What Are Carbon Offsets and Do They Prevent Climate Change?

They’re a lesser-known tool in our fight against climate change, but carbon offsets have the potential to do a world of good. Here’s why.
Posted on
February 3, 2021
What Are Carbon Offsets and Do They Prevent Climate Change?

Illustration by Sam Bullis

Illustration by Sam Bullis

Your sushi delivery. That new desk for your home office. A wine country getaway. Much of what we eat, buy and do in this modern world generates carbon dioxide and other greenhouse gases (GHGs) that contribute to climate change.

We know reduce, reuse and recycle as the main pillars of sustainability, but there’s another important way to lessen your environmental impact. Meet carbon offsets.

In this article

Chapter 1: What are carbon offsets?

Chapter 2: What types of carbon offset projects can you buy?

Chapter 3: Which carbon offsetting companies are the best?

Chapter 4: Who should consider buying carbon offsets?

Chapter 5: How effective are carbon offsets at fighting climate change?

Wind turbine, funded by a carbon offset project, with a lush mountain background
Photo by Pixabay - Pexel
Chapter 1

What are carbon offsets?

In the fight against climate change, reducing carbon emissions is our best battle strategy.

But the fact is, the essentials of life—like, eating food and living in a building—mean we can’t help but produce greenhouse gases. And the realities of modern living (that’s the cars, the planes and the factories) produce a lot of emissions that are pretty much impossible to erase overnight.

And the realities of modern life (that’s the cars, the planes and the factories) produce a lot of emissions that are pretty much impossible to erase overnight.

What is the definition of a carbon offset?

Put simply, carbon offsets are a means of balancing out the impact of the greenhouse gases you’re responsible for by creating an equivalent reduction elsewhere. It’s kind of like sleeping in after a late night out, or having a salad for dinner when you did three rounds at the lunch buffet.

What are carbon offsetting projects?

There’s a huge variety of carbon offsetting projects, but they all have a few things in common. They use nature (think trees or wild grasslands) or technology (like alternative power sources) to reduce or sequester greenhouse gas emissions. And they need money to get the job done.

What are the benefits of carbon offsets?

Carbon offsets do more than just balance out emissions. Buying carbon offsets means supporting initiatives that promote sustainability, the proliferation of green energy instead of fossil fuels and other positive environmental and social changes. It’s more than just a passive way to become carbon neutral.

Joining team carbon offset means you’re actually taking action to help make the world a greener place.

A cluster of flags outside of the United Nations headquarters.
Photo by Filipe Pelaquim - Unsplash

When were carbon offsets invented?

You’ve probably been hearing more about carbon offsets in the past few years, but the concept isn’t exactly new. It dates back more than two decades, to the 1997 Kyoto Protocol, a global agreement that gave countries emissions targets.

Among (many) other things, the Kyoto Protocol allowed those countries that produced less than their allowed volume of greenhouse gases to sell their excess allowance to those who were over target.

What are carbon markets?

This tool birthed the idea of “carbon markets,” where carbon offsets could be bought, sold or traded. Doing this allowed individuals, businesses, even cities or countries to measure their output and then buy carbon offsets to balance out the effects of their actions.

(Side note: they’re called carbon offsets because carbon dioxide is the most common greenhouse gas, so emissions in general are measured in metric tons of carbon dioxide and equivalent, or tCO2e. But when you hear about carbon emissions and carbon offsetting, assume that people also mean other greenhouse gases like methane and nitrous oxide.)

What are carbon offset programs?

Though the carbon market is complicated and sometimes a bit disorganized, reputable carbon offset programs have significant oversight, including requirements for third-party stamps of approval. 

This vetting can come from any of several organizations. In 2003, for instance, the World Wildlife Federation and a group of other non-governmental organizations established the Gold Standard registry, a database that tracks, standardizes and certifies carbon-reduction projects. And in 2006, the International Organization for Standardization developed consistent rules for measuring and validating carbon offsets (see more on this below).

