Is offsetting carbon worth it? This question has never been more controversial right now and it deserves a good answer, especially if you’re into carbon offset credits.

If you shop online, take flights, or use ride-hailing apps like Uber, you’ve likely noticed the option of including carbon offsetting when making your purchases. Many companies allow consumers to voluntarily offset the carbon emissions of their rides, flights, or product deliveries by paying for them out of their own products.

But is there an incentive for companies to offset carbon emissions themselves?

Through initiatives like carbon credits, companies can invest in emission reduction projects that will help them move towards carbon neutrality.

So, does offsetting carbon worth it? Do carbon offsetting projects actually do what they say they will? And what else can companies gain by offsetting their carbon emissions?

Before we give you all the answers, let’s get back to basics first by explaining what carbon offsetting is all about.

What is Carbon Offsetting?

Each person on this planet has a carbon footprint, but the size of that footprint is dependent on the actions we take on a daily basis. A carbon footprint is the total amount of greenhouse gases generated by an entity, such as a person, company, event, or place.

The most powerful greenhouse gases are carbon dioxide, methane, and nitrous oxide. But carbon dioxide is the most significant contributor to climate change. That’s not because carbon dioxide is more destructive than the others, but because it’s the most common gas generated by human activity. 

That is why there has been a bigger push and focus on carbon offsetting. It’s true that individual activities like daily transportation, diet, and household energy consumption have a part to play. Yet, the largest contributors of carbon dioxide are companies.

In fact, according to The Carbon Majors Database (published by the Carbon Disclosure Project), 71% of the world’s industrial emissions over the last 50 years were produced by just 100 companies. That doesn’t mean individual decisions don’t still have tremendous power, but it’s especially important for companies to consider offsetting carbon.

Carbon offsetting provides gives individuals and companies with an accessible means of offsetting their emissions. One way is by investing in carbon reduction projects such as tree planting initiatives. 

Companies can seek out specific environmental projects like this on their own and partner with them or buy carbon credits from a carbon credits broker, who will invest in offsetting programs on your behalf. If you have a specific cause you’re particularly passionate about, you can channel your carbon-offsetting investment directly to that.

Now that we’ve covered what carbon offsetting is, let’s look at whether carbon offsetting is worth it. What are the benefits?

Carbon Offsets Help Reduce Climate Emissions

We are all aware that the global temperature is rising, along with sea levels. The evidence for climate change cannot be argued, and human emissions have the biggest impact, contributing to 90% of all carbon dioxide emissions. Most people go about their daily business without giving climate emissions much thought.

But what if they cost money?

We bet that people would think twice about their actions if they had to pay for the carbon they emit. Carbon offsetting programs like carbon credits help reduce climate emissions by putting a price tag on emissions, encouraging corporations and companies to implement emission reduction initiatives (or pay the price!).

And while carbon offsetting is still, for the most part, voluntary, there is a global push to reduce emissions. And with that push will come more regulations.

Depending on the regulatory efforts of countries, research from BloombergNEF estimates the cost of carbon offsets could increase by up to 3000% by 2029.

If that isn’t a reason for companies to get the jump on emission reduction efforts, then what is?

Carbon Offsetting Channels Funds to Conservation and Sustainable Development

Carbon offsetting enables companies to tap into and support some incredible conservation and sustainable development projects that positively impact our planet.

Companies can choose projects that align with their values and have the most significant carbon reduction impact. As the number of carbon offsetting and carbon credit programs continues to grow exponentially, their creditability is of utmost importance.

For those wanting to work directly with carbon offsetting organizations, ensure they are accredited by a third party, such as the International Carbon and Offset Alliance (ICROA), American Carbon Registry, and Climate Action Reserve.

Some examples of projects that offset carbon include waste to energy, reforestation, renewable energy (wind, hydro, solar), kelp forests, or avoided emissions projects.

Boosts Company Reputation

Identifying as a carbon-neutral company can boost your reputation as a positive, environmentally friendly, and purpose-oriented corporation.

Reputation is essential for the success of any company or business.

Companies should all adopt CSR (corporate social responsibility), which shows consumers that they operate transparently. And with increased global awareness around sustainability and climate change, consumers expect companies to operate sustainably and responsibly.

By doing so, and being transparent about carbon offsetting practices, you can expect a nice reputation boost! And this reputation boost makes your company more likely to attract the attention of potential consumers and media outlets. That leads us to the next benefit.

Gives Companies a Competitive Edge/Advantage

As previously mentioned, companies operating sustainably is no longer just an added bonus; it’s an expectation. So, are you implementing carbon reduction practices, or at the very least investing in carbon offsetting? If not, then you will soon fall behind any competitors who do.

