Carbon Offsets, Simplified

What exactly are carbon offsets?

June 24, 2021

Carbon offsets can seem complicated. There are many opportunities for businesses when it comes to offsets, and it’s simpler than you may think. Luckily, Radicle’s team of experts has a broad range of knowledge on how carbon offsets work, how to produce them, and how to use them to meet your emission reduction targets. But what exactly are carbon offsets? 

First things first. The simplest way to explain a carbon offset is an accounting system that can balance the scales on pollution. An offset represents the voluntary reduction, removal, or avoidance of greenhouse gas (GHG) emissions, measured in tonnes of CO₂ equivalent (tCO₂e), which can offset emissions made elsewhere. By cutting emissions beyond what is required, offsets play an important role in meeting GHG emission reduction targets, which is pretty awesome. 

Any business, government, or individual can get involved with carbon offsetting, by either paying to offset their GHG emissions or by generating offsets. 

There are two different types of offset categories: compliance and voluntary. Compliance offsets can be used when a government-mandated GHG emission reduction system is in place for project activities that are included under government-approved protocols. Voluntary offsets are for use by individuals, groups, and organizations for, you guessed it, voluntary reasons. Think of it like this: if you, a single person, flew on a plane and wanted to offset those GHG emissions, you could buy offsets on a voluntary basis, but if your business is in an industry with regulatory requirements to reduce carbon emissions, you can use compliance offsets to meet the government-required reductions to your GHG emissions. 

So how are the offsets generated? A wide variety of activities and projects avoid, remove, or reduce GHG emissions that create offsets. They can take the form of nature-based solutions like planting trees on formerly forested land (reforestation) or reducing emissions from deforestation and forest degradation. They can be energy efficiency improvements for your business, projects like energy-efficient buildings or use of super-efficient cookstoves, using alternative fuels to power your company’s vehicles. These activities and projects can also include using regenerative farming techniques, reducing methane emissions by using clean and innovative hardware options, reclaiming or incinerating hydrofluorocarbons (HFCs), reducing emissions from landfills through the collection and combustion of landfill gas, and generating electricity using renewable resources. 

Once an offset is generated, it is given a unique serial number. Businesses can work with companies like Radicle to buy credits that meet their needs. Once a credit is purchased, it is permanently retired or transferred to ensure that there is no double counting and that a credit can only ever be used once.  

Now that you know a bit more about offsets, you’re surely wondering, “where do I buy or sell them”? We have great news – offsets are sold by both intermediaries and project developers – like Radicle! We provide customized transaction options, tailored insights, and scalable access into opaque and illiquid carbon markets. We find the best-fit opportunities for your business, including executing on carbon transactions. We also support end-to-end solutions for your carbon credit lifecycle – from development and creation, to procurement and retirement. 

“The question you want to ask yourself is what emissions can you influence yourself and what emission reduction projects are you going to do that are under your own control or within your organization. Offsets can then be used to meet the remainder of your emission reduction target or to hedge against forward carbon emissions and pricing exposures,” said Chelsea Bryant, Managing Director, Global Markets & Strategy at Radicle during our Carbon Offsets 101 webinar.

If you want to learn more about how you can be involved in either compliance or voluntary carbon offset markets, our team of experts is ready when you are!