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Are Carbon Offsets Effective or Just Corporate Greenwashing?

Sept. 13, 2023
When managed responsibly, offsetting projects can provide a viable course for sustainability initiatives.

Are carbon offsets an effective way to reduce greenhouse gas emissions, or are they just corporate greenwashing with little if any environmental impact?

If you want to get environmental advocates agitated, bring up carbon offsetting. It is among the most hotly debated climate solution efforts, with opinions fanned out on the spectrum from whole-heartedly for, entirely against, and everywhere in between. But what actually is it?

Offsetting is the act of counterbalancing harmful emissions one might be responsible for by funding a project that removes the same amount of emissions from the atmosphere, i.e., planting trees to compensate for an airplane flight. Offsets are hooked up to a broader financial system called a “carbon market,” where investors can buy “carbon credits” to compensate for their emissions. One credit equals one ton of CO2.

There are two types of carbon markets—one “voluntary” and one called “compliance.” Compliance markets are controlled by official policy and a cap-and-trade system, whereby a government will set a “cap” (a limit) on how much CO2 an industry may release, and then divide it into permits, which are either given or sold to companies within that industry. If a company doesn’t use all of its allowance, it can sell the extra to bigger emitters for a profit. Each year, the cap is supposed to get lower and lower, driving the price of polluting up and, in theory, sending companies careening towards renewables and clean energy.

The voluntary system is similar, but it functions outside of government regulation. Companies purchase credits from carbon offsetting projects in order to prove their environmental standards. On paper, this sounds great. But activists do have valid concerns. An investigation into Verra, one of the leading voluntary carbon credit certifiers, found that over 90% of its credits were phantom ones with no environmental benefit. So, it is easy to see why some think it is a massive scam.

“Stop greenwashing!” shouted young climate activist Greta Thunberg at an assembly of experts at the 2021 United Nations Climate Conference (COP26) in Glasgow. The topic? Carbon offsetting. Greenpeace is very vocal on the matter too, seeing it as merely “tree planting window dressing aimed at distracting [us] from ecosystem destruction.”

But solid belief in the potential in the market is also valid. Johan Rockström from the Potsdam Institute for Climate Impact Research says that offsetting generates much-needed investments even if it does lack proper regulation. In fact, investments in green spaces and local communities are a major upside to offsetting. By selling credits that maintain natural landscapes, often in developing countries, the carbon markets funnel money into wildlife, and could even eventually reverse the depressing maxim: “Our forests are worth more dead than alive.”

And what about the carbon that is already in the atmosphere? Naveen Shivalingam, co-founder of Peak 365, a carbon market solutions company, notes that “the negatives [of the carbon markets] are pretty far reaching. But the fact remains that we have 60 billion tons [of CO2] too many in the atmosphere. Even if the world magically switched to renewables tomorrow, we would still be in a climate disaster in 50 years.” Offsetting projects provide a viable escape route.

EarthTalk is produced by Roddy Scheer & Doug Moss for the 501(c)3 nonprofit EarthTalk. EarthTalk produces content on green living, sustainability and climate change—and distributes it through syndication, social media and other channels.

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