Legal Definitions - carbon offsets

Carbon offsets are a mechanism that allows an entity, such as a company or an individual, to compensate for its greenhouse gas emissions by funding or undertaking projects that reduce or remove an equivalent amount of greenhouse gases from the atmosphere elsewhere.

Essentially, they represent a measurable reduction in emissions that can be purchased to balance out emissions made in another location. These are often used within regulatory systems, like "cap-and-trade" programs, to help entities meet their environmental obligations by investing in projects that have a positive impact on the climate.

• Example 1: Renewable Energy Development

  A large manufacturing corporation, operating several factories, is subject to national regulations limiting its carbon emissions. Instead of solely investing in costly upgrades to its own facilities, the corporation purchases carbon offsets from a certified project. This project involves the construction of a new solar power plant in a developing country, which replaces an older, less efficient coal-fired power station.

  How it illustrates the term: The manufacturing corporation's purchase of these offsets allows it to account for a portion of its own emissions. The solar plant project demonstrably prevents a significant amount of carbon dioxide from being released into the atmosphere that would have otherwise come from the coal plant. Thus, the corporation is "offsetting" its emissions by funding a project that reduces emissions elsewhere.

• Example 2: Methane Capture from Landfills

  A major logistics company, with a substantial fleet of delivery vehicles, aims to reduce its overall carbon footprint. To achieve this, it invests in a project that captures methane gas from a large municipal landfill. Methane is a potent greenhouse gas, and the project prevents its release into the atmosphere by collecting it and converting it into electricity for local communities.

  How it illustrates the term: By funding this landfill gas capture and utilization project, the logistics company acquires carbon offsets. These offsets represent the avoided methane emissions, which are then used to compensate for a portion of the greenhouse gases emitted by its vehicle fleet, thereby reducing its net environmental impact.

• Example 3: Sustainable Agriculture Practices

  An international airline is working to meet voluntary sustainability targets and reduce its impact on climate change. It contributes to a project that helps farmers in a specific agricultural region adopt sustainable practices, such as no-till farming and improved soil management. These practices enhance the soil's ability to sequester carbon, effectively drawing carbon dioxide out of the atmosphere and storing it in the ground.

  How it illustrates the term: The airline receives carbon offsets for its contribution, as the project demonstrably removes carbon dioxide from the atmosphere through enhanced soil sequestration. This allows the airline to balance a portion of the emissions generated by its flights with the carbon captured and stored in agricultural soils.