Carbon Offsetting Cheat Sheet: How to Understand the Terms

The purpose of this article is to serve as a quick primer of terms used in carbon offsetting and global warming discussions. Think of it as a ‘cheat sheet’ to help you understand carbon offsetting well enough to follow the other articles in this Carbon Offsetting series, or elsewhere.

This will be a live article. I plan to update it as I discover additional terms that seem useful to explain, or if I think of better ways to illustrate these concepts. If you are an artist or some kind of visual communicator who can think of creative ways to have these concepts come across more intuitively to regular people, please get in touch.

What does a carbon offset mean?

In order to understand carbon offsetting, first you need to understand global warming.

Global warming refers to the increase of the sun’s heat energy in the earth’s atmosphere. In its long history, the earth has gone through periods when it received more, or less, radiation from the sun (i.e. ‘solar radiation’).

It has also seen various events that make the atmosphere worse or better at trapping the sun’s heat. These include formation of carbon-fixing ecosystems (like, forests), volcanic activity, and carbon dioxide accumulation.

However, the warming in recent times is unusual because its speed is driven by the rate of fossil fuel burning by humans. This makes the atmosphere really, really good at trapping the sun’s heat. The phenomenon is called the greenhouse effect.

What does the ‘greenhouse effect’ mean?

To put it another way, human beings are releasing carbon dioxide into the atmosphere (i.e. ‘carbon emissions’) faster than the ability of other systems on the planet to re-absorb it. The excess carbon dioxide hanging around is a problem because it has the effect of trapping solar radiation on earth, i.e. a ‘greenhouse gas’. Because of this, carbon dioxide and other gases that have the same effect are called a greenhouse gases, because they make the earth like a greenhouse (or at least, even more than it normally is).

The Earth is already naturally like a greenhouse. Sunlight can reach the earth’s surface as light waves. But it mostly then goes into space as heat radiation. Greenhouse gases block this radiation. This is not a bad thing in itself. It is what makes Earth warm and habitable for us in the first place.

The problem is when there’s too much of it, that it starts to change the climate systems that ecosystems – and humans – have evolved to rely on (i.e. ‘climate change’). It’s even worse when the rate of change is so fast that plants and animals in the Earth’s ecosystems have no time to adapt or evolve.

What does carbon offsetting do?

To solve this problem, we have to stop the excess emissions, or at least slow down the rate of change. We need to drastically reduce our carbon emissions rate, and increase the planet’s ability to re-absorb past and current emissions that are out of balance.

Carbon offsetting is about quantifying how much greenhouse gas is released from an activity such as burning fuel for energy (i.e. ‘calculating a carbon footprint’), and then increasing carbon absorption or removal capacity somewhere on earth by the same amount. This is a carbon offset. The activity is then considered ‘carbon neutral’ or ‘net neutral’. (If it captures more greenhouse gas than it releases, then it is ‘carbon positive’.)

What carbon offsetting doesn’t do.

In order to appreciate and use it correctly, we need to understand what carbon offsetting does, as well as doesn’t, do. Carbon offsetting does not cover all climate action. This tool isn’t directly about reducing ongoing baseline emissions. However, it provides the necessary finance infrastructure to support carbon pricing, which is about reducing current emissions.

For why carbon offsetting is a thing that we need, even though it’s not enough on its own, see this section in my first Carbon Offsetting article. In summary, carbon offsetting is not the goal of climate action. It is just a tool to reach the goal. As it is a tool, if the broken systems are fixed, you should not need it anymore.

Climate action doesn’t always solve other environmental problems

Secondly, carbon offsetting does not necessarily solve other environmental problems. In fact, focusing only on carbon reduction can worsen other sustainability measures. Unless the carbon offsetting project coincidentally has such benefits, carbon offsetting is not an action directly related to efforts around problems of water scarcity, biodiversity, plastic pollution, etc.

Environmental issues are broad; no single solution solves everything. Different groups of people specialise in these problems, separately from carbon management. That said, carbon offsetting projects bearing the Gold Standard do solve some additional issues (see section on accreditation programs below). This is so that we don’t get in a situation where solving one environmental problem creates a different one.

Carbon offsetting is only for emissions from human economic systems

Thirdly, carbon offsetting is only about human-caused emissions. The reason is that the purpose of carbon offsetting is to change the unsustainable human economic systems, which are causing the problem. This effort is also called the ‘energy transition’, because a large part of the change needs to happen for the energy part of the economy.

