What Is the Difference Between Carbon Offsets and Carbon Credit?

Rising carbon emissions are one of the gravest problems the world faces. The level of carbon dioxide in the earth's atmosphere is currently around 410 parts per million — the highest it has been in modern history. Antarctic ice core samples reveal a previous cyclical history of even lower carbon dioxide concentrations — ranging from about 200 to 280 parts per million — during each of several ice age cycles. But since record-keeping began at Hawaii's Mauna Loa Observatory with observations of 313 parts per million in 1958, atmospheric carbon dioxide levels on earth have set a new record each year.

Climate change has many severe consequences — rising global temperatures, rising sea levels, ocean acidification, increases in severe weather events and the threat of public health crises and famine in times of searing heat.

To address the global crisis of climate change, world leaders and scientists have set ambitious, necessary goals for worldwide emissions reductions. In the landmark Paris Agreement, drafted in late 2015, 195 countries agreed to try to curb their carbon emissions enough to limit the increase in global temperatures to less than 2 degrees Celsius. In 2018, though, the Panel on Climate Change reported that even a temperature increase of 1.5 degrees Celsius would be catastrophic for the planet.

Reaching one or both of those temperature-curbing goals will be a formidable task. In 2018, global carbon emissions hit an all-time high of 37.1 billion tons. To hold climate change to the 1.5-degree threshold, the world will have to reduce its carbon emissions by 45% over the next 11 years.

For these reasons, alternative, sustainable energies, such as solar and wind energy, are likely to be the fuels of the future. But many people who are concerned about climate change want to reduce their carbon footprints right now, even if it is not feasible for them to disconnect from municipal power grids or use alternative energy to heat their homes.

Fortunately, solutions exist for helping curb carbon emissions and balance net carbon emissions. Carbon credits and carbon offsets are two of those solutions.

Carbon Offsets vs. Carbon Credits

What are carbon offsets and carbon credits, exactly?

Carbon Credits

A carbon credit represents the right to emit one metric ton of carbon dioxide. To give you an idea of how much that is, if you drove an average car from New York to Las Vegas, the vehicle would emit about one ton of carbon dioxide on the trip.

Most carbon credits are part of cap-and-trade systems, which involve a cap on the amount of carbon dioxide companies can emit and a market system through which companies can buy, sell and trade their credits.

How Do Cap-and-Trade Systems Work?

Companies involved in these systems receive carbon credits, so they can participate in economies that monitor and regulate carbon emissions. Usually, the government sets the emissions caps for each industry and determines the penalties for exceeding the maximum emissions levels. Companies receive carbon credits, which allow them to emit carbon dioxide, as their allowance toward the cap, or they can sometimes purchase carbon credits at auction. The cap is the number of carbon dioxide emissions the industry is not to exceed, and the allowance is each company's share of permitted emissions.

Ideally, each industry's cap also drops over time, providing an incentive to work toward even further reductions in carbon emissions.

Companies can emit set amounts of carbon dioxide based on the number of carbon credits they have. If a company emits fewer tons of carbon than forecast, it can sell or trade its excess carbon credits to another company to use. It can also hold onto them for future use. If it sells its credits, the purchasing company is effectively paying for its excessive carbon emission by purchasing more carbon credits.

Where Are Some Successful Cap-and-Trade Systems?

Here are a few examples of successful cap-and-trade programs around the world.

  • European Union: Europe participates in a cap-and-trade program under the European Union's Emissions Trading System. As of 2016, total carbon emissions under cap-and-trade programs were 26% lower than they had been in 2005, when the programs first started.
  • China: In 2017, with the help of the Environmental Defense Fund, China initiated the first stage of an ambitious national emissions market that contains many elements of the cap-and-trade system. This market covers more than 2,600 companies in an area with a population of more than 250 million people. Experts predict it will create a substantial reduction in carbon emissions in China, which is currently the world's leading producer of greenhouse gases.
  • California: California has a cap-and-trade program at the center of its emissions-reduction policies. The state has seen a drop of 8% in its carbon emissions during the first three years of the program's operation and has also experienced an overall economic boom.

