Carbon Offsets 101

Carbon offset graphic

The first carbon offset project was undertaken in 1988. Applied Energy Services (now just AES) planned to build small coal-fired powerplants around the United States, selling the electricity to local utilities. But the CEO of AES, Roger Sant was concerned about climate change. He approached the World Resources Institute in Washington D.C. to explore whether AES could do anything to mitigate the potential climate change impacts of the AES business model. As a result of that consultation AES funded the first carbon offset project, an agroforestry project in Guatemala implemented by the relief agency CARE. AES had just launched the first carbon market.

Since then offset markets have grown and proliferated, evolving into both compliance-based and voluntary markets. Offsets are technically attractive for climate change mitigation for several reasons:

  • Carbon dioxide (CO2) and the other greenhouse gases (GHGs) emitted by human activities are global gases with no direct health impacts.
  • Any molecule of CO2 can be anywhere else on the planet within about a week, regardless of where it was emitted.
  • As a result, it literally doesn't matter to climate change where emissions and emissions reductions occur around the world.
  • The costs of reducing GHG emissions or sequestering carbon (the two main categories into which offsets are grouped) vary widely across the world, so offsets have the potential to make climate change mitigation more cost-effective.


And offsets are attractive to specific audiences for several additional reasons.

  • Companies and individuals love the idea of a low-cost way to reduce their carbon footprints.
  • Policy-makers like being able to offer companies a low-cost way to comply with emissions reduction targets.
  • Many environmental and social welfare groups have embraced osets as a means of funding initiatives ranging from poverty reduction to endangered species conservation.

Today, carbon offsets are also increasingly used as a consumer branding tool. Your credit card company may already be buying offsets to make your purchases "carbon neutral," and that's just one of many examples. All at potentially no cost to you.

That said, offsets have been contentious throughout the 30 years of their history. Before buying carbon offsets you should understand why that has been the case. That’s the goal of this Carbon Offsets 101 Climate Site that has been extracted from the Climate Web, an open-access climate knowledge solution, and the closest thing today to a collective climate intelligence. Incorporating the work of thousands of experts, the Climate Web facilitates access to the actionable climate individuals, companies, and policy-makers need for their climate change decision-making.

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