However, climate change itself can cause additional carbon emissions from release of previously dormant carbon storage. For example, consistently warm winters are causing permafrost melts which release previously trapped methane, a more potent greenhouse gas than carbon dioxide.

Carbon offsetting does not attempt to neutralise these emissions. These emissions, along with past emissions, are the reason why we have to change as fast as we can. It is why climate action is more than just carbon offsetting. But this article does not cover all of those; it’s only related to the carbon offsetting topic.

What do ‘carbon projects’ mean?

Carbon projects are those projects that remove greenhouse gases from the atmosphere, stop an ongoing source of greenhouse gas emissions, or prevent a future source of greenhouse gas emissions.

How do carbon offset projects remove carbon?

There are many ways to eliminate carbon emissions, as well as absorb carbon dioxide from the atmosphere.

Some projects seek to increase the natural ability of the planet to re-absorb carbon emissions. They do so by increasing the acreage of carbon-fixing ecosystems (or ‘carbon sinks’), or ensuring their permanence. Examples include re-planting forests and protecting wetland habitats. These are called ‘nature-based solutions’.

Some projects seek to help developing countries afford renewable power generation. Energy growth will be highest in developing markets. Removing any cost difference between renewable power and conventional fossil fuels helps ensure that newly-built power generation is sustainable, and does not come with even more carbon emissions in the future.

Other projects seek to capture methane losses into the atmosphere. Examples include methane leaks from old landfills, as well as – no lie! – farts and burps from cows. Although present in smaller quantities compared to carbon dioxide, methane is better at trapping heat than carbon dioxide. Without carbon offsets, such research and infrastructure upgrades would often not be funded.

Different carbon projects do slightly different things

Aside from these, research and technology trials are also in progress to invent new ways of capturing greenhouse gases already in the atmosphere. At the moment we only have nature-based solutions for this at scale. Eventually nature-based solutions will max out, but we will still need to remove more. This is why these efforts are important. Examples include carbon capture and storage (CCS), carbon capture into industrial processes, and biochar.

Other articles in this series will cover some project types in greater detail. They are by no means exhaustive. They’re just a sampler for you to get an idea of the range, and understand the different values of scalability, timing, inclusiveness, permanence, etc. You should get a better idea for why no single solution can be ‘the solution’.

Where do carbon projects take place?

Carbon projects take place everywhere!

Because of the diversity of carbon offset methods, and the diversity of need and opportunity around the world, different projects have the most impact in different parts of the world.

For example, renewable power generation capacity projects usually takes place where there is growth in demand, plus cheap fossil fuels. (If fossil fuels were already expensive, the renewable energy project would probably happen anyway because it costs less).

Forest protection projects might take place in countries where deforestation threat is real, but also with sufficient rule of law. (Otherwise, a corrupt government can chop down the forest and the project can’t honour the carbon offset you purchased).

CCS, on the other hand, might be more suitable at legacy power stations in countries where energy demand has plateaued. Where there’s no demand for additional energy, it could be more expensive to replace existing power stations with a brand new one, compared to fitting old ones with CCS.

What are carbon emissions?

Carbon emissions are the result of any process, whether natural or through human activity, that release (emit) carbon dioxide and other greenhouse gases into the atmosphere. In the context of global warming, usually it refers to emissions from human activity. Generally (but not always), they arise from burning fossil fuels.

Why is it called ‘carbon’ emissions?

I’ll be honest with you. I’m not 100% sure.

When people talk about greenhouse gases in the context of climate change, they typically mean carbon dioxide. It’s not because carbon dioxide is the worst greenhouse gas. It’s because there’s just way, way, too much of it, as a result of burning fossil fuels since the Industrial Age. Not only that, some other greenhouse gases like methane eventually break down to carbon dioxide in the atmosphere, adding still more.

I think it just became a shorthand for ‘carbon dioxide emissions’. Especially since some of them start out as carbon monoxide or methane.

Why are carbon emissions measured in CO2e?

You might remember that CO2 is chemistry annotation for carbon dioxide. So, what does the ‘e’ mean?

Well, the ‘e’ means ‘equivalent’. So, CO2e is ‘carbon dioxide equivalent’. We use this unit because most of the greenhouse gas in the atmosphere is carbon dioxide, but we also want to measure other gases along with it.