There is an increasing number of places where you can buy offsets, from airlines to eco-friendly clothing retailers.

Taking steps to become carbon neutral has become easy and accessible. The catch is that it can be difficult to know exactly what you’re buying, and whether your carbon offsets will have the impact you’re aiming for. But don’t despair—that’s why we’re here.

How do carbon offsets work? 

Right off the bat: Carbon offsets don’t actually reduce your carbon footprint, or the amount of greenhouse gases you generate from your activities or purchases. Instead, they balance out the emissions you generate with projects that reduce the amount of emissions in the atmosphere.

What types of carbon offset project are there?

There’s a wide array of projects you can buy into to offset your carbon emissions. You might be helping to fund a social initiative that maintains coastal mangrove forests, or contributing toward a wind power project aiming to reduce a region’s reliance on coal.

How do I offset my carbon footprint?

The first step is to determine your greenhouse gas output using a carbon offset calculator. (For comparison’s sake, the average American carbon footprint is around 18 tCO2e.) You might work this out for a certain activity like a ski vacation, for a specific purchase like that sweet new Tesla in your garage, or for your day-to-day lifestyle overall.

Then, you buy the equivalent amount in carbon offsets, effectively making your activity—or your whole life—carbon neutral.

A closeup of an electric car charging station, which was funded by a carbon offset project

Are carbon offsets the same thing as carbon taxes?

This is a common misconception. They’re both necessary in our efforts to fight climate change, but their mechanics differ quite a bit.

Carbon taxes are run by governments. They’re charged when you buy fossil fuels (like coal or gasoline).

Carbon taxes have a double purpose, though—they’re not just a money grab. They make it more costly to generate greenhouse gases (bad), and the proceeds help make it cheaper to use sustainable, environmentally friendly energy (good).

With offsets, you are funding a specific project that reduces the amount of carbon dioxide and other greenhouse gases in the atmosphere.

How do I know how much carbon to offset?

The first step with carbon offsetting is to figure out the amount of greenhouse gases you generate. Whether it’s your total carbon footprint or the amount of emissions from specific activities like that recent flight to Honolulu, a carbon footprint calculator will do the math and help you figure out this number. It’s pretty straightforward: just enter the details for the activities you want to assess, and you’ll get your total carbon footprint in metric tons of CO2e.

That’s the easy part. Finding the best way to offset those greenhouse gases is where it gets slightly more complicated.

A wind turbine farm, which is a carbon offset project, against a pink sky
Chapter 2

What types of carbon offset projects can you buy?

Carbon offset projects exist all over the world.

And good news for shopaholics: there’s huge variety in the price of offsets, the types of projects you can fund with your offset purchase, and even the traceability and credibility of sellers. That means it’s easy to find a project you can feel good about contributing to, and even connected to on a personal level.

There are many ways to categorize carbon offset projects, and as of yet industry insiders haven’t come up with a consistent system. But to help you get a handle on the terminology, we’ve broken things down into six major categories.

 1. Energy efficiency carbon offset projects

It’s pretty simple: the less fuel we burn, the fewer emissions end up in the atmosphere. So some energy efficiency offset projects are designed to reduce how much fuel people need to use. Examples include distributing fuel-efficient stoves or replacing incandescent lighting with LED.

An example of an energy efficiency carbon offset project

In Madagascar, where diesel is a common source of electricity, one smart initiative has replaced more than half a million incandescent lightbulbs. The switch to energy-efficient bulbs is expected to reduce emissions by 52,000 tCO2 over seven years.

2. Renewable energy carbon offset projects

Renewable energy projects develop and promote sources of energy like solar, hydro and wind power. They have huge benefits, as building this kind of infrastructure reduces future carbon emissions from the old-school electricity generation (i.e., coal) it replaces.

