What is Carbon Offsetting?

Carbon offsets represent a tradeable certificate that proves that one ton of CO2 or the equivalent amount of one ton of another greenhouse gas (GHG) has been removed from (or not emitted into) the atmosphere. They can be created by either renewable energies such as wind or solar projects, by planting trees and other procedures to eliminate GHG from atmosphere.


Carbon offsets are not all equal form the price point of view. Their value is a function of several factors such as the delivery time and whether the offset can be certified.


The voluntary carbon market (VCM) is a place where companies and individuals can buy carbon offsets to offset their carbon emissions. This means that whenever a company is environmentally conscious and wants to reduce its carbon footprint, or a company that wants to demonstrate to its clients that is doing its part to protect the environment, they use carbon offsets to compensate for their emissions.


A carbon offset credit is a transferable instrument, or right, that allows the holder to emit one metric ton of CO2 or GHG in atmosphere and are regulated by the government. They are awarded to companies that finishes below its required emissions cap and can be sold to companies which do not.


The main difference between carbon offsets and carbon credits is that companies trade carbon credits because they have to and they trade carbon offsets because they want to.