What is a “carbon offset”?

A carbon offset, also called a “carbon credit”, is a financial asset that can be bought and sold freely. One carbon offset equals one metric ton (approx. 2,200 lbs) of carbon dioxide. To picture what a metric ton of carbon dioxide would look like, picture a block of dry ice (which is frozen carbon dioxide) that is approximately the size of a full-size refrigerator.  In gas form, one ton of carbon dioxide would fill a balloon 30 feet in diameter. Burning 120 gallons of gasoline releases one metric ton of carbon dioxide into the atmosphere.  A carbon offset is generated by reducing or displacing carbon dioxide or other greenhouse gas emissions into the atmosphere.  This reduction can come from either preventing the gases from being emitted in the first place – for example by replacing coal-fired energy with wind energy  - or from sustainable practices that promote the growth of plant life and root system that naturally consume carbon dioxide and stores it in its roots, a process called carbon sequestration.

What is “carbon sequestration”?

Carbon sequestration is the process of removing carbon dioxide from the air naturally, where as “carbon capture” is the process of doing it artificially. Trees, plants, and grass naturally absorb carbon dioxide through photosynthesis. To give an example, an acre of well-managed, non-grazed grassland can sequester about 1 metric ton of carbon dioxide per year.

What is “cap and trade”?

The main goal of a “cap and trade” system is to facilitate the reduction of greenhouse gases in the atmosphere.  To accomplish this, emitters of carbon dioxide (such as power plants and factories) are given a limit or “cap” on the amount of carbon dioxide they are allowed to emit each year.  If they emit more carbon dioxide than their cap, they must purchase carbon offsets in order to cover the difference. In the U.S., these caps are currently being implemented through mandatory and voluntary programs at state and federal levels.  Cap and trade systems have also been implemented in Europe and around the world. A cap and trade system essentially makes it costly for participants to emit carbon and therefore provides incentives to invest in carbon reduction projects, such as renewable energy, methane capture, and sustainable land management, so they can emit less than their assigned cap.

Where are carbon offsets bought and sold?

SunOne Solutions is a member of the Chicago Climate Exchange (CCX) and the California Climate Action Reserve (CCAR), which are the U.S.’s leading carbon offset registries. There are other voluntary registries in the U.S. which SunOne also works through, such as the Voluntary Carbon Standard (VCS) and the American Carbon Registry (ACR). The federal government is currently discussing setting up a federal, mandatory cap-and-trade system to govern carbon offsets. A bill (The American Clean Energy and Security Act) has already been passed by the U.S. House of Representatives in 2009 and the U.S. Senate is considering a similar bill in the Spring of 2010.