Climate Action

The Real Deal About Carbon Offsets

You may be familiar with offsetting if you have recently purchased a plane ticket. It has become increasingly popular for airlines to offer customers the option of paying extra for carbon credits in order to offset their emissions from the flight. A scaled-up version of this practice is employed by most corporations in the “developed” world in sectors ranging from transportation to fast food. So what are offsets? Do they really work to decrease carbon emissions?

By purchasing carbon offsets, companies seek to counteract the negative effects of their own emissions by investing in projects that decrease carbon emissions elsewhere. In some programs, one offset credit accounts for one ton of carbon removed from the atmosphere. Popular offset suppliers include reforestation organizations, and renewable energy companies

Offsets are a primary method by which companies with significant carbon emissions contribute to decarbonization efforts. Aside from reallocating funds to pay for the credits, offsetting requires minimal change from participating companies, as they can continue their business-as-usual practices with the assumption that their investments in offsets will “cancel out” their emissions. However, this is an oversimplified and inaccurate perception of how offsetting works. In reality, this multibillion dollar industry “cannot be relief on to cut planet-heating emissions.” 

What are the problems associated with offsets?

A recent investigation into the legitimacy of the top 50 most popular offset projects found that 78% of these projects offer no real atmospheric benefits because some of their characteristics undermine their proposed emission cuts. For example, some projects grossly overestimated their sequestration capacities, meaning that offsets were insufficient in permanently curbing a company’s carbon footprint. Other projects would have occurred without funding from offset sales, so they did not yield additional decreases in greenhouse gas emissions.

Aside from their specious benefits, many offset projects are associated activities undermining the wellbeing of local communities and staff. This is especially pertinent with REDD+ projects, which stands for the Reducing Emissions from Deforestation and Forest Degradation in Developing Countries, a subgroup of the United Nations Framework Convention on Climate Change (UNFCCC). Last year, reports emerged of female employees of the Kasigau Corridor conservation project in Kenya, a popular offsetting site for Big Oil, being sexually abused and harassed by their male staff. Such stories indicate how some companies purchasing these offsets do not do enough due diligence on these projects to ensure that working conditions are safe — it seems that they want the carbon credits regardless of potential social costs. Furthermore, many REDD+ projects disregard indigenous land rights for the sake of corporations’ continued financial success. 

Ultimately, offsetting serves as a mere bandaid on the bullet hole of climate change. By failing to directly abate a company’s own emissions, offsets only address the symptoms of climate change and often perpetuate the cycle of systemic injustice.

How is the Biden administration attempting to rectify offset shortcomings?

On May 28, the White House, in partnership with the Department of Treasury, Department of Energy, and the Department of Agriculture, released a policy statement and set of guidelines on promoting a high-integrity Voluntary Carbon Market. A high-integrity market is characterized by the sale of carbon credits that are real, additional, long-lasting, and independently verified. To promote greater transparency around who is investing in these high-integrity offsets, the Biden administration called third-party organizations to action — specifically, multi-stakeholder oversight initiatives, like the Voluntary Carbon Markets Integrity Initiative (VCMI) and the United Nations Development Program, as well as carbon credit rating agencies. 

The statement also calls for greater regulatory action in the carbon credit market. Similar to how it is common for companies to report Environmental, Social, and Governance (ESG) standards to offer transparency to shareholders, there should be more detailed reporting on the nature of offset projects. In particular, companies should detail how they know they invested in a project that meets the high integrity criteria. 

The Biden administration also takes the important step of encouraging corporations to find ways to decrease emissions within their own value chains before they resort to purchasing offsets. This statement would be more powerful if it were accompanied by tangible legal action, but it is a good first step in addressing the root problem of the climate crisis. 

Next steps

Overall, carbon offsets are inadequate in tackling carbon emissions from the world’s largest polluters. To make genuine progress in the decarbonization effort, the U.S. government must incentivize direct emissions mitigation from companies. Without market-based incentives levied by the government, corporations will continue to prioritize profit maximization — a path that the planet can no longer afford.