What Are Carbon Offsets?

What Are Carbon Offsets?

Apr 29, 2021

Apr 29, 2021

There's a pretty good chance that you've heard the phrase 'carbon offsets' thrown around recently. There's also a pretty good chance that you don't know exactly what they are or how they work, since companies are quick to brag about investing in them without much further explanation. We're here to give you the 411.


A carbon offset is basically a way for people, companies, and institutions to pay someone else to reduce their greenhouse gas (GHG) emissions or absorb extra emissions in order to compensate for their own. They've become a hot topic since the UN Intergovernmental Panel on Climate Change (IPCC) found that we must reach 'net zero' emissions by 2050 to avoid the most lethal effects of warming the globe beyond 1.5 degrees Celsius above pre-industrial levels. To date, 177 companies, 77 countries, and over 100 cities have pledged to become carbon neutral by 2050, and many have turned to carbon offsets to help reach their goals.

Excuse us while we get technical, but there are two types of carbon offsets you need to know about: voluntary and compliance. Voluntary offsets are for individuals, companies, and institutions who are voluntarily seeking to offset the carbon emissions of a specific activity. If you've recently been presented with an option to pay a few extra dollars to offset the carbon emissions associated with a flight or online purchase, you know what we're talking about. Compliance offsets are marketed to companies that are required to limit their overall carbon footprint because of the industry or activities they're involved in (i.e. car manufacturing, air travel, oil & gas), and want to use carbon offsets to do so. Compliance offsets are also popular in states like California, for example, that have carbon cap programs to help fight climate change -- these states allow companies to purchase carbon offsets to help the state reach their emissions goals. Read on for a breakdown of how they work and, in true Finch form, an analysis of their pros and cons.


Let's say that Person A is taking a flight from New York City to Los Angeles. If we're talking about a commercial flight on JetBlue, let's say, then you'd imagine there are a lot of other people that are also on that flight. If you think about the total emissions associated with that flight on a per person basis, that makes Person A responsible for about 0.29 tons of carbon dioxide equivalent (CO2e) emissions. What's that little e after CO2, you ask? That means the metric is accounting for not just carbon dioxide, but also other GHG emissions like methane and nitrous oxide that are potent contributors to climate change. But we digress... in order to 'offset' these emissions, Person A chooses to pay Person B enough money to cover the cost of absorbing those emissions in some other way, thereby absolving Person A of the guilt and responsibility for the emissions associated with their flight. As it turns out, Person B lives in Brazil and is part of an organization that helps fight deforestation in the Amazon. The money that Person A gives to Person B will go towards paying a company that is planning on destroying part of the Amazon to NOT destroy it, ever. Because trees absorb CO2 during photosynthesis, Person B is able to tell Person A that the money put towards stopping this act of deforestation will 'sequester' (aka capture or remove) 0.29 tons of CO2e over a stated period of time. Person A can now rest easy knowing that they are paying to have 0.29 tons of CO2e removed from the atmosphere, thereby rendering their travel 'carbon neutral.' Person B gets paid to perform an activity that fights climate change, the forest is saved, and everyone lives happily ever after, especially the Earth, which is the direct beneficiary of this chain of events. Yippee!

Ah, if only things were so simple. Unfortunately, this story does not usually have a Disney Channel ending -- indulge us while we give you the breakdown of why that's the case.

First of all, very few people can afford the luxury of adding incremental costs to their purchases in order to offset their emissions. The cost of living is far too high and wages are far too low for that to be within grasp for the vast majority of Americans. Even if you CAN afford to pay for offsets, well... there are still potential issues with this process at every turn. For example, when you pay to protect one forest, there is no guarantee that the perpetrator of deforestation won't just go destroy a different forest. This is called 'leakage,' and it occurs when the protection of one forest leads to the deforestation of another. Leakage is really hard to prevent because it requires communication and cooperation between different countries (and we all know how that goes). Because voluntary offsets are not regulated by the government, it's really hard to make this happen. Even if leakage does not occur, it's nearly impossible to ensure that the forest you're putting your money towards will remain intact. The project would require indefinite monitoring, and ultimately, nature could always interfere with droughts, storms, wildfires, and invasive insect infestations. Because trees release much of their stored CO2 back into the atmosphere as they decompose, they present a risky bet when it comes to permanent carbon sequestration.

On top of this, projects that involve reforestation or forest protection are usually cheaper to execute in the Global South. Inherently, they run the risk of harming indigenous communities, or accidentally making a local environmental or social problem worse. For example, how do we know that the trees being planted in the reforestation projects we're throwing our money at are actually native to the area where they're being plopped? We must avoid climate colonialism like this at all costs. Moreover, while people on the ground might be paid to implement these offset projects, the majority of the money from these sales will end up in the pockets of people in the countries buying the offsets. For example, it is estimated that ending global deforestation through offsets could boost U.S. agriculture revenue by $190 billion to $270 billion between 2012 and 2030. Americans making money off of the land of indigenous peoples? Sounds like a familiar history that we do NOT want to repeat.

Despite all of these issues, the market for voluntary offsets was nearly $300 million in 2018. That is a lot of money going towards projects with outcomes that are incredibly difficult to guarantee, and powerful proof of how far we are willing to go to absolve ourselves of consumer guilt while still consuming at record levels. Can't we just have our cake and eat it, too?


