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Carbon Offsets Explained

Compiled by Rebecca Gallagher for Sustainable Lawrence

The Basics

Every day people do dozens of things that put more carbon dioxide into the atmosphere. This gas is the main perpetrator of climate change, yet activities like driving, heating your house, air travel, and electricity consumption, are hard to stop. Individuals that want to reduce their “carbon footprint”, the amount of carbon dioxide generated in a year, have the option of buying carbon offsets, often called renewable energy credits, or REC’s.

Carbon offsets are projects that decrease the amount of greenhouse gases (GHG) like carbon dioxide in the air to counterbalance the amount that an individual has emitted. These projects can include, but aren’t limited to planting trees (carbon sequestration), erecting wind turbines or solar panels, reducing methane (a greenhouse gas more potent, but less common than carbon dioxide), or updating manufacturing processes to use less fossil fuel.


To offset the average US household energy consumption of 10,656 kWh per year, 3Phases, a large wind company in the Midwest, charges $213.00. 3Phases will use this money to produce, in theory, 10,656 kWh extra in wind energy by building that many more turbines. This new renewable energy will be added to the grid in the place of conventional energy, like coal. The pricing of carbon offsets for alternative energy firms is based on the price difference between fossil fuel energy production and the alternative energy production per kilowatt hour. In all cases, the money from the offset purchase must instigate additional reductions by the company. Otherwise, the price of the credit will not accurately reflect the amount of GHG reductions it caused.

Community Energy Inc., a Pennsylvania-based organization operating in New Jersey, is one of several companies doing the same thing.


As offset purchases have become more popular, journalists and researchers have raised the alarm and cautioned consumers about offsets that do little more than make you feel good. The major concern centers on additionality. Carbon mitigation is only additional if it occurs at a level above the baseline level, also called “business as usual.” Ideally, the offset you buy should initiate extra reductions that could not have happened without the money you spent. Additionality is hard to measure: large firms are already working to reduce their GHG-producing activities, and offset purchases, especially small ones, may not actually instigate enough new activity to fully offset the promised amount of kilowatt hours.

A recent New York Times article publicized these problems. “To many environmentalists, the carbon-neutral campaign is a sign of the times — easy on the sacrifice and big on the consumerism,” Andrew Revkin reported in his piece Carbon Neutral Is Hip, but Is It Green? Revkin quotes Denis Hayes, a leading sustainability activist and expert; “the worst of the carbon-offset programs resemble the Catholic Church’s sale of indulgences back before the Reformation,” he says. “Instead of reducing their carbon footprints, people take private jets and stretch limos, and then think they can buy an indulgence to forgive their sins.” In the past year, researchers discovered that Al Gore, director of the climate change documentary An Inconvenient Truth, has a carbon footprint twenty times the national average; his mansion consumes almost 221,000kWh (kilowatt hours) a year. Gore buys offsets to legitimize this enormous fossil fuel consumption, but many question if his offset purchase actually exempts him from his climate change “sin”.

Citizens in China use an average of 3 carbon tons per year, and in India, the average is less than half that. In the United States, however, the average person generates around 20 carbon tons per year. Many environmentalists feel we should be reducing our carbon consumption by taking big steps to change our personal and organizational habits and use different technologies and/ or fuels, instead of taking the easier path of changing nothing, and spending money to transfer the reduction responsibility to others.

Different offset providers have different pricing schemes, which further complicates the issue of additionality. For example, the 10,656kWh for which 3Phases charged $213.00, NativeEnergy charges $96.00 to offset, and Carbonfund just $89.00. Naturally, consumers are drawn to the cheapest prices, yet these cheaper brands may have questionable additionality. Currently, there are no standards or regulations on offset providers, putting responsibility on the consumer to find the most reliable offsets.


Most people familiar with the offset market, including offset providers, encourage individuals first to take steps to reduce the amount of energy they use before making an offset purchase. Conserving electrical energy by turning off lights and computers at night, buying fuel-efficient appliances and vehicles, and being an informed consumer about the food you buy can all make significant reductions in your carbon footprint. For more ideas, visit http://www.nativeenergy.com/more_you_can_do.html. After taking these steps, only carbon offsets can mitigate the remaining GHG emissions, allowing individuals to go completely “carbon neutral.”

(Sustainable Lawrence takes the position, along with most others who study global warming, that conservation of energy is the easiest and best way to go. It’s also saves anyone who does it real money. We recommend significant, permanent cutbacks, not fractional reductions. Make important cuts in the way you use energy before you even think about carbon offsets. We have to make significant adjustments; we cannot just shift our spending.)

A Consumer’s Guide to Retail Carbon Offset Providers, a reputable report commissioned by Clean Air Cool Planet in 2006, published their “Top Performing Retail Offset Providers.” Here are brief summaries of the American companies they list, which are more user-friendly because they use standard units and dollars. These websites first calculate your carbon usage in tons, and then offer their price to offset this amount. Users can choose to offset a single car or plane trip, their entire carbon inventory for a year, or even give an offset as a gift. How much you want to offset is up to you; the calculators will only compute for the values that you choose to enter.

Climate Trust (climatetrust.org) has a myriad of projects, including small-scale wind, carbon sequestration (tree planting) and increasing transportation efficiency. To offset, the site directs individuals through a user-friendly CarbonCounter.org to compute their energy usage. $12/ton of carbon.

NativeEnergy (nativeenergy.com), a company that sells both offsets and renewable energy credits1, does projects to benefit the Native American communities. $12/ton of carbon.

MyClimate (my-climate.com) is an international organization with projects in many countries. Their carbon calculator also computes emissions from lodging at hotels. $15.25/ton of carbon.

Renewable Energy Credits are different than carbon offsets. Buying these credits means you legally own renewable energy, even if it provides energy for other people. Often the purchase of RECs does not guarantee additionality, but does allow institutions to claim that they are effectively run on wind, solar or geothermal energy.

Summing It Up: Several Points to Keep in Mind…*

  • Trees don't reduce carbon, they sequester it for as long as they live.
  • Energy conservation is probably the best way to lower your carbon footprint.
  • Carbon offsets essentially fund additional carbon reduction that would not happen otherwise.
  • Individuals and institutions have 3 ways to lighten their carbon footprint:
    • Reduce your own energy consumption
    • Replace dirty energy with clean
    • Facilitate and fund energy conservation by others, particularly those who cannot afford to do it themselves.

* Information in the “Summing It Up” section provided by Liz Robinson, Executive Director of the Energy Coordinating Agency, a private organization in Philadelphia.

Learn More!

Check out the video explanation of how offsets work at Native Energy.com. Scroll down and click graphic labeled "Still Confused?" at bottom right of page. If that doesn't work, try this link).

Try out the useful, home-focused, personal climate calculator.

Carbon Neutral Is Hip, but Is It Green? A New York Times article by Andrew Revkin published April 29, 2007, is a good summary of the controversy surrounding the offset market.

A Consumer’s Guide to Retail Carbon Offset Providers” is a useful resource that mainly explains flaws in the offset market, but also outlines the carbon impact of various activities and helps individuals decide from whom to buy offsets.