There are two markets for carbon offsets. In the larger, compliance market, companies, governments, or other entities buy carbon offsets in order to comply with caps on the total amount of carbon dioxide they are allowed to emit. In 2006, about $5.5 billion of carbon offsets were purchased in the compliance market, representing about 1.6 billion metric tons of CO2e reductions.
In the much smaller, voluntary market, individuals, companies, or governments purchase carbon offsets to mitigate their own greenhouse gas emissions from transportation, electricity use, and other sources. For example, an individual might purchase carbon offsets to compensate for the greenhouse gas emissions caused by personal air travel.
Planes emit carbon dioxide (among various other greenhouse gases), and, until a viable alternative to jet fuel is available on a large scale, there's no way to completely eliminate carbon from air travel. That's where offsets come into play. A carbon offset represents a reduction in emissions somewhere else, such as a landfill-to-gas energy project in India, or protecting forests in Africa. This balances the emissions from air travel, though you can also purchase them to offset other aspects of your lifestyle (natural gas, oil, electricity, and gasoline usage, among other things). There are numerous sites that offer carbon offsets, and a few airlines that offer the option to offset air travel. EasyJet gives travelers the option of purchasing offsets during the booking process. It then purchases an equivalent share in a UN-certified emissions reduction project. Qantas and Cathay Pacific also purchase offsets on the traveler's behalf.
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Many companies offer carbon offsets as an up-sell during the sales process so that customers can mitigate the emissions related with their product or service purchase (such as offsetting emissions related to a vacation flight, car rental, hotel stay, consumer good, etc). In 2008, about $705 million of carbon offsets were purchased in the voluntary market, representing about 123.4 million metric tons of CO2e reductions. Offsets are typically achieved through financial support of projects that reduce the emission of greenhouse gases in the short- or long-term. The most common project type is renewable energy, such as wind farms, biomass energy, or hydroelectric dams. Others include energy efficiency projects, the destruction of industrial pollutants or agricultural byproducts, destruction of landfill methane, and forestry projects. Some of the most popular carbon offset projects from a corporate perspective are energy efficiency and wind turbine projects.
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