CO2e is a measure of how much global warming effect a gas has, relative to carbon dioxide. In this way, we can measure the warming effect of methane and carbon dioxide using the same unit.

Are carbon emissions the same as a carbon footprint?

The carbon emissions from all the processes that go into making a specific product or service is the carbon footprint for that product. An individual or business also has a carbon footprint; this refers to the total carbon footprint of all activities we do and our share of carbon emissions due to the products we use.

It is a concept meant to facilitate measuring where carbon emissions are coming from, so that we can do something about it.

What is a secondary carbon footprint?

There are two kinds of carbon footprint. The first one is easier to calculate, which is your energy carbon footprint. This relates to carbon emissions from energy use; for example, driving a car or taking a flight. All you need to calculate are the carbon emissions from the energy you used. Most carbon calculators will calculate this carbon footprint.

The second one, i.e. secondary carbon footprint, is a lot less straightforward. This relates to carbon emissions from making non-energy products we use. For example, the carbon emissions from making everything from your coffee mug to your clothes. These carbon emissions are more difficult to calculate because, unlike energy, the carbon footprint of things vary tremendously depending on so many things: what it’s made of, where it comes from, how it was grown, etc. etc.

Technically food is an energy product, but it comes under this category because of this. As an example for why this is not straightforward, take one food type: milk. Factory farm milk has a carbon footprint that is totally different from milk that comes from a permaculture ecosystem.

The biodiversity crisis is not a subset of the climate crisis, and requires its own tools

Because of this, carbon calculators that do calculate secondary carbon footprint always benchmark a very limited scope. If you’re outside that scope, you should not use it. For example, the one on Carbonfootprint.com’s calculator uses data applicable for the UK to create the calculation. Unless you’re in the UK, or a country very similar in diet and consumption patterns, the calculation can be way off.

An important consideration is that the carbon footprint may not be the most important, or urgent, environmental impact of products. Remember, we also have a biodiversity crisis, some places have water scarcity issues, and so on. For all these reasons, this kind of carbon footprint is more appropriately addressed by industry sectors.

What is a carbon credit?

A carbon credit is basically a claim to remove (usually) one tonne of CO2e. In carbon regulated markets, industries that emit carbon emissions have to buy these credits, commensurate to their emissions.

The idea is for carbon emissions to come at a cost, because otherwise our modern economic system that is driving climate change doesn’t swiftly transition to a more sustainable one. A common carbon pricing mechanism uses the economic system itself to make low-carbon projects more financially attractive than projects which are carbon intensive.

Within the scope of an emissions trading scheme (e.g. the ETS in Europe, and the pilot program in China), a starting quota of carbon credits are issued to kick off the mechanism. This type of carbon credits is capped, and meant to be reduced progressively. So, businesses have to compete for a limited amount of credits, or figure out how to be less carbon intensive.

In this way, polluting industries have to choose between reducing their carbon emissions, or pay more for carbon credits and potentially lose competitive advantage. Or, they have to set up carbon offset projects themselves.

What is voluntary carbon offsetting?

Voluntary carbon offsetting refers to the purchase of carbon credits by individuals and entities who are not covered by emissions trading schemes. Carbon offsetting projects in the volunteer market can also generate carbon credits. These can then be traded in the same mechanism, but can also be bought by businesses and individuals outside the scope of the trading schemes.

The idea is to expand the number of carbon projects, but also increase competition for carbon credits even more. The objective is to increase the pace of climate action to bring down the level of greenhouse gases in the atmosphere.

There are ongoing efforts related to expanding the scope of emissions trading schemes, as well as potentially merging the voluntary and regulated markets more. But the two have different target groups. For now, it makes sense to reach them somewhat separately.

How do I buy a carbon offset?

The short answer is my article explaining the two main ways to estimate your carbon emissions“.

An important consideration to buying a carbon offset is legitimacy and trust. Not only is this still a new field, whenever money is involved, eventually there will be cheats jumping on the bandwagon. There are a lot of carbon offsetting service providers by now. But how do you know it they’re legitimate, and trustworthy?

There are two basic parts to assessing legitimacy. The first is whether the emissions reduction itself actually happens (like, in real life), and is additional (it wouldn’t have happened without the assistance of the offset). In my other articles in the series, I describe some basic types of carbon offsetting projects that you might come across independently, and how to get a basic understanding for whether they’re likely to be legit.

The second is whether the accounting part happens, to measure how much offset happened.

