How Does Carbon Offset Work?

If you are wondering what carbon offsets are and maybe you are also asking yourself, “how does carbon offset work?” Well, this complete carbon offset guide will help you take the guess work out of purchasing quality carbon offsets.

There are great carbon offsets in the market and of course there are others of low quality. My goal is to make sure you understand what carbon offsets really are and what to look for when you are ready to buy. This way you are able to purchase carbon offsets that have real benefits to the environment.

I would advise that before you consider buying carbon offsets, first do everything you can to reduce your own carbon footprint as much as you can. A carbon footprint is the amount of greenhouse gases your lifestyle emits.

Almost everything has a carbon footprint because the truth is that we are still in the process of moving completely away from fossil fuels.

To reduce climate change, start by making changes at home and at your place of work and then you can add carbon offsetting to the list in order to do even more for our planet.

What Exactly Are Carbon Offsets?

Carbon offsets refer to reduction in greenhouse gas emissions through activities such as tree planting and such activities are used to compensate for emissions occurring somewhere else. Carbon offsetting is a tool developed to combat climate change.

Carbon offsets are programs that help reduce our emissions at another location; for example a wind farm that creates renewable energy which minimizes the need for traditional sources of electricity from coal burning plants.

The good news is that anyone can buy carbon offsets and balance their emissions.

If you are able to buy enough carbon offsets after doing your part to reduce your own carbon footprint, your net emissions will be zero. This is known as being carbon neutral.

Carbon offsets can be purchased through online and trading platforms. Carbon offsets are measured in tonnes of carbon dioxide equivalent (CO2e). A tonne of carbon offset simply means the reduction of a tonne of carbon dioxide or other greenhouse gases.

After you have made every effort to minimize emissions, carbon offset can become an additional way of taking responsibility to reduce emissions even further.

Put simply, carbon offsets are credits for reducing emissions at another place. An example is a wind farm that produces renewable energy which reduces the need for coal plants. In other words, carbon offsets allow us balance out our emissions.

How Does Carbon Offset Work?


Carbon offsets are aimed at reducing greenhouse gas emissions to compensate excess greenhouse gas emissions produced somewhere else. Players in the carbon market space include government, businesses, individuals and even non-profit organizations.

The carbon offset market operates in two main areas: the voluntary or retail carbon market and the compliance carbon market.

Voluntary Market

The voluntary market refers to offset that does not have to do with government regulation and this market serves organizations, individuals and businesses. This group is not required by government to cut down on emissions but they voluntarily decided to take responsibility to reduce climate change by doing their part.

As an individual or small business, you can make a purchase through an online retail vendor. Large businesses usually make their own purchases through a broker.

Well known businesses such as Google, Nike, TD Bank are already reducing their carbon footprint by voluntarily buying carbon offsets. Even some airlines offer passengers the option to buy carbon offsets in order to offset carbon emissions. Oh! Let’s not forget the Superbowl and the Olympics. Yes they are now buying carbon offsets too.

Compliance Carbon Market

The compliance carbon market on the other hand is regulated by government programs and they ensure big industries and countries minimize their emissions. An example of a government regulated program is the Kyoto Protocol.

Carbon offsets sold under the compliance carbon market are regulated and restrictions on location of projects and the types of projects are enforced to ensure the carbon offsets are of good quality.

Benefits of Carbon Offsets

Remember that carbon offsets should not be seen as a direct way to reduce emissions’ and should only be considered if you have tried in your own way to reduce your carbon footprint. Here are some benefits of carbon offsets:

1. Greenhouse gas emissions from activities like flying are addressed when you purchase carbon offsets.

2. Greenhouse gas emissions spread rapidly across the globe and so in my opinion you can pay for emissions reduction in other parts of the world. It does not have to be where you’re from.

3. You gain a better understanding of how important it really is to cut down on emissions and how to calculate emissions’ in order to buy offsets.

4. As an individual or organization purchasing carbon offsets regularly you may start thinking of how to make further reductions on the amount of carbon emissions you produce.

