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Perspectives

Carbon Offsets, Illustrated

A brief guide to one of the climate solutions we need in order to achieve a low-carbon future faster

May 26, 2021

Even if you haven’t flown in a while, you might remember this scenario: you’re booking a trip, and just before the payment screen, they hit you with one of the great ethical questions of our time.

Are you willing to pay a bit more to offset the greenhouse gas emissions you’re likely to expend getting from point A to B?

Illustration of three airplane windows looking out onto clouds, with an arrow pointing from 'A' to 'B'On a grander scale, countries—and companies the size of countries—are faced with much the same question. But even though institutionalising carbon offsets could create much-needed incentives for faster climate action, they remain underutilised.

So whether you’re concerned with the slow progress on global emission targets or pondering your own carbon footprint, here's how carbon offsets could help.

The Intergovernmental Panel on Climate Change (IPCC) has identified two major climate mitigation imperatives to keep global temperatures within a safer range:

Eliminating excess greenhouse gas (GHG) emissions will be easier for some emitters than others. Consider that technological advances have improved the cars we drive faster than the planes we fly, for example.

Handwritten style text that reads, 'the point is, it's not feasible to eliminate all emissions today. and that's where offsets come in.

The practice of offsetting is simple enough in theory: it entails reducing or removing GHGs (or investing in R&D for tech to do so later) in one place to compensate for emissions elsewhere.

Illustration showing a scale evenly balanced, with the lefthand side showing smokestacks and the righthand side showing a tree absorbing carbon molecules into the soil.'

You’re probably familiar with the sources of emissions, but what about these solutions that reduce, remove and store them?

Illustration showing forests, wetlands, grasslands, soil, decarbonization of transportation and buildings, carbon capture technology, and renewable energy visuals.

Through carbon markets, such projects can sell or trade a carbon credit for each metric ton of carbon dioxide (the most ubiquitous GHG) or equivalent GHG prevented or absorbed to emitters who wish to reduce the negative effects of their emissions. Carbon markets can either be built for voluntary participation (think: companies that have made their own net-zero commitments) or compliance with legal frameworks.

a flow chart illustration showing four stages. 1. a tree with birds pointing to 2. a lock with a carbon molecule on it, pointing to 3. a factory visual pointing to 4. four coins with different global currencies represented, pointing back to the first stage, the tree.

By putting a price on carbon, these markets encourage emitters to reduce emissions where it’s most financially feasible. Then, they can buy offsets to "balance" their emissions, thus generating much-needed finance for mitigation projects. (N.B. — there are different carbon pricing mechanisms, but we’re focusing on offsets in this piece).


One of many tools in a vast climate action toolbox, if you will, subject to help or hurt progress depending on how it's wielded.

Here are some important caveats:

  • Companies and countries must commit to ambitious decarbonisation plans that align with the Paris climate agreement.
  • Only high-integrity credits should reach the market, which includes ensuring "additionality" of the reductions the credits represent—that is, guaranteeing those reductions wouldn't have happened without the market demand.
handwritten text that reads 'we're already in the second year of a critical decade for climate action'
 
Scaling up carbon markets faster—and getting them right—will be essential to reducing emissions in the near term, and funding the low-carbon future we need.

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