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Carbon Offsets: what are they and how do they work?

Critics have taken aim at the voluntary carbon offset market in recent weeks, comparing it to the ‘wild west’ of carbon markets. In this guide, we breakdown how to choose the right project and where to find the best ones.
Csaba Szabo
8 mins

Quick refresher: carbon credits (or offsets) are a way to account for the greenhouse gases you produce. For every tonne of CO2 you emit, you can purchase offsets that will fund projects that will reduce emissions elsewhere.

Offsets are becoming an increasingly popular way of combating climate change. Last year, Amazon, Delta airlines, Google, and Nestlé used carbon offset projects to reach Net Zero and offset their carbon emissions.

However, critics have taken aim at the voluntary carbon offset market in recent weeks, comparing it to the ‘wild west’ of carbon markets. Companies have in the past been accused of greenwashing their greenhouse gas emissions using offsets, or making false claims about their environmental impact.

So how can you be sure that your carbon offset purchase is supporting real emissions reduction initiatives and reduce global warming? Here's our guide on purchasing carbon offsets.

Do carbon offset programmes work?

Some worry that companies will simply buy carbon offsets instead of making real changes to reduce their emissions. Others point to the fact that many carbon offset projects have not been verified as effective. Certification is one way to ensure that your project is verified and is leading to a reduction in your company's carbon footprint. However, there are some questions you can ask beforehand to ensure the validity of what you are purchasing.

Certification standards like the Gold Standard, Verra and the American Carbon Registry are the most established quality assurance standards. They offer a way to ensure that there is a standard criteria behind the very best carbon offset projects. These standards ensure that the voluntary offset providers and offset funds can demonstrate how they effectively reduce the carbon in the atmosphere.

Carbon offsetting can be a great way to offset your total carbon emissions, but it is important to make sure that you are supporting certified projects.

Can you really reduce carbon emissions through carbon offsets?

Yes and no. Carbon offsets can help reduce your emissions, but they cannot completely negate them. Carbon offsetting is one tool in the fight against climate change and should be used alongside other emission reductions measures such as reducing energy consumption and switching to more carbon friendly suppliers (renewable energy).

To reach Net Zero alongside these reduction initiatives, many turn to carbon offsets. However, under the most popular Net Zero standards, a company can only certify to be Net Zero once it has achieved its science-based emission reduction goals (usually a 90% or more decrease). While this may be perplexing, it means that companies can only use carbon reduction offsets (more below) to reach Net Zero.

According to the multidisciplinary team from the University of Oxford, here's a summary below on the three main elements to having a net zero aligned offsetting investment:

  1. Prioritise reducing your own emissions first and disclose how the company are using offsets.
  2. Transition your offsets towards carbon removal projects which remove carbon from the atmosphere.
  3. Transition your offsets towards long-lived storage which removes carbon permanently.

How do you find the right carbon offset projects?

Carbon certification standards

Not all carbon offset programmes are created equal - some are better than others at combatting climate change. There are a few things you should look for when choosing a carbon offset programme in order to go carbon neutral. Here's what you need to know before you purchase carbon offsets:

  • Make sure the carbon offset company is verified by a third party.
  • Choose a company that funds projects that align with your values.
  • Find a company that offers transparency in its pricing and offsetting process.
  • Check if it aligns with the Sustainable Development Goals which can helps support communities in developing countries.
  • See if they are certified through the Gold Standard or Verified Carbon Standard.
  • Check if the projects are carbon removal or carbon avoidance so that it aligns with your company's strategy.

What are examples of carbon offset programmes?

There are a variety of projects available. Carbon avoidance projects, for example, keep carbon dioxide out of the atmosphere by investing in nature based projects like tree planting and renewable energy. The problem that this raises is how permanent these solutions can be. If a forest fire burns the trees that have been planted, this can release the carbon that has been stored back into the atmosphere.

Carbon removal projects are a new category of carbon offsetting that aim to combat this effect. These are projects that remove carbon from the atmosphere and permanently store it underground. More technical solutions like Climeworks capture carbon directly from the air. This can be an incredibly impactful way of capturing carbon emissions but the cost can be prohibitive.  At the moment, the technology is in its infancy but there are plans to reduce the cost over the coming years through investment. A more niche category that is emerging is chemical-based solutions. These solutions use naturally occurring processes to speed up the absorption of carbon, with examples like Project Vesta which uses olivine and the oceans to capture carbon.

How much does carbon offsetting cost?

To offset your emissions, you will need to calculate your carbon footprint. Once you know your carbon footprint, you can choose a carbon offset project that meets your overall budget.

The cost of carbon credits is linked to how much it costs to produce the projects themselves. Carbon avoidance projects above can range from £2 to £50 per tonne, while carbon removal projects can reach up to £500!

How do we choose the best carbon offset programmes at Dodo?

Several environmentalists have expressed concern that carbon offset programmes can help countries or industries appear eco-friendly without even realising their commitment. In the right hands, carbon offset can be a useful tool for promoting sustainable development goals and can reduce the use of fossil fuels. We reviewed several climate offset schemes and selected for the most positive effects on the planet. There are seven key factors that influenced our decision:

  1. Permanent: the offset must remove carbon permanently and completely
  2. Measurable: the amount of carbon that the project has captured must be measurable
  3. Transparent: the day-to-day monitoring and verification of the project must be open and honest
  4. Additional: the project must show that the carbon removal wouldn’t otherwise occur without someone having bought the carbon offset in the first place
  5. Avoid leakage: meaning that the project can’t cause emissions to be released elsewhere
  6. Independently audited: a third party needs to verify the projects impact
  7. Registered: Lastly, the project needs to be officially registered in registrars such as the Gold Standard.

Our top pick for the best carbon offset programme: Patch.io

Announcing our Patch partnership

We partner with Patch for the very best carbon avoidance and carbon removal projects for you to choose from. Patch reviews data from a number of sources to ensure every project in their partner network meet rigorous quality requirements. These sources include verification standards such as American Carbon Registry, Gold Standard, and Climate Action Reserve. This allows your company to reach Net Zero or carbon neutral by investing in  triple verified carbon offset projects around the world.

Bottom Line

Carbon offset programmes have become increasingly popular in recent years as a way for individuals and businesses to reduce their carbon footprint. Carbon credits are purchased from companies that invest in projects that help to offset greenhouse gas emissions. There are a variety of carbon offset projects with the most effective (and most expensive) being carbon removal projects. Choosing the right project can depend on a variety of factors such as budget, location, project type, and your company's sustainability strategy.

However, when selecting a carbon offset programme, it's important to verify that the project is striving for the highest standards in the industry.

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