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).
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.
Sources and further reading:
- https://www.ft.com/content/7e4665a2-1776-11ea-8d73-6303645ac406
- https://www.wri.org/publication/bottom-line-offsets
- https://www.easyjet.com/en/sustainability
- https://www.vox.com/2020/2/27/20994118/carbon-offset-climate-change-net-zero-neutral-emissions
- https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/a-new-look-at-carbon-offsets
- https://www.imf.org/external/pubs/ft/fandd/2019/12/pdf/fd1219.pdf