Using carbon offsets vs carbon credits gives individuals and groups a way to reduce carbon emissions and fight climate change.
What you will learn
Carbon credits generally represent a reduction in greenhouse gas emissions, whereas carbon offsets can represent removal of greenhouse gas.
Carbon credits are typically associated with cap-and-trade systems.
Carbon offsets are traded on the voluntary market and include carbon sequestering efforts, renewable energy, and other projects that remove greenhouse gasses from the atmosphere.
According to the Environmental Protection Agency, climate change impacts our oceans and weather, heat-related death rates, wildfires, and much more. People have organized to develop methods for mitigating the threat posed by climate change. Carbon credits and carbon offsets are among the many techniques created to counteract global climate change.
In this article, we'll look at the issue of carbon offset vs carbon credit while explaining how they work and examining their importance.
Carbon credits generally represent a reduction in greenhouse gas emissions, whereas carbon offsets can represent greenhouse gas removal. Carbon credits are typically associated with cap-and-trade systems in which governments limit the carbon emissions that specific industries can release. Companies exceeding their allowances must buy new credits to increase their cap. On the other hand, carbon offsets are traded on the voluntary market and include carbon sequestering efforts, renewable energy, and other projects that remove greenhouse gasses from the atmosphere.
Although carbon offsets and carbon credits are different, the terms often are used interchangeably. When a carbon offsetting project monetizes its efforts in the voluntary carbon market, it's typically referred to as generating a voluntary carbon credit. The terms can be confusing to people who aren't in the thick of the compliance market. However, if you wish to reduce your carbon footprint using the voluntary market, the credits you buy will likely involve carbon offsetting efforts.
Compliance carbon credit markets are heavily regulated and used by governments and companies that are required by law to participate. Businesses in sectors known for significant GHG emissions are given carbon credits representing the amount of carbon dioxide and other greenhouse gasses they're allowed to produce. If they're thought to exceed their allowance, they must buy compliance carbon credits to adhere to regulations. Each credit typically represents one metric ton of carbon dioxide not released into the atmosphere.
Carbon offsets can be purchased by any entity wishing to reduce emissions. Voluntary offset credits can be generated by landowners, sustainable energy projects, and other carbon offset projects that eliminate carbon emissions. For example, Hedera, a cryptocurrency company worried about the fossil fuels used to generate the energy for its mining efforts, decides to buy carbon offsets. The purchase would support an organization specializing in forest preservation, wind turbines, other renewable energy sources, and similar efforts. Only a third-party certified project, however, can qualify for carbon offsets.
Most carbon credits don't reduce greenhouse gasses directly. Instead, the carbon credit system uses financial rewards and penalties to incentivize businesses to lessen their environmental impact. This cap and trade methodology reduces emissions over time, as the cap is lowered yearly. Sometimes, it's cheaper for a business to exceed its cap and buy more carbon credits. However, as the cap continues to shrink, many businesses will have to reduce their emissions to save money.
Carbon offset programs represent more-direct emission reductions. Buying carbon offsets helps support offset projects that remove greenhouse gasses from the atmosphere.
There are a variety of carbon offsets available, and many support sustainable energy projects. These offsets are produced by companies, farmers, individuals, nonprofits and other groups. Some examples of carbon offsets include:
Trees need carbon dioxide to grow. The carbon dioxide used by trees gets sequestered in their trunks, branches, roots and leaves. Planting trees is a common way to remove carbon dioxide from the atmosphere, but it requires significant amounts of land.
A single mature tree sequesters around 48.5 pounds of carbon dioxide annually. According to the EPA, "a typical passenger vehicle emits about 4.6 metric tons of carbon dioxide per year." (That amounts to about 10,140 pounds a year.) This means it takes around 2 10 mature trees to offset the emissions produced by a single car. Roughly 284 million vehicles operate in the U.S., so it's clear why carbon-offsetting programs are necessary.
This is a vital carbon offset program since trees are essential to the Earth's natural carbon dioxide removal process. Additionally, preventing deforestation reduces greenhouse gasses produced by the machinery required to remove and transport trees. Planting trees and preventing deforestation has other benefits, too. By taking more carbon dioxide out of the atmosphere, it reduces the amount that the oceans might absorb. That, in turn, could help deter ocean acidification and other problems greenhouse emissions pose for the seas.
Clean water projects are responsible for reducing carbon emissions in numerous ways. Areas without clean water typically have to purify it before it can be consumed. In many cases, these areas must burn firewood to boil their water, resulting in greenhouse gas emissions and deforestation.
Energy and heat production is responsible for around 25% of global carbon emissions. Carbon dioxide and other greenhouse gasses are released when we burn coal, natural gas, and oil to produce electricity. Funding sustainable energy sources, such as solar and wind, significantly reduces GHG emissions.
Methane makes up around 16% of the greenhouse gasses released into the atmosphere. The EPA says methane is more than 25 times as potent as carbon dioxide at trapping heat in the atmosphere. This gas is typically produced by agriculture, energy production, and landfill waste. Methane can be recaptured by using it to produce energy.
Purchasing carbon offsets helps support the environment by funding projects that reduce emissions. In many cases, offsets are affordable and accessible. Still, it's important to note that carbon offsetting shouldn't provide an excuse to pollute or produce more greenhouse gasses. For carbon offsetting to be effective, it must be combined with efforts to reduce greenhouse gas production.
Carbon offsetting is an ideal way to reduce your carbon footprint and help in the fight against climate change. Hedera buys carbon offsets from the Greater Lebanon Refuse Authority quarterly. The GLRA produces electricity by burning landfill gasses, reducing the amount of methane entering our atmosphere. Additionally, Hedera is committed to using less electricity than other distributed ledger technologies.
Transacting on the Hedera network requires an average of 0.020 watt-hours per transaction, making it the greenest proof-of-stake network. Comparatively, a single transaction on the Cardano network requires around 378.53 watt-hours per transaction. Other green DLTs like Algorand require around 5.34 watt-hours per transaction.
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