Consumers who have the choice between a carbon-neutral company and one that is not will inevitably choose the more eco-conscious company. A recent study from SmartestEnergy revealed that 4 of 5 people would choose companies with sustainable environmental practices over those without.

To keep a competitive edge, companies will NEED to participate in carbon offsetting. And that’s regardless if it’s on a voluntary basis or not.

Is Carbon Offsetting Sustainable Long-term?

Some are concerned that carbon offsetting is not an effective long-term solution to climate change. And they may be right.

But the true goal of carbon offsetting isn’t to be the only solution for all of time. What carbon offsetting provides a reinforced company commitment to sustainability and sustainable practices.

Even with companies making no changes to their operations, they’re still investing in projects that will improve how the world operates. But inevitably, companies will be forced into operating more efficiently and reducing their carbon emissions because of carbon offsetting.

The price for carbon offset credits will continue to rise, and while they may be mostly voluntary at this point, it won’t be long before it’s legally mandated.

There are already many mandatory international and regional carbon reduction schemes, such as the California Carbon Market and the Emissions Trading System (ETS) in Europe. And we will see more of them in the coming years. Because of this, companies will be accountable to strive for emission reduction before buying carbon offsets becomes a mandate.

Are Carbon Offsets a Tool for Greenwashing?

Another common misconception about carbon offsetting is that it has the potential to be a tool for greenwashing. 

The ability to offset carbon emissions enables companies to claim they are carbon neutral without actually having to update their processes to reduce operational carbon emissions. And this could mislead consumers to believe that carbon offsetting is not worth it.

While that concern is valid, the reality is that few companies will fork out the money for carbon offsets or carbon credits if they have no concern for the planet or their impact. Most companies use carbon offsetting as a tool for positive change. And that’s while they work on implementing new and more efficient practices.

For firms that invest in carbon offsetting without any intention to make operational changes, they will continue to pay a higher premium for their choices. And that money will go directly into world-changing projects.

How Can You Choose the Best Carbon Offsetting Solution?

Choosing the best carbon offsetting solution can be challenging. Voluntary programs are regulated mainly by private entities (with some not regulated at all).

Can we actually trust private entities like Verified Carbon Standard and Climate Action Reserve to connect us with legitimate programs and missions?

For now, it’s the best we have. But as carbon offsetting continues to become legally mandated, we expect that government entities will be the ones to regulate them. 

In the meantime, initiatives like The Voluntary Carbon Markets Integrity Initiative have developed a Claims Code of Practice. This initiative is to improve the integrity of carbon offsetting programs, verify climate claims and provide guidance to companies wanting to buy carbon credits.

Initiatives like this can benefit companies that are new to the carbon offsetting game. But your own research will be a key asset in the hunt for a program that aligns most with your offsetting needs.

There are carbon offsetting programs that are:

Crypto-based
Nature-based
Technology-based
Energy and transportation-based

All these sectors require support and have impactful and reputable carbon-offsetting initiatives worth investing in.

So, Is Carbon Offsetting Worth It?

The only way to be carbon neutral is through carbon offsetting. It’s not possible to produce zero carbon. So carbon offsetting is the best way to decrease our actions’ negative impact on the environment.

Emissions reduction should always be at the core of everything we do as individuals and as companies. But carbon offsetting will always be worth it and can take us to carbon neutrality that we all should be striving for.

If you’re unsure where to begin your carbon offsetting journey, purchasing carbon credits is always a good place to start. These credits are then invested into verified and thoroughly researched carbon offsetting programs.

New York State Gov. Kathy Hochul revealed a first-in-the-nation carbon credits program that put an economy-wide price on pollution to ditch fossil fuels and reduce GHG emissions. 

New York has been taking one of the most ambitious efforts in the United States to address the climate crisis. The state aims to achieve its mandate of 40% emissions reduction by 2030, and at least 85% by 2050 from 1990 levels. 

Hochul’s new Cap-and-Invest Program would put New York on the path to meet those climate goals.

It will allow the state to make more critical investments in the clean energy transition. It will also support vulnerable and disadvantaged communities amid the rising energy prices. 

Gov. Hochul said:

“Our ambitious Cap-and-Invest Program sets a cap on greenhouse gas emissions and shares the revenues with New Yorkers from disadvantaged communities to help cover utility bills, transportation costs and decarbonization efforts. Through our innovative efforts, we will create a cleaner, greener future while helping New Yorkers with the costs of the transition.”

The program, if adopted, can be one of the most sweeping climate plans in the country. 

