The Argument for Carbon Offsets

Chances are that you’ve probably read an article or heard a pundit argue that carbon offsets are a scam. They don’t reduce emissions, they’re the same as catholic indulgences, they’re lining the pockets of greedy swindlers…you know the drill. With all the bad press that carbon offsets receive, you might wonder why any company would still be in the business. Well, here’s why. Carbon offsets are simply more efficient at balancing out emissions.

If you’ve ever taken an economics class, you might remember a concept called “comparative advantage”. That’s a fancy way of saying that some people can produce things more efficiently than others – maybe due to more knowledge, better resources, or any number of reasons. So it’s more efficient for you to purchase some goods from other people because it would cost you more to make them yourself.

The same concept applies to balancing out emissions, which economist Robert Frank touches on nicely in this New York Times blog. Frank gives some examples about buying offsets to neutralize emissions rather than spending the extra money to buy a hybrid car or buy local tomatoes. Although these choices are good for the environment, the same result can be achieved more efficiently in many cases by choosing a cheaper alternative and buying offsets instead. That’s why all of the climate policies currently in practice (Kyoto Protocol) or in the works (Waxman-Markey bill) allow for large emitters to purchase offsets in lieu of some of their emissions reductions. Reductions can be achieved at a lower cost elsewhere, which is good for the economy as a whole.

Frank ends his article by noting that offsets alone won’t solve global warming. For that, we need to limit carbon emissions and build the cost of emitting carbon into everyday transactions. Within that framework, carbon offsets are an efficient means to reduce global emissions. In the meantime, they’re a simple way for ordinary people and companies to keep global warming from getting any worse.