Carbon offsets: What are they and how do they work?

26 Sept 2024 · 8
The planet is warming at an alarming rate. Rising temperatures are already disrupting  ecosystems, shrinking ice sheets in Greenland and the Antarctic, rising sea levels, and extreme weather events. The effects are visible, but there’s still time to act.
If the rise in the world’s temperatures is kept below 1.5 degrees Celsius, this may allow us to reduce projected losses and limit the damage. That’s why many businesses are now taking immediate measures to combat climate change. One of these measures is purchasing “carbon offsets.”
Below, we explore what are carbon offsets are and how do they work. We also list tips to help you get started with carbon offsetting now. But first, let’s dive into a related concept: your carbon footprint.
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What is a carbon footprint?

A carbon footprint is a measure of the total greenhouse gases, particularly carbon dioxide, that are released into the atmosphere due to the activities of an individual, organisation, or product. 
These emissions are directly linked to everyday actions, such as driving, heating and even the types of food we consume. The larger the footprint, the greater the impact on the environment, contributing to climate change, loss of biodiversity and other significant environmental issues.
According to the CO₂ Human Emissions Project, some human sources of carbon dioxide emissions include cement production, deforestation and burning fossil fuels (like coal, oil and natural gas).

What are carbon offsets?

Carbon offsets are a tool used by individuals, businesses and governments to compensate for their greenhouse gas emissions; investing in projects that either reduce or remove an equivalent amount of carbon dioxide from the atmosphere. These projects can range from reforestation efforts and renewable energy initiatives to the development of clean cookstoves in developing countries.
There are two main ways to categorise carbon offsets: by market (voluntary vs. compliance) and by method of carbon mitigation (carbon avoidance vs. carbon removal).
  • Voluntary carbon offsets are purchased by individuals or organisations that voluntarily choose to offset their carbon emissions. These offsets are often part of corporate social responsibility (CSR) initiatives or personal commitments to sustainability. For example, a company might invest in voluntary offsets to market itself as "carbon neutral" or to appeal to environmentally conscious consumers.
  • Compliance carbon offsets are used to meet regulatory requirements within cap-and-trade systems, such as the European Union Emissions Trading System (EU Emission Trading System). These offsets are mandatory for companies that exceed their emission caps, helping them comply with legal obligations and avoid penalties.
Additionally, carbon offsets can be classified by how they address carbon emissions:
  • Carbon avoidance offsets aim to prevent greenhouse gases from being emitted into the atmosphere. This can include projects that protect forests from deforestation or invest in renewable energy solutions, thus avoiding the release of carbon dioxide that would have occurred otherwise.
  • Carbon removal offsets, on the other hand, focus on actively removing carbon dioxide from the atmosphere. These include methods like reforestation, where trees absorb CO₂, or advanced technologies such as direct air capture, which extracts carbon from the air and stores it underground.
However, even after optimising for efficiency, you will still have a residual carbon footprint. Carbon offsets can help mitigate the impact of this footprint.

How do carbon offsets work?

First, you’ll need to calculate how many metric tons of carbon dioxide are generated by a specific business activity.
You’ll then need to purchase carbon credits: for example, by donating a fixed amount of money to a nonprofit environmental project. The amount of your donation should correspond to the amount of carbon emissions created by the initial activity. In this way, you’ll have “offset” your own emissions to net zero.
Accurately calculating carbon emissions can be difficult. Luckily, there are software solutions out there that can make the process easier.
TravelPerk is an all-in-one business travel platform where you can book, manage and report on business travel. The platform offers built-in functionality (such as the GreenPerk programme and GreenPerk API tool) to help companies understand, lower and offset their carbon emissions.
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How does buying carbon offsets work?

When you purchase offsets, you’ll typically pay a fixed amount based on a calculated price for each metric ton of carbon dioxide equivalent you emit. This price may depend on different factors related to the type of carbon offset projects you’ve chosen.
If you choose TravelPerk and opt into the GreenPerk programme, you’ll be charged for each trip you take at a price of €10 or £8.44 per ton of CO₂e.