New York And Its New Carbon Credit Program

New York wouldn’t be the first to adopt this carbon credits program. California has its own cap-and-trade program while Washington and Oregon have their own approaches in place, too. 

But the design of the country’s 3rd largest economy will be the most rigorous, if adopted. 

The “Cap-and-Invest” program will require businesses to buy allowances, also known as carbon credits, to pollute. The number of credits – or the cap – is reducing gradually in line with the state’s climate goals. 

The government will then invest the revenues earned from the cap in various efforts that slash carbon emissions. These include the following initiatives:

Installing electric vehicle chargers
Replacing fossil fuel appliances with electric ones
Weatherizing buildings
Making energy or power affordable

The proposed plan calls for no on-site fossil fuel combustion for constructing smaller buildings by 2025 and bigger buildings by 2028. It also prohibits the sale of new fossil fuel heating equipment by the end of this decade.

Gov. Hochul also said that an existing program, EmPower Plus, will expand to reach 20,000+ low-income households this year by giving them dwellings with no-cost energy efficiency solutions.

She further added that the state will allocate $200 million to 800,000 customers making below $75,000 to pay electric bills via a relief credit.

Large-scale GHG emitters and distributors of heating and transportation fuels will be required to buy carbon credits associated with their polluting activities. 

By putting a price for each metric ton of carbon emissions, the Cap-and-Invest program will incentivize consumers, companies, and other entities to transition to a lower-carbon economy. 

Cap-and-Invest Program Principles

The Department of Environmental Conservation (DEC) and the New York State Energy Research and Development Authority (NYSERDA) will run and oversee the program. Under Gov. Hochul’s direction, the program design will prioritize 5 core principles.

Affordability: 

A crucial part of the cap-and-invest program is the creation of a universal Climate Action Rebate. The goal is to drive ~$1 billion in cap-and-invest revenues to New Yorkers each year. This is meant to help mitigate costs to consumers and preserve funds for consumer-led decarbonization efforts. 

Climate Leadership: 

New York’s new carbon credits program will not only help meet the state’s mandated climate targets; it will further drive a nationwide approach to carbon pricing. Thus, Gov. Hochul plans to design it in a way that it aligns with other programs that lower the cost of transitioning to a greener future. 

Job Creation:

The new climate program will also create new investment opportunities that create a lot of jobs. The proceeds will go into just transition initiatives ensuring no worker is left behind. The state industries will also be put in a competitive advantage while stimulating the clean energy movement. 

Prioritizing Disadvantaged Communities:

The proposal ensures that the burden of carbon emissions are reduced in frontline, disadvantaged communities. It will slate at least 35% of investments under the plan to them. Hochul highlighted that they’ve suffered injustice already and deserved no more burden, saying:

“As we work to drive down polluting emissions across the board, we must make sure that those who have already suffered from environmental injustice no longer bear an unfair share of the burden.” 

Funding a Sustainable Future:

New York’s cap-and-invest will provide funds crucial in achieving the state’s climate goals. The proceeds will support projects that reduce energy bills, electrify business operations, and increase energy efficiency, among others. 

The innovative program will get inspiration from the experience of similar programs that resulted in significant emissions reductions. The state’s electricity system is already part of a regional cap-and-invest style program, the Regional Greenhouse Gas Initiative (RGGI). 

Since its establishment in 2005, the RCGI has helped cut emissions from power plants by over 50%. It has also raised about $6 billion to support cleaner energy solutions among the participating states.

Carbon capture and utilization technology is not only useful, but a necessary strategy to reduce atmospheric CO2 levels, and stall an increase in global temperatures in the near future. It works to remove atmospheric carbon dioxide, and either reuse it or permanently store it.

There are a myriad of technologies and methods to achieve this, ranging from direct air capture to forestry.

Carbon Sequestration Definition

Carbon capture, or carbon sequestration is the process which captures atmospheric carbon dioxide that is often released by emissions-heavy industries such as energy, construction, manufacturing and transport. 

What happens after carbon dioxide is removed and then captured is called carbon utilization. It could be recycled and resold as an economically valuable product to industries. They would then convert this into end products to be sold, such as new materials or fuels.

Carbon fixation refers to the process in which the captured carbon dioxide is stored permanently in the earth, away from the atmosphere. The most common example of this in nature is the way plants convert atmospheric carbon dioxide into organic compounds (e.g. starch). 

However, there are also emerging artificial carbon fixation technologies, such as the Orca carbon capture project. The plant pumps water and the captured carbon dioxide deep underground, where it will be permanently stored in rocks.

