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What are offsets?

Environmental offsetting enables a company, country or individual to be legally or morally allowed to pollute or otherwise damage the environment as long as they pay someone else somewhere else to attempt to compensate for some or all of the negative consequences. The most common offsets are carbon offsets and biodiversity offsets, but there have been discussions about introducing ecosystem and even cultural offsets.

This section focuses on carbon offsets. To read more about biodiversity or other offsetting visit

What are carbon offset projects?

Carbon offsets create carbon credits which businesses, countries and individuals can buy to compensate for emissions reductions they would otherwise have to make. Carbon offsets are a key part of most existing and planned carbon trading schemes, though they have now been ruled out of the EU Emissions Trading System from 2020 onwards. Carbon offset credits can be bought voluntarily by those wishing to assuage guilt or show their green credentials, but the majority are bought by businesses and governments legally bound to reduce their emissions, or by governments seeking to strengthen the carbon trading market.

Carbon offsetting in general has a number of systemic flaws, most of which are dealt with in Fern’s report Trading Carbon. How it works and why it is controversial and briefing Designed to Fail. Carbon Trade Watch also outlines a number of offsetting projects that have intended and unintended negative consequences.

Forest carbon offsets are particularly problematic as forest carbon sinks can easily become carbon sources. Carbon dioxide through deliberate human activities such as intensified forest harvests and changes in land use, as well as natural events such as pest infestations, diseases and forest fires. Other concerns unique to forest carbon offsets are the impossibility of measuring the amounts of carbon being stored and sequestered by forests. For more information about the problems with forest carbon offsets see Carbon Discredited: Why the EU should steer clear of forest carbon offsets and Counting the cost: forest credits and their effect on carbon markets.


Most recent publications

Submission to the UK climate change committee enquiry into the EU ETS

This submission to the "EU Emissions Trading System: New Inquiry" shows that fundamental flaws in the design of the EU ETS have been exposed by (a) a series of fraud and cybercrime incidents; (b) the excessive use of carbon offsets by companies hoarding higher-value EU ETS permits received free of charge; and (c) the lack of a functioning regulatory possibility to adjust thesupply of EU ETS emission permits to a sharp economic downturn, and theresulting drop in emissions far below projected levels that were used to calculate permit allocation.

Submission to UN consultation on new market-based mechanisms to enhance the cost-effectiveness of, and promote, mitigation actions

This submission concludes that the EU ETS and the Kyoto Protocol’s carbon trading schemes have been designed to fail: they assume the contribution of carbon permits and offset credits to limiting greenhouse gas emissions to a verifiable target to be the same, when in reality they are not because calculation of offsets depends on unverifiable hypothetical baselines from which offset volumes are calculated.

FERN submission to a commodity futures trading commission study

FERN’s input into the Commodity Futures Trading Commission and interagency working group’s forthcoming study on the oversight of existing and prospective carbon markets. It concludes that the EU Emissions Trading Scheme and the Kyoto Protocol’s carbon trading schemes have been designed to fail and that it is difficult to see how subsequent regulation could remedy a situation where the challenge is not to remedy design flaws but where the design is the flaw.  

ForestWatch Issue 155 December 2010

  • Social criteria are permissible in timber procurement policy
  • Questions remain about Cancun forests agreement
  • A bold move: the EP votes to address ECA flaws
  • The future of CAP: opinions welcome
  • Agrofuel plans drive destruction

PDF iconFW 155 December 2010.pdf217.33 KB

Designed to fail? The concepts, practices and controversies behind carbon trading.

Carbon trading has become the central pillar of international efforts to halt climate change. It is a term that most people will recognise, but far fewer will have a good understanding of what it means and how it is supposed to work. Fewer still will feel confident to judge whether it is a success or not.

PDF iconFERN_designedtofail_internet.pdf796.56 KB

Forestwatch Issue 152 September 2010

  • Biofuel landscape changing, but will ILUC be taken into account?
  • Another land case won in Sarawak
  • Carbon trading explained
  • Small improvements in draft Ecolabel criteria
  • World Bank palm oil strategy “reckless”
  • REDD+ Partnership’s chaotic, intransparent process
PDF iconFW 152 September 2010.pdf189.81 KB