The Complete Guide to Carbon Offsets
Carbon offsets are a key tool in helping to curb climate change impacts. Here’s how they work.
Our society currently is facing a multitude of harmful effects as a result of climate change. Whether its impacts are seen through rising temperatures, loss of biodiversity and ecosystems, health issues, or extreme natural events, each consequence of climate change is driven by an increase in greenhouse gasses present in the Earth’s atmosphere.
Noting carbon dioxide and other greenhouse gasses as the driver of climate change, experts say that greenhouse gas levels in the atmosphere are now nearly double that of pre-industrial revolution levels. As emission levels continue to rise, it’s crucial for those feeling like they have little to no impact on climate change to find a way to play their part in the decarbonization of our society.
What are Carbon Offsets?
Carbon Offsets are a type of credit that anyone (yes, anyone) can purchase with the intent of mitigating the effects that their actions have on the environment. People can voluntarily choose to buy these credits to offset the carbon emissions caused by building, traveling, using energy, and other polluting activities.
Some offsets are not voluntary and are mandated by the government. This typically occurs when large corporations pass a certain threshold of greenhouse gas emissions that the government has determined to yield negative impacts if not offset.
What Does It Mean for Emissions to be “Offset?”
Carbon offsets are functionally a way for people to donate funds to projects that remove emissions from the atmosphere. These projects are meant to remove the same amount of greenhouse gas in the atmosphere as what was emitted by the purchaser.
By purchasing carbon offsets, companies and individuals can effectively decrease their overall carbon footprint, which is especially important for large corporations, which are the cause of significant amounts of pollution.
Every Carbon Offset Project is Different
Carbon offset projects can range from a simple tree-planting project to one that captures gasses from the atmosphere and stores them deep underground. However, the variety in types of carbon offset projects also means there is variety in how effective every project is.
For example, some projects like planting trees do remove carbon dioxide from the atmosphere through sequestration. However, once a tree dies, the sequestered carbon is again released into the atmosphere, making these projects impermanent, and therefore not optimally effective.
Other projects might occur in a location where mandated carbon offsetting is already being implemented. Because of this, any projects done in the same location will be less effective because there is already a high quality, mandatory project being carried out.
Alternatively, gas capture in rural areas is typically regarded as a high quality offset project, as it is implemented in a location in which mandatory offset projects are not occuring, and by capturing and disposing of the gas, the emissions are permanently offset.
Total U.S. Greenhouse Gas Emissions by Economic Sector and Electricity End-Use. EPA, 2021.
Who Should Get Involved?
With 60% percent of carbon emissions coming from buildings and industry, voluntary carbon offsets are a great opportunity for builders, manufacturers, energy companies, and similar groups to invest in offsets to limit their carbon footprint and mitigate the effects of air pollution and climate change without limiting productivity. Carbon offsets allow for these groups to make internal changes in their emissions gradually into environmentally cleaner operations.
The EPA notes that the average American household emits about 14,000 pounds of carbon dioxide annually. Using this information, the approximate cost for every household in the United States to offset their carbon emissions would be about $130 annually using Green Builder Media’s default portfolio.
Misconceptions About Carbon Offsets
Myth: Companies just use offsets as a way to greenwash their brand; offset projects don’t actually impact emissions in the atmosphere.
Fact: Many companies that sell carbon offsets use offset project ranking software to ensure that offset purchases are put towards meaningful projects that have a high environmental impact, and meet other requirements based on offset regulations as well as ensuring project effectiveness.
Myth: Carbon Offsets are an excuse for companies to not change how much they emit.
Fact: While this is a possibility, many industries will struggle to make immediate, meaningful changes that decrease a given industry’s carbon footprint. By giving industries the opportunity to purchase carbon offsets while they are transitioning to greener practices, skeptics can be assured that companies will ultimately become more environmentally friendly in the future by having the chance to create a better developed emission reduction plan.
Myth: Carbon Offsets are expensive.