Collectively, all these processes are known as Carbon Capture, Utilization and Storage (CCUS). 

Why is Carbon Capture, Utilization and Storage Critical Right Now?

Carbon capture, utilization and storage technology has been around for a really long time. However, interest in this area has increased exponentially in the past few years, due to the urgent climate targets that need to be met in coming years.

During the Paris Agreement and COP27, the consensus was that time is running out to tackle climate change without drastic changes in the coming years. The agreement was to limit the increase in average global temperatures to 2C and ideally, to 1.5C with respect to pre-industrial levels. An increase above these values would lead to irreversible damage to the planet. 

In order to achieve this, the world would need to remove 1 billion tons of CO2 by 2025. While carbon negative renewable energy sources and planting trees can remove CO2 from the atmosphere, they are not sufficient to meet these climate targets. This is where the significant need for carbon capture and storage technology lies. 

The Basic Steps of Carbon Capture, Utilization and Storage

In CCUS, there are four main steps involved:

Sequestering CO2 at stationary sources such as power plants and industrial sites.
Transporting the captured CO2 to storage sites (this involves compressing or liquefying the gas)
Utilizing the captured carbon in various applications (e.g. carbonated beverages, gas injection for enhanced oil recovery)
Permanently storing the CO2

In this article, we are mainly focusing on the first step, which is carbon capture or carbon sequestration. 

Carbon Capture Methods

There are four main categories to which carbon capture methods belong to:

Pre-combustion carbon capture methods

This process removes carbon dioxide before the fossil fuels are burned. In this process, the fossil fuel undergoes a gasification process which turns it into a mixture of hydrogen and CO2. The hydrogen can be burned as a ‘clean’ fuel which does not produce CO2 as a waste product. 

The CO2 captured can then be compressed, transported and stored for other industrial uses. This method is one of the ways of producing ‘blue’ hydrogen fuel.

Since the CO2 produced in pre-combustion carbon capture methods is higher in concentration, CO2 removal is easier and more efficient compared to post-combustion carbon capture. However, the capital costs related to gasification are quite expensive, especially if it is retrofitted into existing facilities instead of new ones.

Post-combustion carbon capture methods

Post-combustion carbon capture and utilization methods remove carbon dioxide gas after the fuel undergoes combustion. It is the most widely used across industries for carbon capture. This is typically done at the exhaust where CO2 is emitted.  It uses specially designed filters or liquid solvents to separate the CO2 from the exhaust stream. 

The first stage will be the absorption phase, where the solvent absorbs the CO2. The second phase will be the ‘desorption’ phase, where a change in temperature will cause the CO2 to be released from the solvent, and thereby separating the CO2.

Another example of a post-combustion carbon capture technology in development is using lime to remove CO2. The byproduct will be limestone, which can be heated to separate the CO2.

Oxyfuel combustion methods

Oxyfuel combustion processes use pure oxygen instead of air to burn fuel. This will eliminate other impurities such as sulfur dioxide. The byproduct in this case would then only be water vapor and CO2 gas, which can easily be separated. 

Direct Air Capture

Direct Air Capture (DAC) is another novel carbon capture method. It removes CO2 from ambient air instead of only at stationary points of CO2 emission such as power plants. 

The difference here is that with DAC, even CO2 emitted in the past can be removed. This would allow more CO2 to be removed from the atmosphere, reducing the overall CO2 levels in the air.

With post-combustion carbon capture, you are only removing the CO2 that is being emitted at that time. Hence, it prevents a further increase in CO2 levels.

Due to the urgency of climate action that needs to be taken, DAC is increasingly gaining interest. One of the leading carbon sequestration companies in this area is Swiss-based Climeworks. It has launched the world’s largest direct air carbon capture facility in Iceland, called the Orca carbon capture project. 

The carbon capture plant would have an annual capacity to capture 4,000 tons of CO2. 

The Future of Carbon Capture

With more development of such carbon capture plants, the goal is to lower the cost of carbon capture and sequestration. One of the biggest hurdles in the large-scale implementation of carbon capture and storage technology is the cost.

Since emitting carbon is cheap, there is little economic incentive to employ carbon capture technology on an industrial scale. However, things are improving, with more interest from investors, governments and scientists in recent years.

The Canadian province of Alberta made major changes to its carbon credits system in preparation for a future surplus of carbon credits that may flood the market. Alberta expects many carbon capture and storage (CCS) projects to come online from 2024 until 2030.

The amendments are made under Alberta’s Technology Innovation and Emissions Reduction (TIER) Regulation (AR 133/2019). They include creating two new types of carbon credits – the “sequestration credit” and the “capture recognition tonne.”

