What is a carbon offset?  Based on the David Suzuki definition, a carbon offset is a credit for greenhouse gas reductions achieved by one party that can be purchased and used to compensate (offset) the emissions of another party. Carbon offsets are typically measured in tonnes of CO2-equivalents (or CO2e) and are bought and sold through a number of international brokers, online retailers and trading platforms. So, in a nutshell, carbon credit (often called carbon offset) is a credit for greenhouse emissions reduced or removed from the atmosphere from an emission reduction project, which can be used, by governments, industry or private individuals to compensate for the emissions they are generating.

What are carbon offsets and how do they work? It’s a concentrated effort to produce less waste and use more renewable energy. After reduction has reached its limit, or its comfortable threshold, carbon offsets can make up for the rest. Carbon offsets are a form of trade. When you buy an offset, you fund projects that reduce greenhouse gas (GHG) emissions. One carbon credit is equal to one tonne of carbon dioxide, or in some markets,carbon dioxide equivalent gases. Carbon trading is an application of an emissions trading approach. Buyers and sellers can also use an exchange platform to trade, which is like a stock exchange for carbon credits.

How much is a carbon offset? The average price is $18.15, with the majority of offsets selling at prices between $10 and $25 per tonne. Gas Emission Trading System (EU ETS) has capped industrial emissions for several years, while allowing the purchase of offsets.

How many trees does it take to offset 1 tonne of co2? Tree offset calculation is based on a tree planted in the humid tropics absorbing on average 50 pounds (22 kg) of carbon dioxide annually over 40 years² – each tree will absorb 1 ton of CO2 over its lifetime; but as trees grow, they compete for resources and some may die or be destroyed.

What kind of activities generate carbon offsets? Renewable energy such as the wind farm example above, or installations of solar, small hydro, geothermal and biomass energy can all create carbon offsets by displacing fossil fuels. Other types of offsets available for sale on the market include those resulting from energy-efficiency projects, methane capture from landfills or livestock, destruction of potent greenhouse gases such as halocarbons, and carbon-sequestration projects (through reforestation – planting of trees, or agriculture) that absorb carbon dioxide from the atmosphere.

The Quantaloop offsetting carbon solutions: The Q Global Land Reserve for forest and land management (reforestation) and Carbon Offset Universal Payment Add-on API – & SDK. More info coming soon.

The problem with the current state of carbon offsets is that while there are many companies collecting carbon offset credits and funds, the offset market is largely unregulated. Other criteria of high-quality carbon offsets include: validation and verification of the project by reputable third-parties; steps by the project developer to ensure that each offset is only sold once (e.g., by listing the offsets on a public registry – such as the Quantaloop Blockchain); and systems in place to control “leakage”, where the creation of a GHG reduction in one region causes an unintended increase in GHG emissions somewhere else (for example, protecting a forest in one location could simply shift logging to a forested area in a new location). The Quantaloop blockchain GLR solution solves many of these issues as it holds funds and all transactions transparent on a decentralized global ledger system.

The following are some very common questions potential buyers can ask offset vendors that Quantaloop solution can help answer:

• What is/are the specific offset project type(s) (e.g., wind farm, methane capture, etc.) in your portfolio and where are the carbon offset projects located?

• Have your carbon offsets been certified to a recognized standard (Gold Standard, CDM, VCS, Climate Action Reserve, Green-e Climate Protocol for Renewable Energy, etc.) to ensure quality? If so, please list the standard(s).

• What steps have you taken to ensure that the carbon offsets you are selling are additional?

• How do you ensure that the greenhouse gas reductions that your carbon offsets represent are quantified accurately?

• Are 100 per cent of your offsets validated and verified by accredited third parties?
• If you are selling offsets that will be created in the future (i.e., forward crediting), what mechanisms (insurance or otherwise) have you put in place to ensure those offsets will actually be delivered?

• What percentage of your portfolio (by tonnes of CO2e) is made up of offsets from tree-planting or agricultural soils projects? If it is a significant percentage (more than 20 per cent of your portfolio), how do you address permanence risks?

• Do you use a publicly accessible registry to track your offsets? If yes, please list the website. If not, how do you ensure that your offsets are only sold to one buyer? And do you “retire” offsets that you sell?

• What is your company doing to educate consumers about climate change and the need for government policy to deal with it?

Other carbon offset links of interest: 

• The Gold Standard: The standard and certification body that works to ensure every dollar of climate and development fund goes as far as it can: https://www.goldstandard.org/
• Carbon dioxide emissions calculator
• Canadian guide to purchasing carbon offsets: https://www.less.ca/images/offset-purchase-guide-v3.pdf