An example of an energy efficiency carbon offset project

One example is a wind power development in Turkey that’s saving 66,000 tCO2 per year as it replaces less sustainable power sources. That’s enough to power 7,616 American homes for a year.

Why are renewable energy carbon offset projects less common nowadays?

A cool thing to know about renewable energy is that it’s actually become a less common type of carbon offsetting project. Not because it doesn’t work, but because clean power is now profitable enough that it doesn’t need the funding from offsetting programs. That’s all thanks to early investment from believers like you.

3. Methane abatement and capture 

Methane gas is shockingly potent (and we don’t just mean the smell).

Emitted by farm animals, landfills and other waste generators, it’s estimated to be 25 times more potent than carbon dioxide at warming the Earth. Methane abatement projects contain and convert this gas, keeping it out of the atmosphere so it can’t contribute to the greenhouse effect.

An example of a methane abatement and capture carbon offset project

One project in China, for instance, is recovering methane from a landfill and converting it into electricity, which both reduces methane emissions and lessens the need to produce electricity by burning fossil fuels. Now that’s a win-win.

The estimated result over 10 years will be a greenhouse gas reduction of approximately 420,000 tCO2e. That’s equivalent to the annual carbon footprint of about 25,000 average Americans.

4. Industrial gas and pollutant carbon offset projects

In the quest to develop new technologies, we haven’t always been on top of the negative side effects.

And it turns out that many industrial processes use or produce harmful greenhouse gases. Offset projects in this area work to capture and destroy these gases, or to upgrade how things work so the super-harmful gases are no longer emitted at all. Some of these projects are extremely niche—yet very effective.

An example of an industrial gas and pollutant carbon offset project

For example, one automotive parts manufacturer working in the U.S. and Canada has historically used sulfur hexafluoride (SF6)—which, if you didn’t know, is a greenhouse gas with a global warming potential 22,800 times that of CO2—in its casting process. By using a new gas instead, they aim to reduce emissions by 196,000 tCO2e. That’s like taking more than 42,000 cars off the road for a year.

 5. Reforestation and nature preservation carbon offset projects

Reforestation and preservation projects are probably the first thing that spring to mind when you hear about carbon offsetting. They reduce greenhouse gases by protecting and proliferating carbon-sequestering greenery. This means forests, yes, but also grasslands and even giant seaweed.

(And if you didn’t know, scientists have concluded that nature-based solutions are a hugely potent low-cost tool to help limit global warming.)

An adult and child planting a sappling, as part of a reforestation carbon offset project
Photo by Eyoel Kahssay - Unsplash

An example of a reforestation and nature preservation carbon offset project

Look at Colombia, for example. A project there is reforesting more than 1,400 acres of degraded grazing land with native and endangered tree species, and pretecting an additional 108 acres of forest. Not only is this initiative a win for conservation, it’s creating permanent jobs.

 6. Fuel switching carbon offset projects

Like slipping lentils into your pasta sauce instead of ground beef, these are projects that substitute cleaner fuels for those that create more carbon emissions.

An example of a fuel switching carbon offset project

One example in India has distributed 60,000 solar water heaters, reducing electricity use and saving 150,000 tCO2e per year. That’s the equivalent of driving from Miami to Anchorage and back about 37,500 times. 

The social benefits of carbon offset projects

Another thing to keep in mind: many carbon offset projects support social and sustainability goals in other ways, too.

Take the Kenyan Energy Efficient Stove Project, which supplies brick stoves to households in rural Kenya.

The new stoves paid for by carbon offsets cut the amount of firewood needed for cooking in half, which is helping to lower the global carbon footprint. 

But in addition to reducing the amount of carbon traditional stoves generate, the reduced demand for firewood means that local forests have a chance to recover and locals have more time to put toward economic development, jobs and education.

Logos of carbon offset registries like Verra and Gold Standard
Chapter 3

Which carbon offset programs can you trust?

Most people are averse to following hard-and-fast rules, but when it comes to carbon offsets, having stringent standards works for the greater good.

