What Is a Carbon Offset?

Carbon neutrality is not always achievable by simply reducing energy consumption and converting to renewable energy. In some situations, the use of fossil fuels is unavoidable, like for commercial air travel and other scope 3 emissions. As universities, cities, and even entire countries attempt to achieve carbon neutrality, they will look to use carbon offsets to compensate for areas of greenhouse gas emissions they cannot reduce down to zero. In 2005, the Kyoto Protocol set up the framework of carbon offsets and validated their use to reduce carbon emissions globally. Of the 145+ brands certified by Climate Neutral and the seven universities that have reached carbon neutrality, all have purchased offsets to achieve their goals.

Carbon offsets are financial investments in projects that reduce greenhouse gas emissions in one location in order to balance out the emissions made elsewhere. These greenhouse gas reduction projects exist outside the usual operations and boundaries of the organization purchasing the offsets.

How Does Offsetting Emissions Work?

Developers establish offset projects that reduce greenhouse gas emissions. TerraPass, one provider of carbon offsets, defines three ways that offset projects can reduce the amount of greenhouse gases in the atmosphere:

  • By producing energy using a clean, renewable resource that eliminates the need to produce that same energy from fossil fuels. An example of this is wind power.
  • By capturing and destroying a greenhouse gas that would otherwise be emitted into the atmosphere. An example of this is a methane gas capture project at a landfill. 
  • By capturing and storing (or “sequestering”) greenhouse gases to prevent their release into the atmosphere. An example of this is a project that promotes the healthy growth and maintenance of forests.

The project developers can then sell these reductions of greenhouse gas emissions as carbon offsets. This transfer of funds enables project developers to finance new projects, and it enables the purchasers to offset emissions they cannot reduce from their own operations. 

To bring this concept closer to home, we can give three hypothetical examples of offset projects that U-M could invest in as part of our carbon neutrality plan. U-M could fund the installation of rooftop solar within the community, such as on fire stations throughout the county. U-M could fund the capture and destruction of methane gas at a landfill in California, or U-M could fund reforestation or wetland restoration in the Upper Peninsula. While these project examples range in location and scale, they could all be used to offset a portion of the emissions generated on campus.

Limitations of Offsets

Now, you might be thinking that this climate change solution almost sounds too good to be true, and in some ways, you would be right. Carbon offsets do get a lot of scrutiny for functioning as cheap permits allowing mega polluters to keep polluting without addressing the real problem, but generally, the limitations and nuances of carbon offsets are left out of the conversation.

First, carbon offsets are not a long-term solution because we can’t offset everything. There simply are not enough offsets in the world to enable organizations to use them to compensate for more than a small fraction of their needed reductions. As a result, organizations must take aggressive action and meaningfully reduce the carbon footprint of their operations before purchasing offsets. 

Second, it can be extremely difficult to measure the quality of carbon offsets and know that these projects are actually diverting as much carbon emissions as they claim. Duke University looks for these five characteristics when selecting quality carbon offsets as part of their carbon offsets initiative:

  • Additional- The reduction would not have occurred during business as usual.
  • Permanent- The reduction must last in perpetuity.
  • Enforceable- The reduction must be counted only once and then retired.
  • Verifiable- The reduction must have been monitored and confirmed to have occurred.
  • Real- The reduction must have actually occurred and not as a result of flawed accounting.

Third, being able to purchase offsets can leave developing countries and minority communities at a disadvantage because the argument that a ton of CO2 saved somewhere is equal to a ton of CO2 saved anywhere, while true on a global scale, does not work on a more local level. Buying a carbon offset does not directly protect communities where toxic pollutants are being emitted or eliminate underlying health and safety concerns. For example, if a company located in Southwest Detroit bought carbon offsets that reforested land in the Upper Peninsula, that carbon reduction project would not likely improve the lives of residents living in Detroit’s 48217 zip code, the most toxic place in Michigan

Think about these limitations while you continue to grow your understanding of carbon offsets. When the PCCN releases its final report this fall, utilizing offsets to pursue carbon neutrality could be one of the recommendations made to President Schlissel. As a result, it will be vital that Planet Blue Ambassadors think critically about U-M’s choices and advocate for quality offsets that complement a meaningful suite of actions to reduce emissions created on campus.


What’s your perception of carbon offsets and their role in enabling organizations to pursue carbon neutrality?

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