An Introduction to Carbon Offsetting

3 min readSep 22, 2021

On September 15th, the world’s biggest carbon capture plant began its operations. The plant is called Orca and is located near Iceland’s capital, Reykjavik. Developed by Swiss company Climeworks, it uses carbon capture technology that directly pulls CO₂ from the atmosphere and stores it below ground.

It is projected to remove 4,000 tons of carbon each year as one of 15 large-scale carbon capture plants worldwide. Directly removing CO₂ from the atmosphere has become a necessary measure to prevent temperatures from rising 1.5° above pre-industrial averages, as outlined in the Paris climate agreement.

Though they are growing in number, these carbon capture projects are expensive to maintain. Orca costs $600 to $800 to sequester just one ton of carbon. Luckily, the growing carbon offset market is readily creating the demand for the carbon offset packages such as those that Orca provides.

Carbon offsetting provides a way for companies and individuals to “cancel out” their carbon emissions by funding projects that reduce an equivalent amount of CO₂ from the atmosphere.

Climate organizations offer carbon offset packages for the public to purchase. For example, Orca sells packages at $1200 per ton, attracting eager clients such as Microsoft and Coco-Cola despite the high price point. By purchasing such packages, companies that rely on fossil fuel-consuming activities for their operations are able to reach carbon neutral status.

There is a large variety of fundable carbon offset projects. Beyond man-made carbon capture plants such as Orca, forestry projects reduce the amount of carbon currently in the atmosphere. Wind farms and other renewable energy projects lessen ongoing carbon emissions. Methane destruction projects release less harmful carbon dioxide into the environment. Other funds go towards the installation of more energy-efficient stovetops in third-world countries.

The availability of carbon offset packages for sale around the world allows for buyer flexibility, so accessibility only increases as their prominence steadily grows. With both supply and demand rising, the carbon offset market is projected to be worth $100 billion by 2030.

However, the growth of the market is matched with rising controversy about these projects. Critics are worried about the largely unregulated nature of offsetting schemes.

Many investigations have shown that carbon offset projects tend to overpromise their carbon savings, either due to sincere misestimation or dishonesty. California’s forestry offset programs have recently been shown to contain almost one in three “ghost credits,” accounting for nearly 39 million credits that do not actually achieve climate progress.

Combating the lack of transparency in the carbon offset world, independent certifying bodies and select governments have launched efforts to ensure the quality of carbon credits sold.

Climate tech startups have also popped up to address the problem of verification. Pachama uses a combination of lidar, satellite imaging, and artificial intelligence to measure the actual amount of carbon being sequestered in forests. Providing remote certification and continuous tracking of forestry projects, it offers purchases of trustworthy packages on its website.

As venture capital and private equity firms build larger climate funds, investment into climate technology is reaching new heights. There is much hope for the development of more efficient and reliable technology that will power our way to net-zero emissions.

Sources:

An Introduction to Carbon Offsetting

Written by Jasmine Wang