Carbon Offsets: Why No Two are Created Equal

carbon-offest.jpgBefore we get into the nitty gritty, let’s make sure we’re all clear on what a carbon offset actually is. In its most simplified form, a carbon offset is a commitment that 1 metric ton of C02 equivalent has been prevented from entering the atmosphere and contributing to global warming. Whew. Feel free to read that again if you need to. The offset can come about through dozens of different means like tradable credits from the Chicago Climate Exchange, or they can take the form of different carbon reduction projects.
Carbon offsets can be categorized into three main types: renewable (emissions free) energy generation, energy efficiency, and sequestration. The first two avoid emissions, while sequestration projects attempt to aim to absorb or capture emissions that have already occurred.

wind-tur-55.jpgRenewable Energy Generation
Here’s how it works: a company creates a renewable energy project (like a big solar farm or a windmill) and sells energy to the big utility, and the big utility has to buy less dirty energy (like that from coal or natural gas) to keep up with demand for power from its customers. The cleaner the electricity that is being sold, the less carbon is being emitted per kilowatt hour of electricity. The owners of renewables carbon offset projects measure the carbon savings by calculating the local average emission per KwH, and sell the tons of carbon saved as offsets. To look at this another way, the purchase of a renewable based carbon offset allows a company to build the infrastructure to create one ton of carbon savings. These projects are a great buy because, in addition to ensuring the removal of carbon from the atmosphere, the purchase supports a paradigm shift to a permanent cleaner energy mix. To put it another way, the purchase is not just about a short-term carbon savings, it’s about creating a cleaner future where we don’t get ourselves into this mess again. The downside is that the carbon savings is pretty far removed from the infrastructure investment.

cfl-bulb.jpgEnergy Efficiency Projects
These projects are about reducing the demand for energy. If less energy is needed, less is produced, and less carbon is emitted into the atmosphere. They also tend to be about creating social “co-benefits” along with the offset savings. A common project you might see is the purchase and distribution of solar powered portable energy sources and stoves in Africa to replace dirty coal cooking fires. These projects attempt to solve a social health problem (breathing in all that smoke is not really very healthy), in addition to the environmental one. The project owners calculate the energy use saved from the newer efficient technologies and from this, the number of relevant carbon offsets is calculated. These offsets are great for their social co-benefits, but from a carbon standpoint they are problematic because it is difficult to prove that people will use the new technologies, that they will not break, and that they will be used exclusively over the traditional products. These projects aren’t permanent. Carbon needs to be permanently removed from the atmosphere in order to mitigate the damage from global warming. This isn’t to say that these project are bad, just that they are not the best choice if your top priority is to ensure a certain global warming reduction potential with your carbon offset purchase.

forest.jpgSequestration and Capture Projects
These offsets are the largest source of carbon offsets sold on the voluntary market by far, nearly 60% by some counts. These projects fall into two main categories: forestry and greenhouse gas capture. When you buy a forestry offset, you are buying a commitment that a certain parcel of undeveloped land will remain that way, and that the carbon tied up in those trees will stay there instead of going into the atmosphere. These offsets are appealing because they are really tangible and easy to understand. The carbon savings seems more direct than in some of the other project types: trees are made of carbon, it’s pretty obvious that ensuring that there are a lot of trees means that there will be less carbon in the atmosphere.

However, these projects are somewhat problematic for a few different reasons. First, the type of tree and where it was planted make a big difference in how much carbon actually gets sequestered. It is very difficult to quantify the exact carbon savings per tree or per acre, and when you buy a carbon offset, that one ton of carbon removed from the atmosphere, you are paying for precision. Second, it is impossible to guarantee that a forest will not burn down (at which point the carbon will go straight into the atmosphere). Just like the efficiency projects discussed above, permanency is problematic with these projects. How long into the future can we guarantee that that forest will stand? 100 years max? The sequestration needs to be permanent to be effective. Finally, it is very difficult to demonstrate that the forest would not have stood anyway with or without the purchase – if it would have, your offset money did not go toward that one ton of carbon.

Another type of sequestration is the capture of methane (from cows or landfills) or other types of global warming gases that are emitted by industrial processes. These offset projects are appealing because they are actually the easiest to quantify. The gasses literally get captured, measured, and safely disposed of so that they do not enter the atmosphere. Given that each unit of methane has 21 times the global warming potential of carbon dioxide, (each unit will make global warming 21 times worse than a comparable unit of C02) these are an important area of concern and attention for folks who are trying to mitigate global warming. However, methane in the atmosphere breaks down in 10-15 years whereas C02 hangs around for as much as a century. Some would argue that it’s better to focus on the gasses that have the most permanence.

The other problem that naysayers point to is that these offsets don’t have any environmental or social co-benefits, like the renewable or the energy efficiency projects. This is mostly a matter of personal preference, and comes down to your values and reasoning for buying the offsets.

