Money: Carbon Offsets

Intro——–Carbon Offsets——–Green Investments——–Challenges——–Solutions

When individuals, businesses, or governments want to reduce their CO2e emissions by a certain amount, they can purchase carbon credits. Carbon credits are official permits that can be given to individuals or organizations that either store GHGs or reduce GHG emissions through “carbon offset projects”. Each carbon offset project is evaluated to estimate the number of credits that should be given, depending on how many tonnes of CO2e have been removed or avoided. The credits can then be sold to anyone who would like to purchase carbon credits [in $/tonne of CO2e removed].

For example, imagine that a company has undertaken a large forestation project. To recover some of the costs associated with this project, it decides to sell a portion of the carbon credits it received thanks to the carbon storage abilities of the new forest. Let’s say the company sells them at $20 per tonne of CO2e stored. With these carbon credits now on the market, all that individuals, businesses, or governments have to do reduce each tonne of their emissions is pay $20. If all the credits from that specific project end up purchased, then the forestation company has succeeded. It can now do whatever it pleases with this revenue, which includes expanding the forestation project to sell even more carbon credits down the line.

Why Purchase Carbon Credits?

Well, some people want to help reduce impacts on the environment, for whatever reason [e.g. good intentions, building an eco-friendly reputation, not exceeding emissions limits].

Carbon offsets are a way to help do that, anywhere in the world. Carbon offset projects take place in almost all ecosystems and countries – which allows us to pick and choose how we want to reduce our impacts as well [e.g. mangrove restoration project in Southeast Asia, RNG plant in Western Canada].


Unfortunately, carbon offsets are riddled with challenges. We’ll go over a few of their most important limitations here.

Evaluating Tonnes of CO2e

First, a project’s potential emission reductions need to be calculated. While that seems like an obvious preliminary step, it can actually be near impossible to predict how many tonnes of CO2e can be credited. For example, there’s no telling how long carbon can be locked up in soil and biomass, so how can we set a price tag for carbon credits when planting trees? Between extreme climate events, future policy changes, and straight up poor forestation techniques, there’s no guarantee that those carbon offsets will make any long-term difference [e.g. wildfires ravaging forestation projects, land use conversion of green ecosystems]. The same uncertainty goes for non-natural projects, where the amount of GHG emissions avoided thanks to energy-efficient equipment can depend on a multitude of factors.

In both cases, measuring carbon offsets based on inaccurate assumptions can lead to serious ineffectiveness in our fight against climate change. In other words, we might be wasting money on inefficient measures – when there are better alternatives instead.

Actual Emissions

While offsetters can easily buy carbon credits to reduce their emissions – they’re not physically reducing their emissions.

For example, imagine a New York skyscraper that emits more tonnes of CO2e than its owner would like. To fix that, the skyscraper owner funds a renewable energy generation project in Paris to offset the entirety of the skyscraper’s emissions.

While that’s certainly a great initiative, it doesn’t erase the fact that the skyscraper is still physically emitting GHGs – since it’s still consuming energy in New York through the local energy grids. So while the skyscraper could claim to be running on 100% renewable energy, they’re still very much emitting GHGs into the atmosphere.

It’s interesting to see how carbon offsets can help shift the responsibility of GHG emissions onto others, and how complicated this global web of interconnected carbon credits can get. While the math of who’s contractually responsible for who’s emissions usually works out, there’s something very wrong about projecting our own ‘actual’ emissions onto someone else. In our example, the skyscraper provides renewable energy to Parisians, but also shifts its own ‘actual’ emissions onto them [without the skyscraper, Parisians would not enjoy renewable energy – so in a sense the skyscraper owns the Parisians’ lower emissions].

Preventing Actual Change

Carbon offsetting can be an effective strategy for top-emitters that don’t want to change their ways. At the end of the day, we need to reduce actual emissions. If carbon credits are simply viewed as small ‘reputation’ fees by large companies to keep their polluting practices and customers the same time, then carbon offsets aren’t doing their jobs.

Bad Carbon Offset Projects

The global reach of carbon offsets can have additional consequences. Profit-driven carbon offsetting can be extremely sloppy and have impacts of its own, far from the public eye. We’ve already seen examples of this in an earlier section when discussing poor forestation techniques.

Some have dubbed the impacts of remote carbon offsetting projects on local populations as “carbon colonialism“, where underdeveloped communities [that emit much less than we do] are forced to move/change their way of life so that top-emitters in developed countries can offset their emissions. As carbon offsetting takes a more significant role in our societies, we’ll have to make sure that these remote projects don’t cause more harm than good.


Faced with numerous challenges, it’s pretty clear that carbon offsets won’t solve the climate crisis on their own. They can be useful in certain situations, but should never be regarded as equal alternatives to on-site [e.g. at the skyscraper] emissions reductions. Reducing emissions at the source ensures the GHGs are never emitted in the first place, so there’s no carbon storage issues. On-site measures also help reduce complexity and ensure money isn’t wasted on a poor offsetting scheme – all the while avoiding any underlying impacts that cheap carbon offsets can cause to underdeveloped communities.

Carbon offsets can offer a false sense of security that can lead to inaction in our fight against climate change. Inaction is simply not an option. Capturing most of the carbon we’ve emitted in the past few centuries with green ecosystems will be hard enough. If we continue to justify our current GHG emissions based on the carbon storing potential of vegetation [e.g. through forestation-type carbon offsets], then we won’t even get close to reducing GHG atmospheric concentrations. At best, we’d only be ensuring they don’t increase [in a hypothetical net-zero emissions scenario that is still very far away].

While carbon offsets can and will help reduce emissions, we have to use them responsibly – only after on-site emission reduction measures have been taken, as a ‘top-up’.