Purpose of Cap-and-Trade Economies

Establishing this mini economy of carbon-credit trading creates an incentive for companies to reduce their carbon emissions, so they can cut their operational costs. Though companies may also be interested in working to reduce the effects of climate change, the immediate effect of reducing emissions under the cap-and-trade system is to benefit a company's bottom line.

The direct goal of companies using carbon credits is not to reduce greenhouse emissions or support sustainable energy projects. The objective, instead, is to be able to participate in a regulated market that encourages reduced greenhouse gas emissions by making excessive carbon emissions more expensive.

Carbon Offsets

And what is a carbon offset? Like a carbon credit, a carbon offset represents one metric ton of carbon emissions. But unlike a carbon credit, a carbon offset goes directly toward supporting the use of sustainable energy. When customers cannot reduce their carbon emissions, they use carbon offsets to pay to have the same amount of emission reduced somewhere else.

A heating oil company such as Harmony Fuels might offer a carbon offset program. Through the program, customers do not receive sustainable fuels directly. They still buy and receive fossil fuels like heating oil and propane. But when customers purchase a specific amount of fuel, the heating company then buys the corresponding number of carbon offsets from a sustainable-energy program.

What Types of Sustainable Energy Do Carbon Offsets Support?

These carbon offsets come from certified green-energy projects such as solar power projects, wind farms and methane-recapture operations at landfills or dairy farms, and projects that plant trees or work toward forest preservation. Though customers still receive liquid fossil fuels, purchasing carbon offsets helps keep these projects running and allows project owners to create more of them, which helps lead to cleaner air and reduced carbon emissions.

Each certified carbon offset project must pass stringent requirements to prove it is a legitimate project working toward sustainable energy or other tangible carbon reduction. It's possible to buy or trade these carbon offset projects anywhere in the world, and customers can be sure they are participating in projects that have a genuine impact on helping create more sustainable energy usage and a greener planet.

Using Carbon Offsets to Achieve Carbon Neutrality

Carbon offsets effectively make a consumer's energy consumption carbon-neutral because for each discrete quantity of emissions they produce, consumers are paying to reduce the same emissions elsewhere. The production of sustainable fuels does not negate the use of fossil fuels, but carbon offsets can reduce the net effect of a person's emissions to zero.

Heating and fuel companies are not the only ones making use of carbon offsets. Online carbon offset companies allow individual consumers to calculate the carbon footprint of their everyday activities — like driving to work or school — then pay to offset that carbon usage.

When you travel by air, you can even buy carbon offsets to offset your plane's carbon dioxide emissions. An average round-trip flight halfway across the country and back emits as much CO2 as many people do in a year. At this point, though, many airlines are buying the carbon offsets themselves. By 2021, under a UN agreement, airlines that offer international flights will pay to offset the extra carbon those flights emit.

Which One Should You Buy — Carbon Offsets or Carbon Credits?

If you're interested in carbon emissions reduction, should you buy a carbon offset or credit? Which one works best for the average consumer, and how can you get the most benefit for your buck?

Carbon credits and carbon offsets both represent the emission of a certain amount of carbon into the atmosphere. But carbon credits represent the right to emit that carbon, whereas carbon offsets represent the production of a certain amount of sustainable energy to counterbalance the use of fossil fuels.

Most carbon-trading plans, which involve carbon credits, are complex affairs involving large, technologically advanced companies, often multinational corporations. Because such enormous interests are at stake, carbon credits are typically incredibly expensive.

Carbon-trading programs also exist because companies that do business in certain countries are legally required to participate in them. However, the companies that offer them do not necessarily have a genuine interest in supporting sustainable energy goals.

Carbon offsets, on the other hand, are because an energy company wants to invest in sustainable energy solutions to climate change and contribute to a greener future for our planet. So buying carbon offsets allow environmentally minded consumers to align themselves with companies and projects that share their values. A carbon offset program is often also more affordable because carbon offset projects generally target less expensive emissions reduction plans.