Buying Credits from a Trading Scheme
This offset choice is perhaps the most contested of all. Some people are very much in favor of them because a purchase on these markets is a stand in support of the market for carbon, a stand for carbon emissions as a financial liability for firms who choose not to make reductions and a financial gain for firms who become cleaner. A purchase of these credits is a vote for the ability of markets to solve the problem of global warming with the right incentives. Many people have critiqued CCX because its verification schemes – the way they verify that their members have made the reductions they claim to–are not available for public viewing. They are lacking on the transparency side, to put it lightly. I’m not as familiar with the European scheme, so I’ll leave comment to those people who are. The problem with investing in a market that is not rigorous with its verification is that all the firms in the system have a financial incentive to make reductions. It can be a little too tempting to fudge the numbers in their favor for a quick buck. With a product as abstract as a gas emission you can’t see, if the reductions are not strictly verified, the whole system will collapse.

Many people I respect, including bloggers here on Triple Pundit, support CCX unequivocally, so I’ll leave my critique at that and say that if you believe solely in the ability of the market to solve our problems, buy some offsets to drive up the price per ton, and put some energy into pressuring CCX to publish their methodology so you can buy offsets from them without concern.

The offsets landscape is clearly complicated and difficult to understand, and the type of project you should buy depends on your personal politics in addition to the quality of the offset. Things get even more complicated when we bring in all the competing schemes to verify that the offsets are rigorous. I’ll cover that next time.
Jen slings 100% post consumer recycled paper for the Union of Concerned Scientists as the Berkeley office manager, but she’s not representing said scientists on this blog. Of course, she fully intends to swipe facts and figures from their materials in addition to her own research as an MBA student in Sustainable Management. You can reach her at

Jen Boynton

Jen Boynton is editor in chief of TriplePundit and editorial director at 3BL Media. With over 6 million annual readers, TriplePundit is the leading publication on sustainable business and the Triple Bottom Line. Prior to TriplePundit, Jen received an MBA in Sustainable Management from the Presidio Graduate School. In her work with TriplePundit she's helped clients from SAP to PwC to Fair Trade USA with their sustainability communications messaging. When she's not at work, she volunteers as a CASA -- court appointed special advocate for children in the foster care system. She enjoys losing fights with toddlers and eating toast scraps. She lives with her family in sunny San Diego.

5 responses

  1. Hi Jen. I am the head of a non-profit that creates charitable offsets from energy-efficient light bulb installations. The light bulbs go to low-income families.

    I liked your description of the offset project types. A couple of comments on your description of Energy Efficiency Projects:

    “These offsets are great for their social co-benefits, but from a carbon standpoint they are problematic because it is difficult to prove that people will use the new technologies, that they will not break, and that they will be used exclusively over the traditional products.”

    We address the difficulty of proving that the bulbs don’t get de-installed by assuming that they do get de-installed. We assume roughly 5% per year get removed and factor that into the calculation of how much CO2 is offset.

    And our energy efficiency-based offsets have one strength that you imply but don’t mention, that unlike the renewable energy infrastructure, our offsets are more tangible or more directly tied to the offset. Do you agree?

    Also, did you mean to say that energy-efficiency offsets are not permanent? The energy efficient bulbs are not permanent but the offset is permanent, right? Otherwise, one could say that because a wind turbine needs replacing in 20 years means it is not permanent?

  2. Hi Jay,
    Thanks for your thoughts!
    It sounds like you have a great start with your 5% assumption. I’d be curious to hear how you arrived at that figure, because my gut tells me that the actual failure rate would probably be a bit higher. Do you account for the end of life as well?
    Regarding your second point, I would say that the tangibility of co-benefits makes them very appealing for consumers because they are easy to understand. The downside is that they aren’t as precise. It’s much more difficult to measure with precision what the carbon savings will be because there is so much user variability. For example, you can’t predict how many hours the light bulb will actually be turned on in someone’s home. The carbon offset is based on the amount of energy the CFL bulb saves compared to a traditional bulb, right? If you don’t know how many hours the bulb will be used for, you can’t accurately predict the amount of carbon savings. The carbon offset is all about the precision of that golden metric ton.
    Regarding your final point, I guess it depends on how you are calculating your offset. The bulbs certainly aren’t permanent– they’ll fail eventually, but you include end of life in your assumptions and calculate the emissions savings using the emissions factor for the utility company in the local area where the bulbs are distributed, your carbon emissions could be considered permanent. It’s nearly impossible to prove they are additional though.
    Don’t get me wrong. It sounds like you are really trying to do a good thing. I would recommend that you go for conservative assumptions whenever you can, and you go out of your way to make sure they are as accurate as they can be, because there is so much uncertainty at play. Your offsets will be more trustworthy that way, which might score you some extra buyers.

  3. What I find particularly fascinating about LiveCooler’s project is that it fits the model so many of us have in our heads about what offsets should look like in terms of co-benefits, distributed behavior change at the consumer level, etc. Yet, the actual markets have a real difficulty capturing these reductions due to one of the very things that make it a great offset. That is, because the reductions occur at such a micro-level, one household at a time, they are almost impossible to calculate precisely.
    Who so ever cracks this nut will yield the fruit of the carbon future. Kudos to Jay for getting a head start on the markets!

  4. Hi,
    I have a question about methane capture. If carbon offset companies consider one ton of methane 21 carbon credits, but then they burn the methane to dispose of it. That destroys the methane but releases CO2 back into the air. Are they ripping me off? I was thinking of buying my credits with just people that plant trees instead of the methane capture method. It appears a little shady. I have a funny feeling that my 21 carbon credits are more like 10.

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