CNaught explainer: What are Carbon Offsets?
CNaught is building the easiest place for companies and other parties to access carbon offsets and begin to take climate action. But what is a carbon offset and how can those who want to take climate action be sure they are doing the right thing when they purchase them? In this blog post, we explain the basics–which are fairly straightforward–before turning to the fine print, which demonstrates why it is critical to be careful when choosing how to use carbon offsets.
Carbon Offset Basics
A carbon offset is a reduction or removal of emissions of carbon dioxide or other greenhouse gasses that compensates for an equivalent emission somewhere else. They are typically measured in metric tons of carbon dioxide-equivalent–short-handed as CO2e–so that they can ideally be treated as interchangeable, no matter where or how the reduction or removal of carbon dioxide occurs. An offset buyer therefore pays a price per ton of carbon and then uses the carbon offset to offset their emissions elsewhere.
While there are some regulated markets for carbon offsets in the European Union and elsewhere, there is also a large voluntary market that is growing rapidly in the United States and around the world. Carbon offsets can also be called carbon credits, though we tend to use offsets to refer to purchases in a voluntary market and credits for purchases made in a regulated market.
Why Carbon Offsets are Powerful
The science of climate change is unequivocal: we need to transition the global economy to net zero rapidly–by 2050, according to the Paris Agreement–to keep warming to 1.5 degrees Celsius and avoid the most severe consequences. But we cannot just flip a switch and transition to a zero carbon economy. Indeed, entire sectors of the economy like power generation and construction require significant investment and in some cases invention before they can become zero carbon. Individual actors like corporations have limited resources and may not be able to reduce the entirety of their carbon footprint to zero immediately or even over ten or twenty years.
By purchasing high quality carbon offsets, companies and other actors can reduce their carbon footprint immediately beyond what would otherwise be financially or even technologically feasible. That is why organizations like the Climate Pledge and Oxford Net Zero recognize that carbon offsets are critical to any path to a net-zero future.
Why the Details Matter
Different carbon offsets should be interchangeable–a ton of carbon should be a ton of carbon–but, in practice, that is not the case. Instead, some offsets are better than others, and the specific details of a given carbon offset project matter a great deal to whether that project’s offsets drive actual climate impact. Below we discuss some of the key attributes that make a carbon offset effective:
Permanence: Permanence means that the emissions reductions achieved through a carbon offset project must be long-term and enduring. If a project results in emissions reductions that are only temporary–for example avoiding cutting down a forest, but only for a year or two–it will not provide the lasting benefits that are needed to effectively offset emissions.
Additionality: Additionality refers to the idea that a carbon offset project must result in the reduction of greenhouse gas emissions that would not have occurred without the funding from the offset. In other words, the project must be “additional” to any actions that would have been taken anyway.
Leakage: Leakage refers to the potential for a carbon offset project to displace emissions from one location to another–for instance, if a developer stopped cutting down trees in the project area and instead cut down additional trees next door. If a carbon offset project results in the reduction of emissions in one area, but those emissions are then moved elsewhere, the net effect will be zero, so accounting for leakage is critical.
Measurement: Measurement is the process of quantifying the emissions reductions achieved through a carbon offset project–both in terms of setting baseline expectations and then monitoring performance against those expectations. Without a clear plan and ongoing monitoring, we cannot understand the impact of an offset project.
On top of all of these differences, offsets can vary widely on price from as little as one-to-two dollars per ton to north of $1,000 per ton. And price does not necessarily correlate well to effectiveness. It is therefore difficult–and intimidating!--to find value in the offset market.
Making Offsets Easy
While they are a necessary and powerful tool, the details of carbon offsets matter greatly to whether the offsets are effective. As a result, carbon offsets can be complicated and even intimidating for buyers who want to drive climate impact but are not experts. That’s why CNaught is working to make carbon offsets easy:
- We charge a flat rate per ton of carbon. No need to muddle through inefficient and opaque markets with prices that fluctuate by the day;
- We pick carbon offsets for you; no need to try to figure out how to find impact and value;
- We charge based on usage. No subscriptions or additional fees;
- We meet you where you are; order through our dashboard or integrate with our easy-to-use API. integrate with your tech through a simple self-serve API. No sales necessary.
If you think CNaught might be a good fit for your company, you can sign up today or reach out to us at info@cnaught.com.