Why? Well, in a perfect world, it would be nice to fund projects that you could personally oversee, giving you the confidence that your money was being put to good use. Since that’s virtually impossible from a time, energy and location perspective, we must accept a world where there’s a common set of standards for projects to follow (if they want to be approved by certification boards).

Even still, vetting carbon offset providers would require sourcing and digesting so much information that you’d feel like quitting before you’d even started.

Evaluating carbon offset projects through third-party organizations

Don’t fear: you’re not in for hours of dry research. The shortcut to choosing legit carbon offsetting projects is to outsource the leg work to a trusted third-party organization like the three listed below. They crunch the numbers and check the facts before handing out an official seal of approval to projects that make the grade.

On top of that, the latter two offer browsing and shopping tools, so you can review and even fund projects right from their websites. Just pick your favorite and go.

Here are three of the best carbon offsetting programs and standards you can refer to in your search.

1. The Verified Carbon Standard (VCS)

The Verified Carbon Standard, or VCS, is a rigorous set of rules and regulations upon which Verified Carbon Units (VCUs) are established. Each VCU represents one metric ton of CO2e that is reduced or removed as the result of carbon offsetting, and each must be confirmed and entered to the Verra Registry. And fun fact: the CEO of the Verra carbon program says that they always try to build in social benefits to their offset projects to help create an even bigger impact.

2. The Gold Standard

The Gold Standard is another recognized body that certifies emission reduction projects, with a registry and marketplace of offset products measured in Gold Standard Verified Emission Reductions (VERs), each of which represents one metric ton of emissions.

3. Carbon Neutral Now

The United Nations carbon offset platform Carbon Neutral Now was launched in 2015. It includes projects in developing countries that have been verified by its Clean Development Mechanism program.

As you come across carbon offset projects, consider accreditation from these groups to be proof the offsets you’re buying are reliable.

What factors should you consider when evaluating carbon offset projects on your own?

Let’s say you want to do your own research anyway, or you want to know how these groups assess carbon offsetting initiatives, and what makes a project worthy of your hard-earned assets.  

Your first question might be, “what’s the difference between planting a tree and seeding a renewable energy corp, anyway”?

While there are many projects that reduce carbon dioxide in the environment in meaningful and traceable ways, there are also those that would exist despite the outside funding. Plus—sad to say—like in any industry, there are scam providers trying to capitalize, literally, on people’s good intentions. 

Digging into how carbon offset projects are evaluated can help you get a sense of the impact that one initiative might have over another. Here are some of the criteria experts use to evaluate them.

1. Additionality: is the reduction in emissions really new?

Would the reduction in greenhouse gas emissions have happened even without the carbon offset project?

The goal of carbon offsetting is to create new or additional reductions in greenhouse gases that would not otherwise exist.

It’s important to find initiatives that aren’t part of the regular course of business. Instead, look for those that are additional: they contribute to reductions in greenhouse gases beyond what’s legally required, or they couldn’t be implemented without the funds generated through offsetting.

2. Quantification: Can we measure the carbon emissions reduction?

Can the results of the initiative be turned into a fancy-yet-meaningful graph based on actual reduction numbers? If it’s all buzzwords and no math, the project isn’t quantifiable and won’t be approved.

A skyscraper of an organization that uses carbon offsets to become carbon neutral
Photo by Snapwire - Pexels

3. Unique ownership: Is it emissions reduction being double counted?

Imagine you went to pick up the pizza you ordered for dinner (a veggie-lovers’ one, of course) and it was gone—they’d sold it a second time to someone else. A similar thing sometimes happens on the shady side of the carbon offsetting world.

Let’s say a clean energy project is responsible for a total 100,000 tCO2e reduction in emissions. That means they can only sell offsets that add up to 100,000 tCO2e. If they try to sell more, that’s violating the unique ownership rule. That’s why in the non-shady world, carbon offsetting projects are registered, and then all the offsets get retired once they’ve been sold. 

