carbon offset
noun

an action intended to compensate for the emission of carbon dioxide into the atmosphere as a result of industrial or other human activity, especially when quantified and traded as part of a commercial scheme.

“purchasing the carbon offsets would contribute to the airline’s commitment to reducing its environmental impact”

Definition from Oxford Languages

Here at Green Story, we recently surveyed our network to gain insights about carbon offsetting. We found that 83.8% of respondents had heard of carbon offsetting, but 54.5% had no idea how carbon offsetting works. We decided then to dive deeper into the topic and bring some clarity. Let’s get started!

In order to understand what a carbon offset is, it’s important to first know a little more about greenhouse gas emissions. Greenhouse gas emissions are one of the largest contributors to climate change and global warming. Named after their effect on the environment, greenhouse gas emissions work to keep heat in the atmosphere, keeping the planet warm enough for us to all live on.

But, the greenhouse gases resulting from human activities like burning fossil fuels, clear cutting forests, and intensive animal farming are rising quicker than the planet can naturally regulate, resulting in climate changes that we can’t deny. As a global community and as industry, we’re in a race to reduce emissions. If you are a sustainable fashion brand, even though you are already engaging in a wide range of sustainability practices (e.g. you are using sustainable fabrics, your employ sustainable manufacturing practices to reduce your CO2 emissions), there are still emissions that are unavoidable from your production.

This is where carbon offset projects come in. Buying carbon offset certificates helps support projects that sequester, and in some cases avoid altogether, future emissions. For example, the carbon offset certificate may help to fund a renewable energy project, which offers a reduced  carbon footprint compared to conventional energy sources (coal, hydro-dam, oil, etc).

Social carbon offset projects work with local communities in developing countries who may not have the resources, or knowledge needed, to start a project on their own. Carbon offset projects connect those communities to larger project developers. Some benefits of these projects include an influx of new jobs and in some cases, safer and more sustainable energy sources.

Carbon offset credits are purchased from these projects, in equal quantity to the unavoidable emissions. This action provides crucial funding for these projects to continue to thrive while making your organisation or products carbon neutral.

Different project types to compensate for carbon emissions

Carbon offset projects can take on different variations. The most common project types can be separated into three main fields: Nature-Based Climate Solutions; Clean Energy; Community Projects.

Nature-Based climate solutions

Nature-Based climate solutions include tree planting projects, sustainable forest management and conservation. Most often, these projects focus on the benefits of sequestration. Trees are known to pull CO2 from the air, sequestering it in its biomass. By planting more trees, more CO2 will be removed from the air.

Clean Energy

Clean Energy focuses on renewable energy projects that include: hydro, biomass, solar, wind and geothermal. These energy production plants emit very little carbon compared to conventional energy sources like coal or gas-based power plants. Once transitioned, these projects see benefits for years to come by providing renewable energy sources.

Community Projects

Community focused projects support initiatives within communities that are socio-economically disadvantaged and are more likely to feel the effects of climate change. The projects typically aim to transition these communities to updated energy grids and appliances to reduce their reliance on conventional sources, which emit high levels of CO2.

Examples of projects

Reforestation Project: Degraded Land Reforestation in India

Reforestation projects protect and restore forests, which sequester carbon and help biodiversity to thrive. One mature tree in a forest sequesters around 20kg of carbon every year. One example of a reforestation project is taking place in India, where farmers and communities that own small plots of land that have degraded are given financial support and technical guidance to begin replanting on their land. Land that would have laid bare is now a source of livelihood, and any carbon revenue generated goes back to the participating farmers thus stimulating the local economy.

Renewable energy project: Guatemala Wind Power

Creating the infrastructure needed to generate renewable energy harnessed from natural resources like the sun or wind not only promotes the transition to clean and renewable energy but supports local communities as well. For example, installing a wind farm in Gautemala that deploys sixteen 3.45 MWh wind turbine generators can generate 135.655 GWh hours of clean electricity per year and supply over 20,000 homes. This project gives the local community access to clean and affordable electricity and contribute to a reduction of 81,392 tons of CO2 emissions per year.

Community project: Biogas Plant in India

Funding farms and communities is a great way to offset carbon. In India, for instance, the creation of an anaerobic digestion plant to take chicken litter and other byproducts of the food industry and convert them to renewable biogas energy displaces the demand for more carbon intensive energy sources, reducing carbon emissions. In the meanwhile, the biogas plant reduces methane gas emissions from open storage of chicken manure. A bonus byproduct of biogas as an electricity source is organic fertilizer, this is bagged and available to smallholder farmers, promoting sustainable agriculture in the region.

Why should we use carbon offsets?

You might be wondering why carbon offsets? Well, carbon offsets are an effective tool in the fight against climate change. Between 1950 and 2008, carbon dioxide levels have doubled. Carbon offsets support projects all around the world, helping to ensure that these levels don’t continue to rise.

Our day-to-day habits and the products we use, all emit greenhouse gases. Carbon offsets reduce the impact of those emissions by supporting projects that reduce or sequester carbon. This doesn’t entirely eliminate emissions, it helps to limit their overall impacts.

Carbon offsetting projects can greatly impact those people who are living in poverty or who are at a greater risk of the effects of climate change. This is done through supporting carbon offset projects that focus on renewable energy transitions.

