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explainer: what are carbon offsets?

1 min read | july 08, 2022

Carbon offsets are tradable credits generated by activities that reduce or remove greenhouse gases (GHG) from the atmosphere. They compensate for the emissions from a company’s or individual’s activities elsewhere.

  • An offset can help a company achieve carbon neutrality, but only if the offset decreases or prevents GHG emissions by the same amount emitted elsewhere.
  • A company can offset its own emissions by undertaking projects that prevent or capture carbon emissions and by purchasing offset credits from other projects.

why offsets are important

Offsets help reduce the impacts of climate change. They come in many forms:

  • Nature-based solutions, such as planting trees that take in carbon dioxide from the atmosphere.
  • Renewable energy, such as solar and wind.
  • Energy efficiency efforts, such as electrification, methane leak detection and other lower carbon activities.

that sounds good, but how do you know they’re working?

To be effective, offsets need to be real. We generate and purchase independently verified, measurable offsets, using credible emissions baselines to compare to project activities.

We use several valid third-party standards to determine whether an offset is:

  • Permanent, possessing appropriate safeguards to minimize the risk of releasing carbon back into the atmosphere, known as a reversal.
  • New, providing reduction beyond what would have been realized in the absence of a project. This concept is called additionality.
  • Unique, being tracked by an independent registry to make sure claim to the reduction is exclusive – in essence, to prevent double-counting.

what we’re doing

We are making the most of our capabilities, assets and relationships to help meet the growing demand for offsets. While we take action to lower our own carbon intensity, we also want to help others to lower theirs.

For instance, we’re working on:

  • Reforestation. We are teaming up with Restore the Earth Foundation to plant up to 3.7 million bald cypress trees on 18,800 acres of land in Louisiana.*
  • Collaboration. We are working with leading organizations to develop a way to track emissions, develop accounting systems and grow the scale of offsets. These include the Taskforce on Scaling Voluntary Carbon Markets, World Business Council for Sustainable Development and the World Bank.
  • Advocacy. We advocate for climate policy that includes offsets and carbon pricing mechanisms and that supports innovation.
  • Technology. We team up with key technology partners like Boomitra to innovate and grow the supply of carbon offsets.

*The number of trees and the number of acres reported here were updated after publication to reflect new, higher targets.

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