4. Leakage: Does the project have negative effects elsewhere?

What we’re trying to do is reduce carbon emissions overall, across the whole wide world. It doesn’t help things if a carbon offset project in one place results in an increase in emissions elsewhere. 

One example that’s easy to understand is logging. Let’s say one region or country decides to protect a certain forest, and lumber output goes down. That’s great—until the timber companies just go elsewhere to cut down the same amount of wood.

A feel-good story in one place becomes a total downer somewhere else, and ultimately, there’s no benefit for the planet as a whole. A quality carbon offsetting project will take leakage into account in its calculations and define plans to avoid it. 

5. Verification: Is the carbon offset project owner doing what they say they’re doing?

Sadly, we can’t just trust what people write in their reports. So to make sure carbon offsetting projects are doing what they say they are, you want them to be verifiable by independent and credible third parties.

6. Permanence: Are the carbon emissions reductions for good or are they temporary? 

Forestry projects, for instance, aren’t helping matters if the trees are just going to be cut down 20 years from now. Permanence means the offsets more or less forever. Which is what we’re going for, right?

A project that reduces emissions for only a few years—isn’t offsetting, it’s just delaying. 
Majestic forest with trees at dusk, funded by a carbon offset deforestation prevention project
Photo by Lukasz Szmigiel - Unsplash

Chapter 4

Who should consider buying carbon offsets?

Since the idea of carbon offsetting was drawn up, it’s become easier and more accessible to support projects to neutralize your carbon footprint.

Companies, and even governments, use offsets, too. Here’s what carbon offsetting looks like in action.

How popular is it for individuals to offset their carbon footprints?

We don’t know for sure (yet!) how many individuals are buying carbon offsets, or even know they exist. But consumer attitudes suggest that the appeal is real, and increasing.

One in seven people would choose a lower-carbon form of transportation even if it were more expensive or less convenient, says a global study by Ipsos conducted on behalf of the World Economic Forum. Here in the U.S., 12 percent of respondents in a 2018 Ipsos study said they had purchased carbon offsets in the past, and more than half were interested in doing so to offset future activities. That’s something. 

Which celebrities are offsetting their carbon footprint?

There’s a celebrity element to the growing trend, too. Like when Prince Harry and Meghan Markle visited Sir Elton John in Nice in 2019. The singer, bless his carbon-busting heart, offset the couple’s private flight to France. Eco-loving posterboy Leonardo DiCaprio also buys carbon offsets to counter his jetsetting lifestyle.

The most effective way to go carbon neutral is to start by reducing your footprint.

But these high-profile examples can also inspire people to explore ways of offsetting smaller, everyday activities. And that’s where regular folks can make a real difference.

Which companies are offsetting their carbon footprint?

In addition to purchasing carbon offsets yourself, you can also help to neutralize some of your carbon footprint by being a discerning shopper. More and more companies are signing up for carbon offsetting with the goal of significantly decreasing their carbon footprints—and yours as a consumer.

L'Oreal's commitment to carbon neutrality by 2025

L’Oréal, for example, has committed making all of its sites carbon neutral by 2025. Some of the reductions are coming from using renewable energy and improving energy efficiency for all its plants and distribution centers. But the cosmetics powerhouse has also invested in renewable natural gas development, a technology that captures and cleans landfill gases so they can be converted into usable energy. It also set itself “zero deforestation” target for the end of 2020.

Enbridge headquarters. This is a company who has committed to offsetting its carbon footprint

Allbird's carbon footprint transparency

And then there’s Allbirds. As you might expect, the shoe company knows a lot about footprints. Allbirds publishes extensive details about the carbon impact of its products, highlighting the importance of transparency. Its website includes details on how it measures its carbon footprint as well as the steps it is taking to first reduce emissions and then offset.

Many energy companies are making moves to reduce their carbon footprints, too, through mechanisms like investing in wind farms and developing solar energy and other renewable fuel sources.