The changes bring the TIER system in line with the minimum federal standards while ensuring that the carbon credits system continues to work in Alberta. 

What is Alberta’s TIER? 

TIER implements Alberta’s industrial carbon pricing and emissions trading system. It imposes an emissions benchmark on Alberta’s large emitters (emitting 100,000 tonnes or more of greenhouse gas) and opt-in facilities (smaller emitters that voluntarily opt in). 

Facilities subject to TIER must meet their emissions benchmark by reducing their year-over-year operating efficiencies. In case they can’t meet the benchmark, they may choose to do any of these options:

Buy a “fund credit” from the TIER for each tonne of excess emissions
Submit Emission Performance Credits (EPCs) showing reduced emissions to below the benchmark in the previous or current compliance year
Submit emission offsets generated under an approved protocol

EPCs are tradable to other emitters to meet their compliance obligations. TIER-regulated emitters are exempt from carbon pricing under the federal Greenhouse Gas Pollution Pricing Act.

CCS and Carbon Credits in Alberta

The carbon capture and storage industry, popularly known as CCS, is on the rise and Alberta is keeping up with the trend. The province agreed with 25 major CCS projects to explore potential project areas.  

If all the projects go as planned, about 50-60 million tonnes of CO2 or its equivalent can be sequestered yearly. This can potentially create 50-60 million carbon credits. And that’s way more than expected of credits from projects under the TIER system. 

Carbon offset credits issued to date are registered with the Alberta Carbon Registries (ACR). The body also publishes each offset project’s plan and verification of registered offsets. Each project’s plan estimates the annual emissions reductions the developer expects the project to yield. 

Some think the flood of potential credits from CCS projects will cause their price to fall relative to the carbon price. This may restrict the deployment of CCS and the decarbonization of heavy emitters. These include Alberta’s power, oilsands, oil and gas, and other industries. 

But estimates show otherwise as seen in the chart below (CCUS also means CCS). 

Alberta TIER Carbon Credit Scenario (2021-2030)

Currently, a CCS project developer can create carbon credits for 20 years if it follows the Quantification Protocol for CO2 Capture and Permanent Storage in Deep Saline Aquifers. 

A facility can retire the credits as part of its compliance obligations under the TIER. The credit holder can also sell them to another facility or a company looking for offsets. 

Changes to Alberta’s Carbon Credit System

The major change to Alberta’s TIER regime is the creation of two new carbon credits.

Sequestration credits: 

Sequestration credits are also applicable under the Clean Fuel Standard. An offset can be converted into a sequestration credit if it meets certain criteria, which include:

produced in 2022 or later year
the CO2 sequestered must have been captured at a large emitter or opted-in facility (e.g. oilsands facility or fossil fuel power plant)

Sequestration credits may only be used for compliance for 5 years after generation.

Their creation may tell that some companies prefer to buy carbon credits from projects that permanently remove CO2 rather than projects that offset emissions. It will also be interesting to see if the new credit will trade at a premium price.

Capture recognition tonnes:

Capture recognition tonnes allow emitters to deduct sequestered emissions from their total regulated emissions at carbon capture sites. A sequestration credit can be converted into a capture recognition tonne if: 

the CO2 sequestered for the emission offset was captured at the facility applying for the conversion, and
the sequestration happened in 2023 or later.

The emitter can then retire the capture recognition tonnes and use them in calculating its net emissions from its facility. This will reduce its compliance emission obligations. 

Other amendments:

The scope of “large emitters” now includes a facility that imports ~10,000 tonnes of hydrogen in 2023 or later.

They also lower the minimum emissions threshold for opt-in facilities in emissions-intensive trade-exposed industries from 10,000 CO2e tonnes/year to 2,000 CO2e tonnes/year. This enables smaller emitters to opt into the program and increase demand for offset credits. 

Moreover, the current 8-year period for using EPCs will go down to only 5 years with a vintage year of 2023 or later. The amendments also expand the limit of using carbon credits in Alberta under TIER as a compliance method.

For 2023, a facility can still meet its regulated emissions by up to 60% through retiring carbon credits. But this will go up to 70% in 2024, 80% in 2025, 90% in 2026, and any year thereafter. 

The emissions intensity baseline will also be higher. A 2% annual tightening rate, from 1%, will apply to facility-specific and high-performance baselines. But for oilsands operations, this rate will go up to 4% in 2029 and 2030. 

Lastly, the carbon tax under TIER for 2023 through 2030 will increase along with the federal carbon price from $65 to $170 in $15 annual increments.