In the new "green" world that we are heading into, some of the terms and different jargon can get confusing. For those of you who may not know what carbon offsetting is, here is your guide to what they are and what they do.
What is Carbon Offsetting?
Carbon offsetting is one of the many different financial instruments that represents a way to reduce the greenhouse gas emissions that are released into our environment. Since there are six primary categories of greenhouse gasses, the carbon offsets are actually measured in metric tons of carbon dioxide-equivalent or CO2e. So, one carbon offset actually equals the reduction of one metric ton of carbon dioxide, or other greenhouse gas that is released into the environment.
How Carbon Offsets Work
But what do carbon offsets actually do? Well, there are two main areas where carbon offsets are used. The larger of the two areas is the compliance market, where governments and companies have to purchase these offsets so that they can comply with the laws and other regulations that govern their usage and release of greenhouse gasses into the environment. Many manufacturing and other companies have specific codes, laws, and regulations that they have to follow that say how much greenhouse gas they are allowed to emit into the environment. The smaller of the two areas use much smaller amounts of the carbon offsets, since they are not as large as the other corporations or governments that comprise the first part of the market. The smaller areas usually purchase carbon offsets due to their own greenhouse gas emissions from areas like electricity usage and transportation.
Now that you know how they are normally used, you are probably curious on how carbon offsets are created. Well, one of the most common ways that carbon offsets are created is through renewable energy sources, like wind farms, hydroelectric dams or other types. Some other areas that produce carbon offsets include energy efficiency projects, destruction of landfill methane, forestry projects, or the destruction of industrial products. This helps to create carbon offsets that allow both the purchasing and withdrawal of emissions trading credits. So, this helps to create a connection between those voluntary markets and the regulated ones in the global market.
Popularity of Offsetting on the Rise
In today's greener world, carbon offsetting is seen as a larger part of a "carbon neutral" lifestyle that is gaining appeal among individuals all over the world that are concerned about the negative effects of the energy-intensive lifestyles and economies that the world is dependent on. For example, the Kyoto Protocol has helped to sanction carbon offsets as a way for governments and companies to earn the credits that they need to trade in the marketplace by establishing the Clean Development Mechanism (CDM). This mechanism helps to both validate and measure the projects that these governments and companies do so that they are sure to produce authentic benefits from them. Those organizations that have problems meeting the quota are then able to offset this by purchasing those CDM-approved Certified Emissions Reductions. Therefore, the CDM encourages those projects that use or involve a renewable energy source, renewable energy production, beneficial changes in land usage, forestry programs, and other areas that help to give back to the environment and reduce the greenhouse gasses that those companies emit.
Of course, the commercial system has helped to contribute to the rise in popularity of the volutary carbon offsets that companies, individuals, and governments invest in. These carbon offsets are normally cheaper alternatives to reducing fossil-fuel consumption, but some critics question these offsets and some of the benefits that come with them, but there are over 200 different types of projects that the CDM identiries as suitable for generating carbon offsets, which are then grouped into categories. Most of these projects include renewable energy, energy efficiency, reforestation, fuel switching, and methane abatement.