As for trust, certification helps in that regard. As the field continues to develop, standards that can anticipate and withstand trust challenges would set the bar for the rest.

Do I need to understand the carbon offsetting technology to participate?

No. You can participate in carbon offsetting as an individual even with a low level of knowledge. Like many other things in modern life, you can rely on the verification by people who do have the knowledge. Look for the badge of at least one carbon accreditation program on the website of the carbon offsetting provider. Scroll down for examples.

Remember, there are two things that need to be verified in order for a carbon offsetting service to be credible.

First, there is some way to calculate your carbon footprint. For a detailed description for what a credible calculator looks like, see the first article in this Carbon Offsetting series.

Second, the project fulfils the legitimacy tests above: it can quantify how much emissions reduction is supposed to happen for a given amount that you’re paying; and that it does really happen. If the project is verified under a carbon accreditation program, then you can participate without having the knowledge to validate it yourself.

Note that standards are still developing for carbon projects. They have come together a lot more than in the beginning, but there are still differences of opinion in the expertise community, for example on how much risk to tolerate when approving projects to a standard. This doesn’t mean the projects are “fake”. It just means some projects are weaker than others, or didn’t pan out as intended.

What are the major carbon accreditation standards?

There are a few types of carbon accreditation programs. They range from the basic ‘did the carbon offset really happen’ kind of audit, to programs that take into consideration additional environmental or social benefits (‘co-benefits’) associated with the carbon offset project.

These are three that I’ve heard of, and that you’d probably come across.

Climate Action Reserve (CAR)

Climate Action Reserve (CAR) is a registry of carbon offset projects in North America. CAR assures that emissions reductions of its projects are real, additional (wouldn’t have happened anyway without carbon credit funding), and permanent. You can buy credits as a voluntary carbon offsetter through here.

Verified Carbon Standard (VCS)

VCS is also a voluntary greenhouse gas emissions reduction program, managed by Verra. Like projects under CAR, emissions reduction of projects verified by VCS are assured to be real, additional, and permanent.

Gold Standard

Gold Standard verification goes beyond just validating that the emissions reduction of the carbon offset project are real. This voluntary program tries to maximise the benefit of the project by lining up with suitable UN Sustainable Development Goals.

Therefore, projects assessed under the Gold Standard do something extra than just climate action (SDG #13). They might also contribute to other Sustainable Development Goals such as alleviating hunger (#2), or accelerate transition to sustainable cities (#11), or facilitate gender equality (#5).

What is the difference between carbon capture and carbon sequestration?

If you’ve come across these two terms, you might wonder if they’re different, or interchangeable. I’m going to use a metaphor to explain how they’re different. Otherwise, it gets complicated because there are many ways this can look like.

Basically, carbon capture is like when you divert water from a river into a canal. Now, if you were to irrigate a farm with the canal water, that’s like carbon sequestration. The water can’t go back to the river – at least not for a long while.

And what is carbon storage?

So after you irrigate the farm with the canal water, the plants take up the water and grow. Now the water is part of the plant matter. That’s like carbon storage. The water isn’t just water anymore; it’s become part of something else. In order to get back to the river, it has to undergo additional processes to turn it back into water.

What is carbon leakage?

A big issue in climate action is carbon leakage. At a regulatory level, carbon leakage is when actions to reduce carbon emissions in one jurisdiction, causes emissions to rise in another jurisdiction. For example, excessively stringent climate laws in one country may cause a business to move its carbon intensive portion to a country with less stringent laws, resulting in a higher total carbon emissions than before.

When considered at a project level, leakage in carbon accounting terms means increases in carbon emissions elsewhere due to the carbon offsetting project itself. For example, a project reforesting existing agricultural land which causes other forest land to be cleared for farming instead.

The difference between carbon accounting and regular accounting

This is a problem in carbon accounting that financial accounting does not have, because economic systems assume perpetual growth. However, carbon accounting is about real planetary resources, and therefore needs to balance. In fact, this is the reason why the economy needs to become circular; the global warming problem exists precisely because economic theory assumes perpetual growth. But that’s a topic for a different article.

This is why UN Sustainable Development Goals like Reduced Inequality matters in climate action. High inequalities in the world makes leakage more likely and limits the pace of climate action. One part of the world being very stringent doesn’t really help. Most parts of the world being able to enforce the same standard – that is more impactful.

Do you have questions? What other terms do you think I should add? Comment below!