- Voluntary carbon offsets are purchased when an individual wishes to offset their carbon emissions from travel or other energy use. Carbon offsets as part of a compliance market involve a company or government entity purchasing an offset to comply with a mandated cap on carbon emission. An offset is measured in terms of tonnes of carbon dioxide equivalent avoided (tCo2e)
- Typically, carbon offsets are associated with projects such as reforestation, efficient stoves, biomass powers, waste management, etc. Third parties (e.g: https://www.goldstandard.org/) evaluate their impact and measure the Certified Emissions Reductions (CERs).
- Those CERs can be exchanged in voluntary market, where buyers and sellers trade with their rules, or as part of the compliance market, where government regulations requited emitters to reduce or buy CER. In 2017, projects issued ~63m tCo2e. Those projects trade between $3-$6 per tCo2e. A good read is Carbon markets outlooks and trends.
- The additionality of those carbon offset project is hard to measure:
- For instance, say you invest in a reforestation project, you'll need to wait for the tree to grow (~100 years) to really account for the carbon removal. What if your forest is not really growing? What if it gets destroyed?
- Electric CERs (ones that PG&E use for their 100% renewable electricity programs for instance) are also dubious. Here is a good read on the additionality of electric CER.
- There is growing skepticism on carbon offsets as a short-term fix that does less bad rather than actually doing good.
Another type of emission-reducing projects involve carbon removal. These projects actually remove carbon dioxide from the atmosphere and lock it away (see description here). Those projects can clearly indicate the number of tons of carbon removed. Removal echnology exists, but the market is still nascent.