Carbon offsetting used to be a thing. Then it was not a thing. Now it’s a thing again. But what is carbon offsetting, and does it have any effect at all?
Let’s start with the “what”. A carbon offset is a reduction in emissions of greenhouse gases made in order to compensate for emissions made elsewhere. There are currently two different carbon offsetting schemes: The EU compliance market, and the UN Clean Development Mechanism.
In the EU mandatory compliance market, governments and industries in the union have to buy carbon offsets to comply with the caps on the total amount of CO2 they are allowed to emit. The market has a fixed number of carbon offsets available. To reduce the total EU greenhouse gas emission, that number is gradually decreased every year. Less carbon offsets means that those available for purchase will become more expensive. In turn, this means that it will be increasingly more expensive to pollute within the EU. At some point it will then be sensible, not just from an environmentally friendly point of view, but also from an economical perspective, to replace polluting industrial processes with greener ones.
The other carbon offset market, the UN Clean Development Mechanism (CDM) is voluntary. Using the CDM, individuals, companies, and governments can purchase carbon offsets to mitigate their own greenhouse gas emissions. The money raised from the sale of carbon offsets is used to fund environmentally friendly projects around the world. As an example, if a German citizen purchases carbon offsets to compensate for greenhouse gas emissions caused by personal air travel, that money can potentially be used to build a solar power plant in India.Read more