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What is Offsetting? Here's What You Should Know

What is offsetting?

Carbon offsetting is a mechanism for removing carbon dioxide from the atmosphere or reducing carbon dioxide emissions from other organizations or individuals.

Consequently, an offset activity does not have a long-term net impact on atmospheric greenhouse gas concentrations. Carbon offsetting is very much contested as a method of addressing climate change.

The practice means that companies can virtually reduce their environmental impact and carbon footprint by investing in projects that reduce carbon emissions elsewhere. Carbon footprint refers to how much carbon dioxide is emitted by individuals, organizations, and communities each year. Many factors contribute to calculating one’s carbon footprint (e.g., transport).

Further, there are multiple ways to 'offset' your carbon emissions, including investing in renewable energy sources like wind, solar and hydroelectric power or simply switching transport methods (e.g., using a bike instead of a car). Carbon credits is another form of offsetting. This is a permit that allows a country or organization to produce a certain amount of carbon emissions, and which can be traded if the entire allowance is not used. Offset allows for a company to take responsibility for their actions that releases greenhouse gases into the atmosphere.

Generally, offsetting falls in two broad categories: voluntary and compliance. Voluntary offsetting occurs when companies buy credits at their own discretion, while compliance offsetting is done to meet certain legal caps such as the European Emissions Trading System (ETS). According to Ecosystem Marketplace, the market for voluntary offsets came close to $300 million and traded almost 100 million metric tons of carbon dioxide equivalent in 2018, the latest year for which data is available.

Carbon offsetting has been argued to have played a vital role in reducing carbon emissions while transitioning to a low carbon economy. Although carbon offsetting cannot solve climate change alone, it is an important tool to reach Net Zero.

How effective is carbon offsetting?

Carbon offsetting is a virtual way of reducing one’s carbon footprint. Even though carbon offsetting is growing in popularity, it is not always the best way to address climate change. It has been criticized as many companies have used it as a justification for maintaining their high carbon emissions within their operations. The practice has been used as a way out of tangible CO2 reduction in business operations, while the usefulness of carbon offsetting to combat climate change is hotly debated. According to the Clean Development Mechanism (CDM), offsetting promotes sustainable development and emission reductions while giving industrialized countries some flexibility in how they meet emission reduction targets. Many critics claim that carbon offsets are merely a ‘distraction’ and at worst a way to justify a company's lack of results in reducing their emissions.

Nature based climate solutions have grown in popularity due to their convenient use. For example, many companies have used reforestation projects to justify their production of huge carbon emissions. Recent offsetting strategies are being used by planes where during the booking process, one can pay extra for a carbon offset, so a tree is planted for the emissions the buyer uses. At the start of 2020, Air France offers passengers to offset their travel via the Tree and Trip program. British Airways is another organization that offers the chance for passengers to buy credits. Multiple issues rose with this program. The biggest controversy was the lack of transparency on where the said carbon credits were going, and the lack of a guarantee for what the company would do with the additional funds they received (i.e., planting a number of trees that would sequester the carbon the passenger has used).

Examples of Carbon Offsetting in Practice

Carbon offsetting has been used by several companies to reduce their emissions to reach virtual carbon-neutrality. AllBirds - a shoe company, notorious for their sustainable shoe-making practices - have invested in several projects as a means of offsetting. Apart from this, the company has invested in sustainable practices, and have sought certain certifications to prove this to their consumers. The company recycles materials, and has become certified for their regenerative agriculture practices and alternative methodologies. Nevertheless, their carbon-neutrality has come from their offsetting practices and not their sustainable operations as it would be nearly impossible with the present technology to draw their emissions down to 0 due to their cross-border operations. Brew Dog, a sustainable brewer company announced last year that they are now carbon negative. Nevertheless, as with AllBirds, their strategy has been strongly based on offsetting, as their carbon negative status comes from them offsetting twice the CO2 they emit.

Why is offset a controversial topic?

‘Business as usual,’ is a common idea when companies decide to offset their carbon. This can meet environmental goals while not making any drastic changes to the company. Buying carbon credits to pay for the carbon the company makes or planting trees for every carbon created doesn't mean the company changes how it runs. The strategies they use will only absorb the carbon they created and not the carbon in the atmosphere. Offset allows for companies to carry on with their ways (i.e. using non-renewable resources) as their strategies sequester their carbon. Nevertheless, it is arguable that that this action ignores the discharge of greenhouse gas emissions while in contrast some argue carbon offsetting is a good step in reducing one’s own carbon footprint.

Offsetting has been criticised as just another means of corporate greenwashing. To limit climate change, the goal is to cut emissions as soon as possible. Offsetting does buy some time, but it is not tangible change. Additionally, the practice becomes available solely to large corporations, wealthy countries and people who can afford to buy carbon credits. The delays caused by offsetting in corporate practice mean that companies are able to continue their high emissions and continue ‘business as usual’ despite its unsustainable nature. The option of offsetting has become a PR campaign used by large, yet unsustainable corporations to distract consumers from the real problem

“First, the concept of offsetting creates an illusion that high-carbon activities enjoyed by wealthier individuals can continue, by transferring the burden of action and sacrifice to others — generally those in the poorer nations in the southern hemisphere,” wrote Massive Attack’s Robert Del Naja in the Guardian. “Ultimately, carbon offsetting transfers emissions from one place to another rather than reducing them.”

To be effective, carbon offsetting must be paired with aggressive reduction methods to meet their full potential in a net-zero economy.


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