In this story, Company X is located in a country that just implemented a 'carbon cap,' meaning that the local government is limiting the amount of GHGs that companies can emit. Company X emits A LOT of GHGs (cough cough, oil & gas company, cough cough), and so it is pretty worried about this. It's possible to restructure the business to emit far fewer GHGs, but the process would be expensive, and it would take a ton of time and energy that it doesn't feel like expending right now. Company X has been operating this way since its inception, and it has been working great so far. If it ain't broke, don't fix it, right? Well, thankfully for Company X, the government just announced that companies can use carbon offsets to meet their emissions targets. Company X leadership is thrilled. It no longer has to worry about investing in measures that will actually lower emissions -- instead, the company can just pay to have someone else lower emissions somewhere else in the world, and the problems are solved. To make this happen, Company X hires Company Y, which is building wind farms to displace coal power plants all over the world. Company Y is able to quantify the reduction of CO2e emissions associated with building a wind farm in place of a coal power plant. Company X buys that reduction in CO2e emissions from Company Y, and then is able to report to the state government that the company is operating in accordance with the carbon cap, all without making changes to its operations in any way. Voilà! Company X is able to continue business as usual, Company Y is being paid handsomely to be the middleman, the earth benefits from one less coal power plant, and the government is proud of implementing legislation that will help fight climate change. Another success!

Wait! Not so fast...this sounds like some magic wand-waving stuff or at the very least some super wonky accounting...

This story highlights a common critique of carbon offsets, which is that they often allow the wealthy super-emitters (such as Company X) to throw money at climate change without making any meaningful changes to its practices. What we need, ultimately, is a reduction in CO2e entering the atmosphere, and offsets do not solve this problem. Rather, offsets allow super-emitters to continue business as usual, while greenwashing their way into consumers' wallets and governments' good graces. Meaning we continue to increase consumption, increase extraction, and increase operations, and somehow, some magical third-party is going to make all our problems go away because of $$. This scenario has structural flaws, as well. Investing in renewable energy is an increasingly common option in the carbon offsets market, which is awesome, IF (and this is a big if), it can be proven that the renewable project was not already going to happen. If you pay someone who is already building a wind farm to build that wind farm, you're not actually contributing to carbon reductions, you're just paying them to do what they were already going to do. What a rip off, right? Turns out, it happens all the time.

Let's flip this story on its head and say that Company X does not have the option to cover its tracks with offsets. In this case, it would have an incentive to get creative and make meaningful changes in its business and supply chain that would lead to fewer emissions overall. While it would take time and money, it would also hold Company X accountable for its carbon-intensive behavior, meaning we might actually have a chance at mitigating the IPCC's worst-case scenarios.

Currently, it is estimated that the size of the global compliance offset market is between $40 billion and $120 billion. That's a whooole lot of companies willing to throw money at solutions that don't actually work. It's time we put those dollars to work making actually meaningful changes.


The short answer is yes. Successfully executed carbon offset projects that are well-managed and maintained with proven returns can play an important role in fighting global warming. Currently, deforestation and renewable energy offsets are quite popular and quite unsuccessful in delivering on their promises, but there is hope in innovation. Scientists are investigating geological storage, which can turn CO2e into rock. Since the rock wouldn't emit CO2e over time, this technology would provide a permanent carbon capture solution. Industrial gas destruction is another technology with great potential. Industrial gases are easy to track and quantify, and they can be permanently destroyed. CO2e scrubbers, which suck CO2e directly from the air, are super interesting and potentially impactful, though currently they are really expensive and energy-intensive (so it's unclear how much energy/emissions we're actually averting).

Here's to hoping we can improve carbon offset technology through measures like these. Because it takes time for companies to implement changes that will limit their emissions, carbon offsets can be a good option for making short-term investments while waiting on larger changes to take shape. The important thing to remember is that offsets alone are not the solution to the climate crisis, and they don't give us a free pass to continue business as usual.


We won't be suggesting that our community purchase carbon offsets anytime soon (in fact, we may never suggest this). They are pricey and therefore prohibitive, and in their current form, pretty ineffective. They generally shift the burden of climate change from the rich to the poor, and we're not about that. Rather, we're all about reducing emissions in the first place (instead of just covering them up with offsets), which is why our goal is to encourage thoughtful consumption and to hold super-polluting companies accountable. We're sure as heck not going to tree-plant our way out of this climate crisis, and we know that buying carbon offsets doesn't cancel out emissions. We'd prefer to see companies get their hands dirty by investing in infrastructure changes that will reduce emissions permanently, rather than throwing money at solutions that ultimately just...don't work.

Next time you're presented with the opportunity to buy offsets, consider choosing a different action that will make a measurable difference. For example, instead of purchasing offsets at check-out from an online retailer, why don't you choose the slowest possible shipping method? This will make it much more likely that your package is driven rather than flown to you, saving up to 88% of transportation emissions. The same goes for travel -- are you able to get to your destination by train, bus, or car, rather than by airplane? If you have to fly and want to do something in return, consider donating to a local environmental nonprofit instead of buying offsets. Our favorite resource for finding environmental nonprofits is Patagonia Action Works. At the end of the day, if you are interested in purchasing those offsets, go ahead -- just know that it probably isn't the most efficient use of your money if your goal is to fight climate change.