What do Disney, J.P. Morgan Chase, and the Vatican, have in common? They’ve all come under fire for participating in the carbon offset market. These institutions emit carbon dioxide by the ton, while masquerading as paragons of environmentalism.

What is a carbon offset and how do they work?

Carbon offsets, or carbon credits, are an instrument used by corporations, non-profits, and governments to cancel out carbon dioxide emissions. An offset is carbon removed from the atmosphere and is represented by the carbon credit.

Offsets represent emissions that, without intervention, would otherwise be released.

For example, consider an “at risk” forest, which is a common carbon offset. A company could purchase the forest and protect it from logging, intervening on the forest’s behalf. The company can now sell the carbon credits associated with the protected forest land to others seeking to offset their emissions. This tradeoff is the core of carbon crediting. It only works if the forest is going to be harvested, because if the forest were safe already, there would be no need to protect it from logging.

Anyone can purchase offsets.  Some airlines allow customers to purchase carbon credits to  “offset” the emissions of their flight. Large corporations buy offsets to account for emissions from their business activities, like buying credits to offset employees’ travel.

Who decides what an offset can be?

Offsets are verified through third-parties organizations such as the American Carbon Registry (ACR). Offsets are complicated to measure, but the key question is how they calculate risk. Remember, the forest was going to be logged, and an offset is only meaningful if it protects a forest that is “at risk”.

The registry bases its assessment for risk for a forest on surrounding land. That means even a protected forest would still be rated at high risk if the surrounding land was commercial timberland. This could be good: it’s to the public’s benefit to treat all land as if it has the potential to be logged. That way all forests are protected adequately.

What if the land is already protected?

The Nature Conservancy owns huge tracts of forestland across the US.  Protecting forests is consistent with its mission, so one would think TNC would not log on their land. Yet the ACR predicted TNC lands were at high risk of being logged because it neighbored commercial timberland.

TNC was able to register their forests as carbon offsets and sell the equivalent emissions to private companies. The non-profit made millions of dollars off credits on land that was never at risk. Businesses like Disney and Chevron released thousands of tons of carbon, and their credits purchased from TNC did little to offset that impact.

Other major environmental non-profits, like the Massachusetts Audubon Society and the Hawk Mountain Sanctuary Association, have been caught up in similar cases — selling offsets based on lands at little risk of development.

Can carbon offsets work? 

Offsets have been touted as a solution to climate change but this example highlights major problems.

The verification agencies in the US are not regulated. There is no standard way to measure offsets, and it isn’t clear that regulation would solve the problem. Furthermore, carbon offsets are challenging to measure. Rarely does the one to one tradeoff carbon credits promise actually pan out.

Centrally, carbon offsets act solely as a band-aid. The challenge is to change our behavior to reduce emissions. Credits only delay emissions and allow for continued polluting by industry. Offsets don’t offer long-term solutions which is what the planet requires to appropriately respond to global warming.

What is next for offsets?

Other offset options, like renewable energy or community projects, could offer more consequential changes. Funding a new wind or solar farm has longer lasting impacts because of the shift in behavior away from polluting fossil fuels.

Offsets shouldn’t be dismissed outright, though reliance on them is dangerous. The Vatican, Disney, Chevron, and others failed to offset their polluting behavior and instead should have focused on cleaning up their business practices. Offsets are the most powerful when used in conjunction with other green initiatives.

EU carbon offsets markets offer an example of how clear standards and a verification process can help countries meet their climate goals. This plan, as part of the UNFCCC, is still under deliberation.

There’s no easy or right way to solve climate change. Picking the right offset is difficult given the pitfalls of nonregulation in the US. Increased awareness can lead to a greater understanding of offsets, making them more effective as a way to address global warming.