Climate change is poised to alter the Earth forever, more and greater businesses are promising to reduce the carbon footprint of their operations. However, reducing greenhouse gas emissions isn’t something that happens over night. Many big companies have adopted carbon offsets as a way to fill the gaps.

“It’s an instrument for transition,” says Sarah Leugers Chief Strategy Officer for Gold Standard, a voluntary carbon offset scheme based out of Switzerland. “A business should be on a scientific decarbonization path and utilize carbon offsets in order to accept responsibility for any emissions that are emitted during the journey.”

Carbon offsets are an instrument by which an individual or a company who has an emission reduction objective compensates another person to cut emissions. Scientists look at carbon mitigation as well as the greenhouse effect as a whole for the entire earth. This means that the atmospheric damage caused by carbon dioxide emissions from factories in Chicago could be compensated by the reduction of CO2 from projects that introduce electric stoves in villages of rural India. Carbon offset programs typically occur in developing countries within the Global South because the costs for taking actions like the planting of the trees (or the cost of paying for people to prevent cutting trees down) or constructing wind farms are much less than those in industrialized countries.

Many of the most vocal supporters of the carbon credit exchange are of the opinion that they’re not a panacea, and there are those who offer an even more harsh criticism. “In the majority of cases, [carbon offsets] can take the place of someone who reduces their own carbon emissions, and they are able to justify or ease the guilt of continuing to emit,” says Barbara Haya Director of the Berkeley Carbon Trading Project at the University of California, Berkeley.

The system is under scrutiny because it has not delivered on the emission reductions that were promised. The two of them, Haya along with Danny Cullenward, policy director at the California-based research firm CarbonPlan and CarbonPlan, consider the system “broken,” relying on flawed incentives and flawed methods with inadequate oversight. Both of them recommend businesses should focus on reducing their emissions in their own businesses, such as the reduction of business travel, utilizing electric vehicles for fleets, or shifting to renewable energy instead of an investment of significant amount in offsets.

The market for carbon offsets has seen a dramatic increase in recent times, with major corporations such as Google and Amazon offering to become net-zero in emissions, partially through purchasing offsets, and airlines such as United and American allow consumers to purchase offsets that are equivalent to the tonnes of carbon they emit from their flights. The 2021 overall market value of carbon markets that are voluntary (VCM) was estimated at $2 billion as per Ecosystem Marketplace, an initiative of Forest Trends, a nonprofit environmental finance company based located in Washington, D.C. That amount is almost four times more than the amount of VCMs in the year before at $520 million.

As the market becomes to the mainstream, you will find a myriad of carbon offset schemes that make big environmental promises, and only a few resources to determine which ones are genuine and which aren’t. This article explains how this process works and what business needs to consider when it decides to make use of carbon offsets.

Certification is an essential component of the System

Carbon offset programs cover a variety of kinds of projects, but the most commonly used ones include Renewable energy sources (such as solar, wind and hydroelectric) methane capture, combustion (burning methane transforms it into an environmentally friendly substance that can be used to fuel) and efficient energy use (such such as electrification) as well as forest-related (like the reforestation) According to the Carbon offset company based in Las Vegas. 8 Billion Trees, which has large plantation and reforestation operations within the Amazon Rainforest.

A carbon offset credit is one metric tons of carbon dioxide that has been reduced in the atmosphere, be it through avoidance or the capture of CO2. Prices vary based on the nature of the project timeframe, location cost of labor and materials and other aspects. The project must calculate the number of tons of CO2 they have avoided, and submit the information to carbon offset registry which will translate the impact of climate change to individual credit that may then be bought and sold through an open market.

For international recognition of credits to fund projects, they must be accredited with one or more of the carbon offset registries which set the industry standard. The four major registries according to experts include The American Carbon Registry (ACR), Climate Action Reserve (CAR) as well as Verra (Verified Carbon Standard)–all three are located on the U.S.– and the Swiss-based Gold Standard.

The certification is based on an audit conducted by a third-party verifier who is commissioned by the project’s developer. Methodologies or protocols for projects that have been that are approved by Verra For instance, they must be scientifically sound with measurable, permanent emissions that are conservatively estimated, which means the methodology isn’t overestimating the environmental benefits of the project.

“Make sure that the carbon credit] comes from an international standard as there are a number of new companies emerging which claim that they can issue carbon credit, however they do not possess the essential characteristics,” says Leugers, of the Gold Standard. Many projects, like don’t have the right baselines for calculating emissions reductionsor would have been able to occur without intervention by the program. Choosing projects that are internationally certified will help to reduce this problem.

However, Haya is skeptical of the methodology employed in carbon offset initiatives. “We’re in a low-quality process,” she says. “Because the amount of credits produced that exaggerate the project’s impact The prices are also too low. At the current price, they’re not enough to reduce emissions.”

She believes that registries must apply stricter guidelines on what constitutes carbon offset credits within a given project. Projects that are liberal in its methodological approach could eventually overvalue the carbon offset credits it generates and the value to the environment. If registries do break down on their guidelines, developers are often able to discover another registry that is willing to adhere to their more relaxed procedures.

Monitoring Reporting, Monitoring and Verification

In every protocol, a project should have a plan for reporting progress as well as how emissions are calculated and credits are distributed. When the plan is in place it is time to enter in the reporting, monitoring and verification, also known as MRV Phase.