Supporting brands going carbon neutral is a good way to let them know that you care about their environmental practices.

Supporting these companies also means you’ll have a lower footprint to offset yourself.

What cities, states and countries are going carbon neutral?

Governments of all levels are working to achieve carbon neutrality through a mix of their own reductions and offsets.

British Columbia and carbon neutrality

For example, 10 years ago, the Canadian province of British Columbia became the first province, state, territory in North America to achieve carbon neutrality for its public sector organizations.

In any given year, the province has between 13 and 25 offset projects on the go to mitigate the emissions they cannot reduce, including projects like electrification, forest conservation and landfill gas collection.

A snow capped mountain range with trees in the foreground
Photo by Richard Main - Unsplash

Ontario and carbon neutrality

Also in Canada, the town of Eden Mills, Ontario, is at least three-quarters of the way to achieving its goal of becoming the first carbon-neutral community in North America. Efforts have included an energy-efficiency overhaul of town's community hall and carbon sequestration from planting new greenery.

Across the U.S. and the world, numerous towns and cities also have ambitions to become carbon neutral.

At the country level, just two nations so far have achieved carbon neutral status: Bhutan and Suriname. Runners-up? The more than 110 countries worldwide who’ve pledged to hit net zero carbon emissions by 2050.

Chapter 5

How effective are carbon offsets at fighting climate change?

After all this, you might be wondering: Can carbon offsets really save the planet? And are there any reasons to be skeptical? Well, in a perfect world, no. But here's the thing.

What are the downsides to carbon offsetting?

1. It's no substitute to reducing your carbon emissions

Buying carbon offsets won’t actually erase the greenhouse gases you’re creating. The best way to reduce your carbon footprint and make a difference in the fight against climate change is to actually decrease the volume of emissions you produce.

2. You can't trust everyone selling carbon offsets

Another caveat: with so many carbon offset projects on the market, it’s extra important to make sure your offset dollars are working for good. (Even the Vatican fell for a fraudulent scam.) Sticking to accredited organizations like the Verified Carbon Standard and the Gold Standard is one way you can make offsetting choices that are legit.

3. Critics say carbon offsets are a distraction

Plus, because carbon offsets offer an easy way to mitigate (and, tbh, feel better about) your carbon footprint, critics worry that the very idea may encourage people to slack off on the reduction front.

Our stance? It’s basically impossible to live a carbon neutral existence in this day and age, and carbon offsetting is a very effective way to help create the change we want to see in the world. That doesn't mean we're off the hook on reducing your carbon footprints. But we are supporting projects that will help make the future less scary.

Man in orange hardhat leaning over a large bank of solar panels, which were funded by a carbon offset project.
Photo by Gustavo Fring - Pexels

Why we recommend carbon offsets as an essential climate change solution

The problem of climate change can seem overwhelming when you look at the numbers.

America's carbon footprint is so supersized, we need to reduce it by 90% to hit Paris Agreement targets.

And other developed countries have a similarly large mountain to scale.

The good news is, there are so many easy wins in sight to get our emissions down. Shifting to a work-from-home schedule, wearing last year’s winter coat instead of buying a new one, hanging your towels on the clothesline to dry, ordering in tofu and vegetable fried rice instead of your usual ginger beef... all of these are totally doable tricks that make a huge difference when they all add up.

But even that is likely not enough. And that’s where offsets show up to save the day. Whether it’s funding new industrial technologies or paying farmers to let some of their land stay wild, carbon offsetting projects are an essential component of our collective effort to fight climate change.

Because you’re not just buying them to balance out your own behavior—you’re helping to build a greener future.

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Alyssa Schwartz
Written By
Alyssa Schwartz

Alyssa Schwartz is an award-winning writer who has contributed to, Food + Wine and many others. She's a proud third-generation composter. Read more of her work at

This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada, RBC Ventures Inc., or its affiliates.

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