. Further, offsets are only effective as long as there exist ways to efficiently offset emissions, meaning that over time a reduction in primary emissions caused by the developed parts of the world is inevitable. That being said, carbon offsets can be a highly effective instrument that allows developed economies for a smooth transition towards a more sustainable future.


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