Jodi Manning Jodi Manning, vice president and director of partnerships and marketing at the California-based Cool Effect, a nonprofit carbon offset company reports that the reporting times for their projects can vary. Cookstove projects can be assessed every year, while forest projects could be evaluated each three years. However, Cool Effect says it is required to update its database every six to twelve months, and conducts regular visits to the site, complete with photographs and interviews.

The Gold Standard Gold Standard, most projects have to submit reports every year at least once, Leugers says. She also points out Gold Standard’s affiliation in the International Social and Environmental Accreditation and Labeling Alliance (ISEAL) and its grievance procedure–to file complaints about Gold Standard and projects as a means for accountability and transparency.

Cullenward CarbonPlan’s Cullenward CarbonPlan believes that strict conformity to protocols could be a problem. “We have a process for declaring that we have were in compliance with the guidelines,” Cullenward says. “We don’t have a way to determine whether the rules make sense.”

The majority part of this uncertainty due to carbon offsets in general Haya says. Haya. “We are able to quantify emissions. When you measure offsets, you’re measuring emissions reductions, and you need to compare them against a counterfactual version of what might be the case without the program. It’s a huge amount, and the uncertainties are being deliberated by a group of people who all profit from higher quality credits.”

Examining the quality of the Carbon Credit

To assess a carbon offset credit’s quality, there are four major terms to know: additionality, permanence/durability, buffer pool, and leakage.

Many experts believe that the long-term benefits to climate change of carbon offsets rest on the idea of additionality. This means that credits can only be used for projects that could not occur without funds from carbon offset schemes. “If the funds are used to fund trees that were planted otherwise so no offset is required for the plants,” Haya says. “You’re not decreasing emissions, you’re paying someone else to do what they’d have done in the first place.”

Cullenward claims that some carbon offset companies overstate the potential benefits of projects. A recent study of the wind power industry in India discovered that at the very least 52 percent of carbon offsets are for projects that could have been constructed without aid from the UN’s Clean Development Mechanism, an international offset scheme that was created in the Kyoto Protocol in 1997.

“Time and time again” he claims, “when academics and financially interested parties conduct research projects that attempt to be careful about the validity of the claims they make They find burning trash fires.”

Permanence is the concept that the benefit of the project to the planet is indestructible and durability is the most likely measure of how long this benefits will endure. Certain reduction initiatives can be a long-lasting solution; for instance making fewer trips and switching on an electric cook stove will stop greenhouse gas emissions from taking place in the first place.

“When we release CO2 into the atmosphere as a result of combustion of fossil fuels can have lasting effects,” Cullenward says. “The effects on the atmosphere and oceans goes beyond the geologic time. Therefore, if you wish to make use of the offset credits to claim”It’s okay I emit CO2 into the atmosphere from flying or drivingfor example], the time span of the claim being created must be in line with the amount on CO2 emission.”

Others projects aren’t assured of being permanent. To benefit from the environmental advantages of forest projects, trees require a minimum of 100 years in order to store the equivalent of a metric tons of carbon. However, fires and droughts and diseases can happen as well, and when trees die, carbon dioxide is released. Therefore, the project’s developers need to be aware of these risks when drafting their protocol.

To protect against natural catastrophes that may thwart an environmental advantage of a plan and other negative impacts, carbon offset providers set up a buffer pool for insurance. For any project there is a range of between 10% and 25% of the credits are kept in a corporate pool. This ensures that the project is able to meet its objectives.

Additionally “if there’s an incident of burning fire” Cullenward says, “the individuals who purchased and sold credit through the market remain in the same position, as long as they retire their buffer pools credits in order to account for the losses. If a million tons CO2 ignites in the forest, then a million credits could be taken out of the buffer pool. As long as the system is stable it is in good shape to achieve its longevity promise.”

But buffer pools aren’t impervious to fire. In a study that was conducted recently of California’s offset program for forestry, Cullenward and fellow researchers discovered that wildfires reduced the carbon credits contained in the buffer pool in the first 10 years of the program. This means that the loss of carbon due to wildfires is far more significant than the benefits to climate change of conserving trees with this offset program.

Protocols must be aware of leakage as this is the concept that projects could create emissions that are higher than the areas producing offset credits. Haya states that this happens in a few forests conservation projects. “If the landowner is committed to reducing their emissions by decreasing the amount of timber they’re harvesting , but not altering the demands for timber products conserving a piece of the land will simply replace the harvesting of timber elsewhere,” she says.

In evaluating the carbon offset scheme it is common for companies to focus on the benefits that come with projects that promote sustainable development, for example and jobs for the locals living in the region, empowerment of communities and health improvement as well as the conservation of biodiversity.

Dee Lawrence, founder of Cool Effect, says she always seeks out projects that have an environmental justice perspective which goes beyond carbon-free benefits. She cites recent projects of the company, which includes restoring mangroves in Myanmar which improves the lives of people in poor communities by creating employment opportunities, as well as a biogas digester in China that converts methane gas generated from trash into sustainable energy, and enhances the health of people by providing healthier air. “If an offset of carbon is executed properly, it could be transformative,” Lawrence says.

In the case of Haya she suggests using carbon offsets as just one option that are available, but in the end, she believes that cleaning up one’s personal operations will make the greatest impact.