Fact: Carbon credits (or offsets) aren't a single commodity with a single price. Unlike grain or oil, carbon offsets as a class aren't expensive, or cheap. They can range from $1 to $1,000 or more per metric ton. And while the $1 per ton offsets are almost certain to carry a high risk of being worthless, the more expensive offsets are also not guaranteed to drive impact because there are inherent operational risks. Diversified portfolios help balance the cost of carbon offsets while driving real climate impact and mitigating risk.
“We need a dramatic reduction of greenhouse gas emissions to keep global warming to under 2 degrees Celsius. If we remain on our current trajectory, we’re expected to surpass that threshold within a shockingly short 5 years,” says Green Builder Media CEO Sara Gutterman. “We know how to decarbonize our economy through the electrification of buildings and transportation, adoption of renewable energy, reimagination of manufacturing, and regenerative agricultural practices. But these things take time, so carbon offsets will play a critical role in meeting our climate needs.”
Carbon Offsets FAQs
What Are Carbon Offsets?
A carbon offset is a transaction that removes CO2 or other greenhouse gasses from the atmosphere to compensate for emissions made elsewhere. The most common carbon offset projects today focus on forest management and conservation, biodiversity protection, renewable energy, biochar, and direct air capture.
How Do I Buy Carbon Offsets?
There are several types of carbon offsets companies, including traders/brokers that work directly with companies that want to purchase offsets, exchanges that trade credits in the open market, incubators that support carbon offset projects, and projects that sell offsets directly. Green Builder Media is now selling carbon offsets specifically for the building industry to help building product manufacturers offset emissions from their products and operations; building professionals offset the embodied carbon of their projects; homeowners offset the impact of their homes and lifestyles. Contact us today to learn how you can purchase carbon offsets.
Are Carbon Offsets Expensive?
Carbon offsets aren't a single commodity with a single price. Unlike grain or oil, carbon offsets as a class aren't expensive, or cheap. They can range from $1 to $1,000 or more per metric ton. And while the $1 per ton offsets are almost certain to carry a high risk of being worthless, the more expensive offsets are also not guaranteed to drive impact because there are inherent operational risks. A diversified portfolio can help balance the cost of carbon offsets while driving real climate impact and mitigating risk.
Are Carbon Offsets Tax Deductible?
The IRS doesn’t have tax rules addressing the tax treatment of carbon offsets bought by individuals. Therefore, a tax deduction for funding a carbon offset project could be considered a charitable contributions deduction. To qualify for a charitable contribution deduction, you must donate to a qualified organization (or a 501(c)3) and itemize deductions on your tax return instead of taking the standard deduction. And you can’t receive a benefit for the contribution.
What’s the Difference Between Carbon Offsets and Carbon Credits?
Carbon offsets are a measurement unit to compensate a business for investing in green projects or initiatives that eliminate emissions. Carbon credits (or carbon allowances) are a measurement unit to cap emissions. They work like “permission slips” and are typically bought from the government to be allowed to generate carbon emissions.
Offsets flow horizontally, trading carbon revenue between companies. When one company removes a unit of carbon from the atmosphere as part of its normal business activity, it can generate a carbon offset. Other companies can then purchase that carbon offset to reduce their own carbon footprint.
Note that the two terms are sometimes used interchangeably, and carbon offsets are often referred to as “offset credits.”
Why Is It Important for the Building Industry to Consider Carbon Offsets?
The built environment is one of the most conspicuously consumptive sectors of our economy and has a tremendous impact on greenhouse gas emissions. The Department of Energy (DoE) estimates that homes and buildings in the U.S. account for 40 percent of U.S. total energy use, 70 percent of electricity use, and 40 percent of total emissions. The UN says that emissions from buildings must be reduced by 50 percent by 2030 and 100 percent by 2050 if we have a chance at staying under a 1.5-degree temperature rise. Unfortunately, not even 1 percent of existing buildings are considered net-zero carbon today.