WHAT IS… Carbon Offsetting?

What is voluntary offsetting?

Voluntary offsetting is a way of compensating for greenhouse gas emissions from certain emission-intensive activities that cannot be avoided. The party that causes the greenhouse gas emissions by its activities funds activities that lead to a reduction in greenhouse gas emissions elsewhere. This could be done, for example, by co-funding the erection of a wind power station in a developing country. Alternatively, the polluter could create carbon sinks, e.g. by planting woodland. The growing trees will absorb carbon dioxide (CO2) and bind it – usually for several decades.

Source: iS­tock­pho­to

In an international context, carbon offsetting is considered to be voluntary if the offsetting scheme has not been established in order to reach legally binding targets, such as those imposed on some countries by the Kyoto Protocol.

As far as the effect of greenhouse gases on the climate is concerned, it mostly does not matter where the emissions come from. It is therefore possible to offset a flight from Berlin to Barcelona by funding a project in South America. Practically any activity that involves the release of greenhouse gases could be offset. Service providers offer offsetting for car, train or plane journeys as well as for household consumption of gas, electricity or heating fuel. Apart from using offsetting services, consumers can choose “climate-neutral” goods, events or services. Providers pledge to offset greenhouse gas emissions linked to the production, transport or use of the goods in question. There are, for example, printing companies that offer “climate-neutral” document-printing if the customer wishes. Many such offsetting services are promoted on the Internet.

How does it work?

The principle behind offsetting is simple. The objective is to make up for carbon dioxide (CO2) emissions that cannot be avoided at one place either by reducing emission elsewhere or by increasing the absorption of CO2 by carbon sinks elsewhere. CO2 calculators have been introduced to determine the exact price for offsetting an activity such as air travel. The calculators work out the CO2 emissions to be offset, based on data and figures such as the amount of CO2 emitted by the combustion of one tonne of aviation fuel. Calculations are also based on a number of assumptions, e.g. the use and average consumption of certain aircraft types.

The German Environment Agency provides a CO2 calculator based on a sound scientific model. Many offsetting service providers also have calculators on their websites.

Once the volume of emissions to be offset has been established, consumers may look at various offsetting service providers to find out how much the offsetting will cost. The offsetting price for one tonne of CO2 may vary, depending on which projects are used to offset the emissions. There are various types of projects.

Certified and verified emission reductions

In the Kyoto Protocol, industrial countries committed themselves to decrease emissions of the three most important greenhouse gases, including carbon dioxide (CO2). The Kyoto Protocol provides three mechanisms that help industrial countries to reach their reduction targets as efficiently as possible. These are international emissions trading, the Clean Development Mechanism (CDM) and Joint Implementation (JI).

The projects are assessed by independent verifiers and registered with the Secretariat of the United Nations Framework Convention on Climate Change (UNFCCC). If projects meet the strict CDM requirements, the emissions savings made may be sold as offsetting certificates to third parties. Certificates that passed the recognition process of the Climate Secretariat of the United Nations are known as Certified Emission Reductions (CERs). They may be purchased by industrial countries to cover a proportion of their emission reduction targets. Companies that are part of the European Emissions Trading Scheme may also cover a proportion of certificates needed for surrender using CERs. The Joint Implementation (JI) mechanism works similarly to CDM; the main difference is that JI climate projects are not carried out in developing countries, but in other industrial countries.

While emission reductions from CDM and JI can be used to redeem climate protection commitments as in the European Trading Scheme and are traded on Kyoto-related markets known as compliance markets, certificates from climate projects that did not go through the international recognition process are excluded from those markets. They are classified not as "certified", but only as "verified" emission reductions (VERs) and are traded on the voluntary market. VER projects are assessed (verified) by an independent third party. In order to guarantee a product quality comparable to CDM and JI, various quality standards have been established throughout the voluntary market over the past years. These largely mirror the Kyoto Protocol requirements for CDM or JI. VERs may be used for voluntary offsetting only. Conversely, CERs are more highly valued, as they can also be used for voluntary offsetting.

Criticism of voluntary offsetting

Critics of offsetting schemes argue that they leave the public under the impression that it is possible to buy their way out of climate-protecting lifestyle changes at apparently low cost. This would, in the long-term, delay urgently needed changes in consumer behaviour. Such an understanding of the offsetting concept would indeed be highly questionable because offsetting, even when effective, does comparatively little to halt climate change. In addition, not all available greenhouse gas offsetting schemes are really effective. Offsetting should therefore only be used if activities cannot simply be modified to reduce or avoid greenhouse gas emissions. Under such circumstances, however, offsetting has two further advantages. Firstly, voluntary offsetting of individual carbon dioxide (CO2)-intensive activities raises individual awareness of emissions caused and brings home the extent of emissions and the cost of a person's individual CO2 balance. Secondly, depending on the project quality, offsetting projects may yield additional benefits for sustainable development in the host countries.