A carbon offset is a tradeable instrument that represents a specific amount of reduction in greenhouse gas emissions or an increase in carbon storage. The offset is purchased by individuals or organizations who wish to compensate for emissions that they have caused elsewhere. For example, suppose that an air traveler wishes to offset the carbon emissions associated with a trip. Using information available online, the traveler can determine the amount of emissions associated with his share of the plane trip. He can then purchase the offsets necessary to “cancel out” those emissions. The concept behind the offset is to create a source of revenue for entities that can reduce greenhouse gas emissions but would not absent a source of funding.
Offsets are measured in tonnes of carbon dioxide equivalent (CO2e). One tonne of carbon offset represents the reduction of one tonne of carbon dioxide or its equivalent in other greenhouse gases.
Carbon offset markets may be voluntary or compliance-based. Voluntary markets are used by individuals, corporations, or other entities that have chosen to reduce the impacts of their greenhouse emissions. Compliance-based markets are used when companies or other entities need to buy offsets in order to comply with legally binding regulations specifying the amount of greenhouse gases they are allowed to emit each year (called “the cap”). To do this, these entities can either reduce their own emissions or buy offsets from others that have reduced greenhouse gases. Failure to comply results in fines or other legal penalties. Activities typically accepted to create carbon offsets include:
- Renewable energy
- Energy efficiency
- Reduction or capture and storage of industrial emissions
- Reduction or capture and storage of agricultural and landfill methane emissions
- Use of agricultural or landfill methane for biofuels
- Reforestation
Numerous third-party organizations certify offset programs to ensure projects are real, permanent, measurable, unique, verifiable, and additional. Additional is the concept that the project is not already required by an unrelated law and that the project would not have occurred without the revenue from a carbon market. Certification organizations include The Gold Standard, Climate Action Reserve, American Carbon Registry, Verified Carbon Standard, Plan Vivo, Green-e Climate, The Climate, Community & Biodiversity Alliance, and Clean Development Mechanism.