Carbon Offsets: Solution or Scam?

green-leafed tree at daytime
by Advice Chaser
by Advice Chaser

It’s almost impossible to run a business or even manage your personal life without burning fossil fuels. When you heat your home, make dinner, or go to work, you add carbon dioxide to the atmosphere. While CO2 you breathe out is part of the natural carbon cycle, carbon dioxide produced by burning fossil fuels isn’t balanced out by any other process. But what if you could balance out the carbon dioxide you release with another kind of offset? Plenty of big businesses claim to do it. Is it really possible, or just another kind of greenwashing?

green-leafed tree at daytime

What Are Carbon Offsets?

Many businesses claim to be carbon-neutral, despite using large amounts of energy in manufacture, distribution, and executive jet flights. How do they balance the books? They purchase carbon offsets. Sometimes, this is as simple as promising to plant a tree for every order. Other times, they pay another company to carry out some environmentally-friendly action. That can include purchasing land to protect it from deforestation, sponsoring renewable energy research, or financing green projects in developing nations.

Prices of these offsets vary depending on the company selling them. They sell by the ton of CO2they promise to remove from the atmosphere, at prices ranging from $1/ton to $8/ton. That’s very cheap, considering the World Bank has set the social cost of excess CO2 in the atmosphere at $30/ton. If we can really reduce atmospheric carbon dioxide, it could end up being quite a bargain.

Some Aren’t Worth It

However, with all the steps between you, the customer, and an actual tree planted somewhere in the world, there’s a lot of opportunity to obscure the situation. How do you know a company’s carbon-neutral claims are accurate? Are they even doing what they claim to? And if they are, how can we know these actions are effective at making the difference they intend?

In many cases, the actual carbon reduction or sequestration hasn’t been anywhere close to what was advertised. Buying up land and taking money for not cutting down the trees does no good if the trees were never going to be cut down in the first place. Some green energy projects simply absorb the extra funding and do the same thing they were going to do anyway. And, to make things worse, sometimes carbon offset companies have evicted indigenous people from their land in order to “protect” it more profitably.

Skeptics claim this is all for show. If a business pays money to a carbon offset company, it can claim to be carbon-neutral without making any major changes. It becomes a license to burn as much oil and coal as they want while still appearing “green.” They point out that someone, somewhere, has to actually reduce fossil fuel use for any of this to work.

Offsets That Work

Environmental advocates stress that offsets are no replacement for cutting emissions. But they also lay down a few standards that prove an offset is of some value. First, and most obviously, the offset should be real. If a company says they’re planting a tree, they have to plant an actual tree and count it only one time.

Second, offsets should be verified by a third party. If you plant a tree in the forest and nobody saw it, did it really happen? Scammers can claim to have done anything they want, but if a third party has verified it actually happened, that gives the offset legitimacy. Third, it should be permanent. No point in preserving some rainforest for six months only to have it cut down later. 

Fourth, possibly most difficult to achieve, it should be additional. This means that it isn’t something that would have happened anyway. Carbon offsets aren’t for millionaires to get a little cash for keeping the woodlands they never wanted to cut down in the first place. Offsets that fail to meet this standard won’t end up reducing carbon emissions over the status quo.

Whether you are considering a carbon offset for yourself or weighing the claims of a business claiming to be carbon neutral, look for third-party verification. An increasing number of organizations are working on developing universal guidelines so that consumers can be assured a carbon offset actually reduces net emissions.

How Green Are Your Finances?

If protecting the environment is important to you, there are many ways to make your financial life a little greener, from the purchases you make to the companies you invest in. A good financial advisor can take your priorities and show you how to put them into practice. To meet the right advisor for you, contact us today.

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