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understanding carbon credits, offsets and trading schemes



Carbon offsets are projects that are claimed to prevent or even reverse specified amounts of emissions. These supposed emissions savings are treated as if they were equivalent to actual emissions reductions, even though many are unverifiable, allowing companies, industries and state actors to claim that emissions are being reduced when actual emissions continue unabated.


Carbon offsets generate credits which can be sold to polluters to allow them to emit pollution over and above their cap. Because buying credits is often cheaper or easier than actual emissions reductions, they are attractive to businesses that want the cheapest or easiest way to meet emissions reduction targets

Offsets usually run in parallel with cap and trade schemes in which a cap is set to limit the total amount of pollution allowed. One company or entity can buy a credit from another company that has supposedly reduced emissions by a certain amount in order to meet its carbon reduction targets, without actually making any real change itself.

Consider this diagram explaining how carbon markets work:


Looks good right? But now ask:

1. Could Emitter A have reduced its emissions to meet the target, but chose not to because Emitter B had some cheap credits to sell?

2. Wouldn't we have made more progress if both Emitter A and Emitter B had simply been required to meet the target and rewarded for exceeding it?

3. Who is measuring how much emissions were saved by Emitter B or other credit sellers? Are those savings real or just on paper? Many offset projects that sell credits are tree planting or conservation projects, which means savings are difficult to quantify and can be erased the moment there is a forest fire (not to mention that an oak tree planted today will take at least 20 years to begin absorbing the carbon it is projected to sequester). Other offset projects include renewable energy plants that are not in fact reducing emissions, but rather replacing energy that would otherwise come from carbon emitting sources. They should not serve as a license for industry to continue polluting.

4. Most importantly, what progress is being made here? Carbon offsets and credit trading scheme do not reduce climate changing emissions, they simply shuffle them around between companies. Only ambitious emissions reduction mandates can make a significant dent in the climate crisis that we face.


1. Are the carbon credits being earned and traded a result of emissions reductions that would otherwise not be achievable through direct action like regulation and enforcement?

2. Are the polluters buying credits making a cynical calculation that buying credits is cheaper than just reducing emissions?

3. In those cases when an industry truly CAN'T reduce emissions, are the emissions credits being purchased based on accurately measured and enduring reductions??

Offsets do not reduce emissions. In fact, they do not even compensate for emissions, as they are advertised to do, merely creating an illusion that something is being done about climate change. Instead, they allow emissions to continue and thus exacerbate global warming.


Further, as research on offset projects in the global South has demonstrated, they violate human rights of local communities and Indigenous Peoples and result in land grabs. In moving the responsibility for reducing emissions from one location to another, often from countries in the global North to countries in the South, they not only make climate change worse but also increase global inequality. 


Carbon offsets, credits and trading schemes are designed by the fossil fuel interests that are promoting them around the world to obscure the truth.


The most effective, rapid and just climate solutions are simple and direct - the Government must mandate reductions from every industry and incentivize the adoption of clean renewable energy if we are to avoid the worst climate disasters predicted by science.

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