5. Carbon offsets provide a pathway for sectors such as air travel to reduce their emissions.

6. Communities where offset projects are located will benefit economically and environmentally.

6 Key Criteria that Make a High Quality Offset

You want to ensure that the carbon offsets you are going to purchase are of high quality. Therefore, carbon offsets need to meet these key criteria:

1. Additionality:

When assessing carbon offsets, a crucial thing to look for is additionality. This means a project cannot be executed without incentives from the offset market.

Let me give you an example of what I mean: a community recreation center would like to install solar panels on its roof, but they have no funds to do so.

The solar panels would reduce green house gas emissions. Now the question is this – Can the community recreation center sell offsets to help fund the project? The answer is Yes. This is because the money made from the sale of offsets will be a huge factor in deciding whether the project can be executed.

2. Auditing:

This is a method that helps determine whether the carbon offset project is actually reducing emissions’. Auditing takes place in 2 forms: validation and verification.

Validation happens before the project is executed and this confirms if the project will be additional while verification takes place after project implementation. This helps determine if the emissions reduction are actually happening.

It is important that the audit be carried out by third party auditors that are qualified and not in any way related to the carbon offset vendors.

Validation and verification should also be conducted by different third party auditors. So in essence, a vendor should not use the same vendor for both validation and verification.

3. Ownership

Establishing clear ownership to greenhouse gases that are reduced due to carbon offsetting is crucial. If not, more than one company can claim the benefits from the reduction.

Let’s look at it this way, greenhouse gases are reduced from one project, meaning reduction has occurred once, so we can clearly say that the purpose of carbon offsetting and its benefit on the climate has been defeated if the same reduction is counted more than once!

It is therefore important that when offsets are sold, they should be retired so that they are not sold again.

4. Permanence

Yes! The offset should be permanent. Permanence has to do with keeping carbon emissions out of the atmosphere for a very long period. Permanence is not an issue for offset projects that has to do with energy efficiency and renewable energy such as wind turbine.

Tree planting on the other hand, is good if the project is monitored. If trees are lost due to wildfires or logging then carbon that has been stored for so many years escapes into the atmosphere which is definitely not what we want.

It is important that tree planting projects have a long term plan and there should be a process in place to replace lost carbon. Projects that rely on storing carbon should be backed by legal instruments.

Certain areas can be denoted as “conservation areas” to prevent any form of urban development in such areas.

5. Leakage

This is something we want to avoid. Leakage is when you are trying to reduce emissions’ from a project and this leads to increase in emissions on another project.

A good example is the Amazon. What if protecting the amazon forest leads to logging in another forest area?

Leakage is something that has to be addressed by the vendors and their project developers at the design stage of the project.

6. Sustainability

A high quality offset project must not have any negative environmental or social impact regardless of whether they are covered by regulations or not. Instead, carbon offsets should be beneficial to the people and the environment.

Carbon offset projects can bring out minimized air pollution and even the creation of jobs as long as the project is achieving its primary goal of reducing greenhouse gas emissions.

What is a Carbon Offset Calculator?

Source: shutterbug75, pixabay

A carbon offset¬†calculator will help you figure out how many tonnes of carbon offsets you need to buy. The calculator can be found on the carbon offset vendor’s website. To do this, you would need to calculate the quantity of emissions’ you are generating.

The calculator will ask you for some information such as the type of vehicle you drive, the model of the car and what year it was made, where you are flying to and where you are flying from.

The carbon offset calculator can help you calculate emissions from different activities like driving, heating, the amount of electricity you consume and even flying.

Now when using the calculator, it is important to be as accurate as possible; after all, what we want to achieve is emissions reduction so that we can save our planet and banish climate change forever isn’t it? So for accuracy, it is best to try out different calculators and make comparisons.

What Are The Tips For Buying Carbon Offsets?

Now that you know the criteria that make a high quality offset, you are ready to make a purchase. Here are more tips to look out for:

1. Start by identifying which offset you would like to support

High quality offsets are normally renewable energy and energy efficiency projects since they tend to support the movement to a clean energy economy. For example, would you like to support a tree planting project? Perhaps you may prefer to support a wind farm project.

2. Transparency

You need to be sure that the vendor in question is transparent about their practices. Go to their website, check out their business practices and see how much information is available to you regarding the offsets that are being sold.

Is the information clear enough, can you contact them to ask more questions if you have any?