Of the 83.8% of people who had heard of carbon offsetting, only 37.4% had actually purchased carbon offsets. Carbon offsetting may not lead to an entirely carbon neutral world, but it’s still important to minimize our carbon footprints. Having said that, carbon offsets don’t provide a free pass  to do whatever you want and emit without thinking. They act as a time solution, not a saving grace.

How to offset your carbon emissions and reduce your footprint

There are different ways to buy carbon offset credits and reduce your carbon footprint: marketplace, external service providers, brands’ websites.

Marketplaces

There are many different carbon offset providers and most have their own marketplace, where you can select and buy carbon credits from various projects. For example: Marketplace from UN and Gold Standard, where you can find up to 40 projects.

External service providers

Recently, external service providers have emerged on the market to provide consumers with more options to buy carbon offsets. They often highlight 3-4 projects, which they will resell to business partners and individuals. These resources often boast a carbon calculator, that consumers can use to calculate their carbon footprint. For example, SouthPole, who offers more than 700 projects, sell credits directly on their website.

Brands’ websites

As carbon neutrality has become more of a hot topic, many brands have added a function to compensate for the carbon emissions applying directly to online purchases. 75.7% of those who told us that they had previously purchased carbon credits, bought them directly from the company’s website. This is most common with airlines who will offer a service to compensate for the carbon emissions from a flight at check-out.

Additional benefits of engaging in carbon offset projects

Carbon offsets have a lot of benefits – aside from the most obvious, reducing carbon emissions and slowing down climate change. Carbon offset projects apply to many of the 17 Sustainable Development Goals, a blueprint set out by the United Nations to work towards a more sustainable future for all. For example,  a community project with efficient cookstoves helps to fight against poverty, hunger, supports good health, gender equality, economic growth, reduces inequality and takes a big step in climate action. This one project alone supports up to 7 different SDGs.

Voluntary and mandatory offsets – what’s the difference?

As an everyday consumer, you’ve probably heard of the voluntary carbon offset market, like compensating the emissions from a holiday flight or buying carbon credits to offset an online shopping order – source.

However, in a lot of countries there is a mandatory offset market in place. The mandatory market was put in place in 2005 as a result of the Kyoto Protocol, signed by the United Nations in Kyoto. From that point on, the European Union has worked on the “Cap & Trade” principle, meaning that each country has an individual cap of carbon emissions they are allowed to emit.

For example, large power plants and energy intensive production sites are part of a mandatory carbon offset market, which covers up to 40% of the carbon emissions in the European Union with almost 11,000 production sites – source.

How are these projects regulated?

The voluntary carbon offset market started in 2005 as the Clean Development Mechanism (CDM) and came into effect as a part of the Kyoto Protocol.

Carbon offsets are regulated through independent verifiers like the CDM to ensure that the projects function as they’re supposed to and the benefits are tangible. Since the CDM was introduced, other verifiers have entered the market to ensure that projects follow rigorous standards and are held accountable.

Clean Development Mechanism

The CDM was the first mechanism used to outline the rules for carbon offset projects and served as the foundation for all standards that followed. The CDM is a mechanism which allows industrialized countries to buy certified emission reduction (CER) credits from offset projects in developing countries.

Gold Standard

Gold Standard, established by the WWF in partnership with supporting NGOs, is an iteration of the CDM, which is also used by the UN agencies themselves. In contrast to the CDM, Gold Standard also supports projects taking place in developed countries. Gold Standard claims to have the most stringent environmental and social safeguards. For example, all Gold Standard certified projects need to have a gender-sensitive project design and must always include local stakeholders. Further, project types with greater risk and potential for negative impacts, like large hydropower projects that can harm the wildlife habitats will not be certified. All verified Gold Standard projects are registered in a database that tracks the retirement and cancellation of all credits sold.

Verified Carbon Standard

The Verified Carbon Standard was developed by Verra, a leader in setting global standards and frameworks for project financing.  VCS covers over 1600 projects worldwide, that are audited by independent third parties and Verra staff to ensure that the defined standards are met and maintained. All VCS projects are registered in a database that tracks the retirement and cancellation of all given certificates.

Variations of offset offerings

In addition to carbon dioxide, there are many other harmful greenhouse gas emissions that need to be considered.

For example, emitting one kilogram of methane is 84x more harmful in the short term than carbon dioxide, and overall is 25x more harmful to the environment. Luckily, there are offset projects that work to reduce methane emissions. These projects are typically recalculated as carbon offsets in order to streamline the process of offsetting and make it easier for consumers to understand.

Another very important variety of offsets are water offsets. In our daily life we consume a lot of water, actively and passively. The water used to produce the products we use everyday contributes to our passive water use. For example, the production of a normal cotton t-shirt requires up to 2,700 liters. So, in order to ensure that everybody has access to safe water sources in the future, you can also compensate your water usage by buying water benefit certificates.

Example of different water benefit projects include:

We hope that this content helped you better understand carbon offsetting, and we also recommend to watch our Demystifying carbon offsets webinar with moderator Amy Nguyen, Sustainability Contributor at Forbes, and a panel including Pepe Martín, founder of the Spanish brand Minimalism, Naomi Swickard, Chief Program Officer at Verra and Guy Turner, Founder & CEO of Trove Research, as they demystify carbon offsetting.

If you have any other curiosity or are interested in getting started, feel free to get in touch or visit our carbon offsetting platform, Simplizero Ecommerce, to learn how brands can make their products carbon neutral.

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