Carbon Offset
What is a Carbon Offset?
A carbon offset is an emissions credit (also known as a “carbon credit”) earned by eligible projects that sequester, destroy or displace greenhouse gas (GHG) emissions. An offset represents a reduction in the amount of Carbon Dioxide (CO2) that is released into the atmosphere. Any activity that releases carbon (e.g., burning fossil fuels) increases the amount of greenhouse gases in the atmosphere. Likewise, some activities reduce CO2 emissions. Carbon can be “sequestered,” or stored, in vegetation, soil, and underground. For example, trees draw CO2 from the air and store carbon in their trunks, roots, and soil. Increasing the number of trees on your property should cause a reduction in atmospheric CO2. Similarly, grasslands and soils under no-till agriculture store more carbon than degraded lands or soils under conventional tillage. Carbon can also be stored deep underground in geologic formations.
Why is the important?
Growing international concern about climate change has led companies across the U.S. to reduce or offset their greenhouse gas emissions. One popular way to reduce emissions is by purchasing carbon offsets. Like many other commodities, offsets can be traded on an exchange – the Chicago Climate Exchange (CCX) in the U.S. The offsets are traded only in large bundles (more than 10,000 metric tons per year), so “aggregators” bundle together the offsets from numerous landowners to sell them through CCX. In special cases, companies will also buy carbon offsets directly from aggregators rather than from the CCX.
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