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Carbon offsets are part of a new climate vocabulary created in the past couple of decades. It’s a term that gets thrown around a lot in the news and advertisements, often without context for what it actually means. That’s probably why you’re here — you heard the term in the wild and hopped on Google to find someone that can explain carbon offsets. Well, we’re happy you landed here.

The world of carbon offsets can feel overwhelming. It’s a field that is still in its infancy, meaning things change often and they change fast. But at the core of it are a few very simple principles and definitions that if you understand, can help you make sense of the information out there.

What is a carbon offset?

A carbon offset is a way to compensate for your carbon emissions by investing in projects that reduce or remove greenhouse gasses from the atmosphere. Think of it as balancing the scales of carbon. When a person or business buys a carbon offset, they support carbon reduction projects that help counteract their environmental impact.

These projects come in various forms, but the key idea is that they lead to a reduction in carbon emissions somewhere else. For instance, a project might involve planting trees to absorb carbon dioxide, installing renewable energy systems, or supporting initiatives that capture and store greenhouse gasses. By funding these projects, you’re making a positive contribution to the fight against climate change.

How do carbon offsets work?

Think about all the stuff you buy — your favorite pair of slippers, dark chocolate you like to keep on hand, a fluffy blanket you wrap up in on rainy days. The reality is that all of these things resulted in some level of CO2 emissions. Materials have to be transported to a factory, a factory has to operate, and the final product has to be delivered to you. Virtually everything out there takes some level of carbon to produce and will for the foreseeable future.

Carbon offsets operate on the principle of reducing greenhouse gas emissions in one place to compensate for emissions produced elsewhere. The goal is to achieve a net reduction in overall carbon dioxide emissions.

Carbon offsetting starts when carbon credits are purchased. These are quantified amounts of carbon equivalent to removing one metric ton of C02 from the atmosphere. The money from that transaction is then invested back into projects that work to reduce or remove greenhouse gas emissions. When an individual offsets their CO2, they can effectively eliminate an amount of carbon equal to what they produce.

Examples of carbon offset projects

Carbon offset projects aim to lower levels of greenhouse gasses on two fronts: carbon reduction and carbon removal. Carbon reduction projects focus on initiatives that reduce the amount of emissions released into the atmosphere while carbon removal projects actively take existing greenhouse gasses out of the atmosphere. Projects are certified by different organizations known in the industry as standards. These organizations include groups like Verra and the American Carbon Registry that ensure projects are actually making the impact they claim. 

Lots of human ingenuity goes into thinking up these projects, with new ones emerging all the time. Here are some of the most common ones that exist today.

1. Reforestation and Afforestation: Trees naturally absorb carbon dioxide through photosynthesis, acting as a carbon sink. Reforestation projects focus on replanting trees in areas where forests have been depleted, while afforestation projects involve creating new forests in previously non-forested areas. These initiatives not only help mitigate climate change by absorbing carbon dioxide but also contribute to biodiversity restoration and ecosystem preservation.
2. Renewable Energy Installations: These projects aim to displace fossil fuel-based energy production with clean and sustainable alternatives. Funds from carbon offsets might be used to support the construction of wind farms, solar power installations, or hydroelectric plants. By shifting towards renewable energy sources, these projects reduce greenhouse gas emissions by reducing reliance on fossil fuels.
3. Energy Efficiency Improvements: These projects focus on optimizing energy usage and reducing wastage. They can include initiatives such as retrofitting buildings with energy-efficient technologies, upgrading heating and cooling systems, or implementing energy management systems. By minimizing energy consumption and improving overall efficiency, these projects help lower greenhouse gas emissions associated with energy production.
4. Methane Capture and Destruction: Methane capture and destruction projects target sources of gas like farms and landfills to capture and utilize methane or prevent its release into the atmosphere. For example, landfill gas capture projects collect methane emitted from decomposing waste in landfills and convert it into energy.
5. Improved Cookstoves and Clean Energy Access: In many developing regions, traditional cooking methods involve burning solid fuels such as wood or coal, which contribute to significant emissions and indoor air pollution. Carbon offset projects support the distribution and adoption of improved cookstoves that use cleaner and more efficient fuels or technologies. These initiatives not only reduce greenhouse gas emissions but also improve health outcomes and quality of life for communities.