What types of emission reduction projects are out there?

The goal of carbon offset projects is to counteract greenhouse gas emissions — either by lowering future global emissions or reducing current CO₂e levels in the atmosphere. Different projects have different methodologies to reduce emissions.
Some popular types of climate solution initiatives include forestry (reforestation and tree planting [afforestation]), methane capture, renewable energy projects (such as wind farms or hydroelectric power plants), and direct carbon capture.
Carbon offset projects may take place anywhere in the world. For example, the projects TravelPerk has selected for GreenPerk are located in Thailand, Cambodia and Turkey.
Interested in making your business travel greener? See how Aesop leveraged TravelPerk to support their sustainability journey.

How to choose a carbon offset project to support

It’s important to be selective about the carbon offset projects you support. Above all, the offset programmes you choose should make a tangible, measurable impact on CO₂e emissions. You should also take care to choose reliable projects that are properly supervised and efficiently run.
Not only are all GreenPerk projects VERRA (Verified Carbon Standard) approved, they’re also hand-selected by our sustainability team. We choose projects based on the UN’s Sustainable Development Goals, and aim for emissions accuracy, permanence,and social benefit to local communities. 

How to use GreenPerk to better understand your company’s carbon footprint

As companies become increasingly focused on reaching net-zero targets, a great place to start is with business travel. However, understanding the impact of business travel may be easier said than done. Businesses face many challenges in measuring CO₂e emissions from travel, including the need to develop a consistent methodology, and difficulties in aggregating data from multiple sources.
At TravelPerk, we’ve developed two different solutions to make it easier for customers to drive down their emissions through data. Here’s what we built:

1. GreenPerk

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All TravelPerk users and clients can now understand their business travel footprint. They can opt-in to offset the carbon emissions of all of their business trips by investing in VERRA-accredited projects focusing on biogas capture, forestry and renewable energy.

2. GreenPerk API

An external, open-source API that businesses can integrate directly into their own platforms and workflows. You can use GreenPerk API to create net-zero strategies through actionable data insights, build a sustainable travel policy, monitor its progress and see exactly what aspects of your business travel are leaving the highest carbon footprint. 
GreenPerk API’s calculations comply with the standards set by the World Resources Institute’s Greenhouse Gas (GHG) Protocol.
So how do these initiatives work in practice? Here are a few practical examples:
  • Company X has set an objective to reduce their travel-related carbon footprint.
  • They log into the GreenPerk API dashboard and discover that 10% of their business trips are between London and Paris, and 100% of those trips are taken by plane. That comes to be around ~0.9% of the cost of their entire business travel!
  • With GreenPerk API, Company X  determines that they can reduce their carbon emissions by almost 75% if they implement a policy that gets their business travellers to take the Eurostar train instead of a flight.
You can also get more granular than that. For example:
  • Company Y frequently books trips between London and New York.
  • By looking at their dashboard, they discover that travellers flying with one airline emitted more carbon than travellers flying with another airline.
  • They can now start booking all their travellers onto the more carbon-efficient airline and reduce their carbon footprint by about 22%.

Reduce your carbon offsets with TravelPerk

Managing carbon offsets is becoming increasingly crucial as businesses look to minimize their environmental impact. Business travel, a significant contributor to carbon emissions, presents a clear opportunity to make a difference.
TravelPerk’s GreenPerk simplifies this process by automatically calculating the carbon footprint of every trip. It offsets the emissions through certified, high-impact environmental projects.
These projects are carefully selected to meet VERRA standards and align with the UN Sustainable Development Goals. They focus on renewable energy, forest preservation, and methane capture.
The benefits extend beyond reducing CO₂. These projects also contribute to local communities by improving access to clean energy, supporting reforestation, and fostering sustainable development.
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