The vendor website should be able to provide necessary information including: what offsets are available for purchase, technologies used, location of the project, tonnage of the project and any applicable certification standards.

3. Education

Purchasing carbon offsets should not be an excuse for not doing our part in reducing our emissions; therefore, vendors should be able to use their websites to educate customers on what exactly climate change is all about, how climate change affects us and ways we can reduce our carbon footprint.

All the above will make more us take responsibility for their actions and seek ways to reduce climate change.

They should be able to give a good explanation of what carbon offsets are, why they are important and how to recognize a high quality offset.

Customers should also be provided with information on how offsets are generated and what exactly makes a high quality carbon offset.

4. Carbon Calculators

If you are going to purchase carbon offsets, the vendor website should have a calculator that is easy to use. The calculator is a very crucial aspect that helps you deduce the amount of offsets you are going to buy.

You want accurate results, so make sure you add all your sources of emission. For example, fuel usage, land and air travel, and even your electricity consumption.

5. Location of the offset project

Another thing you may need to consider is the location of the project. Would you, the buyer prefer to choose projects in a developed country or a developing one?

A good example of a project in a developed society would be a wind farm while in the case of a developing country an example would be solar stoves for cooking.

Nonetheless, you just may be able to purchase both offsets. After all, greenhouse gas emissions’ spread super fast around the planet so it really does not matter which offset project you choose. This way you are able to share the benefits between both regions!

6. Price

Just like the pricing of your groceries vary from one store to another, prices of offsets will vary from one vendor to another. The type of project involved will also contribute to the pricing. So, when you are ready to make a purchase make sure to compare prices.

Now, note that offsets of high quality may cost more and it is okay to purchase one of higher quality than purchasing one that’s cheap and has no benefit to the environment.

7. Structure of the Organization

Note that offset vendors can either be not for profit or for profit organizations. You may want to know this upfront before making a purchase. For some people, they would rather have the money go to a non profit that is committed to offsetting carbon while others may not really care.

8. Carbon Offset Standards

When you are ready to make a purchase you can also consider buying one certified with a strong standard. When you are shopping for offsets, you want to ensure that they are high quality offsets that meet strong standards such as the Gold Standard and the CDM (Clean Development Mechanism) standard and also make sure that an independent auditor has certified them.

Now on the other hand, there are also offset projects that are of high quality but have not been certified. That is why I would advise that you always do your homework to assess the offsets before making a purchase.


How does carbon offset work? I hope this complete guide has helped you answer this important question. Some say carbon offsetting does not work but I believe it does.

It is better to do something about all the emissions than not to bother at all. Greenhouse gases mix in the atmosphere; therefore, reducing emissions anywhere in the world is beneficial to planet earth.

Although carbon offsets have been criticized as a way to buy your way out and just continue polluting as long as you can afford it, this should not be the case because in fact, purchasing carbon offsets actually result in real greenhouse gas reductions.

I cannot stress this enough but carbon offsets should never be seen as the only way to reduce emissions. However, the climate change problem is a huge one that needs urgent solutions and I have to agree that voluntary carbon offsets can help combat the problem and reduce emissions.

Hope you found this guide helpful. If you have any questions, please leave them below. I would love to hear from you.


4 thoughts on “How Does Carbon Offset Work?”

  1. Thanks for sharing this excellent well written and informative article. I have to say that i actually found this to be a very interesting read indeed. Carbon offsetting is an area I have been aware of to a level but wasn’t so clued up on the subject as I am now thanks to this article. I am trying to reduce my carbon footprint in different ways. I guess taking simple steps is crucial. 

    • Hi Kwidzin! Yes, carbon offsetting is not a topic we discuss regularly. I realize not many people know how carbon offsetting works or what they mean which is why I decided to put this guide together. It is important for us as humans to start doing our part now to reduce climate change. Once we’ve done our part, we can then consider carbon offsets. Thanks for leaving a comment.

  2. Hi, I’m pleased to meet you.

    What an interesting and educative post! I’m thrilled to know that Carbon Offset is the reduction in greenhouse gas emissions through activities like tree planting, and also that those activities are used to compensate for emissions occurring somewhere else.

     It’s also great that anyone can buy them and balance their emissions. I have learned a lot here, thanks for sharing


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