Are carbon offsets and carbon credits the same thing?

The terms “carbon offsets” and “carbon credits” are often used interchangeably, but they aren’t the same thing. Carbon offsets and carbon offsetting refer to the overall process while carbon credits represent a specific measurement of carbon.

You can think of this difference the same way you can think about money and a dollar. Money represents the overall concept while a dollar is a specific unit to quantify that. You might tell a neighbor you’re willing to pay them money to mow your lawn, then actually pay them 20 dollars when they complete the task. In the case of carbon, offsets are like money and credits are like dollars.

What does it mean for a business to ‘be carbon neutral’?

Simply put, being a carbon neutral business means that you take as much CO2 out of the atmosphere as you emit into it.

A lot of folks are under the impression that carbon neutral means businesses are no longer emitting carbon. Not only is that not true, but it’s basically impossible. As we talked about earlier, greenhouse gas emissions take into account everything from how materials are harvested, how a factory operates, how products are transported, and literally every other step in between. While there are businesses out there that are trying, no one emits 0 carbon.

The milestone of carbon neutrality is achieved when the scales balance out. Companies often achieve this by starting with carbon reduction projects like switching to renewable energy or creating processes that use less greenhouse gasses. Whatever emissions are left can be offset by purchasing carbon credits through offsetting projects.

How to calculate a carbon footprint

Carbon offsetting starts with calculating a carbon footprint — how much carbon a business or individual emits into the atmosphere. We’ve talked about some of the things that go into a company’s carbon footprint: factories, transportation, and materials. As you might imagine, this can be a challenging number to calculate, especially for large companies that have multiple factories, and offices everywhere, and ship products around the globe.

Part of the work Karbon-x does with businesses is to find these numbers. The good news for individuals, it is usually slightly easier. While there are still a lot of factors to consider — the kind of food you eat, how much you drive and travel, what types of products you buy — there are a lot of handy calculators out there to help you find that number for yourself.

Voluntary vs. mandatory carbon markets

Carbon markets are split into two main categories: the voluntary carbon market and the mandatory carbon market. They share the same underlying principles like the types of projects involved and the ultimate goal of reducing greenhouse gas emissions, but differ in one key way.

Let’s start with the voluntary carbon market. As the name suggests, it operates on a voluntary basis, meaning that participation is optional and not mandated by any regulatory requirements. A business might take part in the voluntary market to achieve claims such as ‘becoming net zero or carbon neutral’ that they can then use in their marketing. The voluntary market is also where individuals go to offset their carbon footprints, often through monthly or yearly subscriptions.

In contrast, the mandatory carbon market is where businesses or entities that are required to offset their carbon go. Governments typically implement mandatory carbon markets through cap-and-trade systems or carbon pricing mechanisms. These markets set legally binding emission reduction targets and establish a regulatory framework for companies to monitor, report, and reduce their emissions.

Best carbon offset programs for individuals

Every individual can offset their carbon footprint through voluntary programs that take money and invest them into offsetting projects. You’ve probably seen opportunities to do this on a small scale such as offsetting your carbon from a flight or a package delivery. But rather than offsetting the occasional purchase and having no control over where that money goes, there are services out there that offer a better way.

Our platform is one of them. Karbon-x allows you to purchase a subscription that offsets your carbon footprint and invest that money in different projects. Not only that, but the app lets you choose what project you want your money to go like planting trees in Bolivia or sucking excess carbon out of the ocean.

Wrap up: Carbon offsets explained 

Explaining carbon offsets can be tricky with how fast things change. But understanding it is vital, as it’s one of the most important things businesses and individuals can do for the planet. If you’re ready to offset your carbon with us, head to our website or download the app to get started today.