Benefits of Buying Carbon Offsets

Buying carbon offsets offers several advantages.

  • Cost-effectiveness: Carbon offsets are affordable. Customers can pay to offset individual carbon usages, often for several dollars per metric ton of carbon emissions. Or they can participate in structured programs like those offered by some heating companies, where the companies pay to offset the carbon emissions. Either way, the cost to the consumer is typically not a huge sum.
  • Support for sustainable energy: Carbon offsets have the practical benefit of investing in sustainable, alternative energy programs. This support helps keep these programs going strong. It also allows them to invest in innovations that can make sustainable energy even more cost-effective and practical.
  • Societal benefits: Carbon offsets support more than just sustainable energy. They often help create jobs, provide education and training and bring socio-economic benefits to a diverse variety of communities around the globe.
  • Supporting eco-friendly values: Usually, a company that offers a carbon offset program has a genuine interest in helping combat climate change and preserving a clean environment. An investment in the carbon offset program shows support for those values.

Buying carbon offsets also has the benefit of supporting the customer's choice of energy project. Some of the projects carbon offsets typically support include these.

  • Tree planting: Many early carbon offset programs focused on planting trees. But although planting new trees has valuable environmental benefits, including improving biodiversity and preventing erosion, it takes a long time for new trees to be able to remove meaningful quantities of carbon dioxide from the atmosphere — often between 10 and 20 years. So some carbon offset programs have turned to other projects that deliver more immediate results.
  • Wind farms: Many carbon offsets support wind farms, which produce clean, zero-emissions electrical energy. U.S. wind-power capacity increased by an astonishing 431% between 2007 and 2017, and though wind currently produces only about 3% of the United States' power, the Department of Energy estimates that figure will increase to 20% by 2030 and 35% by 2050. Apart from helping reduce carbon emissions, wind farms also have tiny, environmentally friendly footprints. Wildlife can continue to flourish in wind farming areas.
  • Solar farms: Many carbon offsets also go toward solar energy projects such as solar farms. Many homes and businesses use solar panels for electricity, but large-scale solar operations also exist, such as the solar array on Nevada's Nellis Air Force Base — which has provided the base with 25% renewable energy — along with many privately owned operations. Currently, the amount of solar infrastructure in the United States is enough to offset over 78 million metric tons of carbon emissions.
  • Methane recapture: Methane recapture is crucial because methane is a more potent greenhouse gas than carbon, trapping 25 times more heat in our atmosphere. Methane-recapture projects often focus on landfills, where pipes capture the methane decomposing trash produces and send it to be burned for heat or electricity. Methane-recapture projects also work at dairy farms, where the cows excrete substantial amounts of methane in their manure. As WIRED magazine put it, "Nobody's quite figured out a practical way to catch cow farts," but methane-recapture projects can gather the manure, break it down with bacteria and then use it to create biogas.

Admittedly, carbon offsets are not a perfect solution. In all carbon-offset scenarios, customers are still participating in the consumption of fossil fuels. In a heating company's carbon offset program, customers are still burning oil and sending greenhouse gases into the atmosphere. But buying carbon offsets encourages the development and use of sustainable energy projects. Though one day, sustainable energy may find widespread use, for now, purchasing carbon offsets is an excellent first step in that direction.

Offset Your Carbon Emissions With the Carbon Offset Program at Harmony Fuels

Harmony Fuels is a brand-new service that allows customers to take action to offset their carbon use. For every gallon of heating oil or propane customers purchase through us, we buy the corresponding number of carbon offsets from a sustainable energy project.

Our customers can choose the carbon offset program that best fits with their interests and budget, from solar projects to wind projects to landfill methane recapture. All our carbon offsets go through certified sustainable energy projects, so customers can be sure their fuel dollars go directly toward reducing carbon emissions somewhere in the world.

We need people around the globe to take action on climate change, and every little bit helps. Participating in a carbon offset program lets you feel good about the energy choices you are making. It also helps us all work toward preserving a beautiful and habitable planet for generations to come.

To learn more about Harmony Fuels' programs, contact us today.