Overview of the Key Terms and Definitions of Carbon Offsetting

Overview of the Key Terms and Definitions of Carbon Offsetting

Carbon offsetting is a controversial attempt to mitigate the effects of global warming by allowing individuals and companies to offset, or compensate for, the emissions of carbon dioxide or other greenhouse gases that are caused by their own activities. A typical carbon offset transaction involves calculating how much carbon dioxide is produced as a result of a particular activity or operation, and then paying someone else to reduce the equivalent amount of carbon dioxide in their own activities or operations. Alternatively, a carbon-offset payment may fund a project that produces a clean source of sustainable energy, thus indirectly reducing carbon dioxide emissions by providing an alternative to oil or natural gas.

Carbon offsetting is related to carbon trading, but it does not require governments to regulate carbon credits. It was conceived as an efficient, market-based method for people and companies to reduce their personal carbon footprints and take steps toward becoming more carbon neutral. Offsetting can be voluntary or mandated by government agencies, as with the Kyoto protocol. Critics of voluntary carbon offsetting believe that it is ineffective, largely because the market is not sufficiently controlled by universal standards for calculating emissions and reductions. In addition, critics speculate that carbon offsetting may serve as an excuse for countries to keep polluting while implementing sustainable projects in other countries, instead of addressing the root sources of greenhouse gas emissions. Another valid argument is that many offset projects may have been implemented regardless of whether or not companies were attempting to reduce carbon emissions. However, this problem can be fixed by creating rules for additionality so that companies do not receive carbon credit for projects that were already scheduled to occur.

Large companies typically choose large projects, including hydropower stations, landfill gas collection, reforestation, wind and solar power farms, and hydro fluorocarbon destruction. At a smaller scale, individuals and even businesses can easily reduce their carbon footprint by increasing energy efficiency, using lower emission products (e.g. buy locally), and by changing travel patterns by having phone conferences and planning out shopping trips.

Definitions and Terms Related to Carbon Trading

Carbon Footprint: The amount of carbon dioxide emissions associated with the daily activities of a person, organization, or country.

Carbon Neutral: A person, organization, or country is described as "carbon neutral" if the sum total of their activities do not bring about any net increase in the amount of carbon dioxide emissions, either by a direct reduction in emissions, or via the purchase of offsets equivalent to the carbon emissions associated with their activities.

Carbon Trading: Carbon trading is the practice in which companies buy and sell certificates (or "credits") giving them the right to produce certain amounts of carbon emissions.

Global Warming/Climate Change: These two terms refer to the gradual increase in the average temperature of the earth's air and water. Scientists agree that the phenomenon is caused by the emission of greenhouse gases.

Greenhouse Gases: Gases, such as carbon dioxide, methane, nitrous oxide, and chlorofluorocarbons, which trap the sun's radiation (heat) within the earth's atmosphere and contribute to climate change. Sustainable Energy Source: An alternative to traditional fossil fuel-based energy sources that does not create environmental pollution or contribute to global warming.

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