Global demand for carbon offsets to combat emissions is growing — but the supply is unreliable

It may seem like a huge feat to get large companies to reach the ambitious goal of net-zero carbon emissions. But it is possible — at least in theory — to make them carbon-neutral by banking on carbon offsets. 

The carbon offsets idea is relatively simple: Companies pay others to remove carbon from the atmosphere in order to counteract their own emissions. 

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That’s what Disney had in mind in 2009 when they spent millions of dollars to help protect a forested area in the Amazonian region of Peru, which had high rates of deforestation.

“What’s being traded is an agreed-upon idea of a ton of carbon,” said Lauren Gifford, an offsets expert at Metropolitan State University of Denver. “No one’s handing anyone anything.”

The market for carbon offsets is worth at least $5 billion globally and is expected to become a lot bigger as companies and countries set ambitious goals for net-zero carbon emissions. 

But experts worry that offsets can be an unreliable solution for reducing atmospheric carbon — and can hurt more than they help.  

Most carbon offsets on the market now come in the form of forest protection and regrowth, as was the case for Disney’s offset project in the Alto Mayo region of Peru.  

“Part of that Disney money was meant to re-train folks, get them to not cut down trees, get them to do more small-scale, sustainable agriculture so that they’re not moving when the soil was no longer fruitful.”

“Part of that Disney money was meant to retrain folks, get them to not cut down trees, get them to do more small-scale, sustainable agriculture so that they’re not moving when the soil was no longer fruitful,” said Gifford, whose PhD dissertation focused on Disney’s offsetting in Peru.

Offsets can seem like a win-win: make companies look environmentally responsible and raise money for forest conservation. Disney’s investments helped the company market itself as eco-friendly, and they won recognition for their work in Peru, including being named the “most socially responsible company” by a private consulting firm.   

Disney is not alone. An increase in net-zero emissions promises is driving demand.

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“There are so many companies coming out there, not just companies, but also countries and governments that are committing to net-zero carbon emissions by 2050, if not before,” said John Davis, a commercial director with South Pole, a Swiss-based environmental consultancy that specializes in offsets.

But there is not enough supply to meet that demand, said Gabriel Labbate, from the United Nations Environment Program.

“It is true that in the last two years, there has been an increased interest from the private sector to find high-quality offsets, and there are not many,” he said.

Labbate’s team recently launched the Green Gigaton Challenge, which aims to secure many offset projects around the world to help meet growing demand. 

It’s also very difficult to determine whether these projects actually reduce carbon emissions. When scrutinized — many projects, like Disney’s in Peru — fall short, according to Gifford. 

Conflict between local people, the government and nongovernmental organizations managing the offset project eventually erupted into violence.

“If you have that level of conflict, your resources are not going to avoid deforestation or improve the way a forest is managed,” Gifford said.

A Bloomberg investigation last year found that the amount of Peruvian forest actually saved was hard to gauge because Disney’s estimates relied on murky math.

“It seems like deforestation has gone down slightly in the region, but not as rapidly as Disney had hoped,” Gifford said. 

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Offsets come with two main pitfalls, according to Tim Searchinger, an offsets expert at Princeton University and the World Resources Institute.

One pitfall is “additionality,” that is — are you really saving the rainforest? 

“Are you actually paying for something that wouldn’t have happened if you hadn’t paid for it? … If you pay somebody to protect a forest, how do you know that they weren’t going to just protect that forest anyway?”

“Are you actually paying for something that wouldn’t have happened if you hadn’t paid for it?” Searchinger said. “If you pay somebody to protect a forest, how do you know that they weren’t going to just protect that forest anyway?” 

The second pitfall is “leakage” — whether offsets actually displace deforestation. 

“If you pay John to protect his forests over here, but you still have demand for food, does Jill then just go and clear some forest over there so you don’t get an actual net gain?” Searchinger said. 

Forest protection would need to last at least a century to offset anticipated emissions. 

If these conditions can be met, offsets could help save a lot of forests, and it’s one of the more affordable ways to help solve climate change, he said. 

Protecting old-growth forests and reducing deforestation is a key part of combating global warming, according to experts.

But when it comes to offsets, many experts struggle to point to an ideal example with clear benefits and no downsides. 

Instead, there are dozens of examples of projects that fail, backfire or lead to bad outcomes for local people.

Critics of offsets say they let polluters off the hook, and the dynamic of rich countries paying poor ones leads to a dangerous power imbalance — or carbon colonialism, Gifford said.

“[Carbon colonialism] reflects, in part, capital from the ‘Global North’ being invested in the “Global South” and then dictating to those folks who are hosting these projects how you need to maintain that land for 100 years,” Gifford said. “And that is privileging the interests of polluters in how people exist in their space and manage their land.”

Critics don’t deny the urgency of saving forests but also think that protecting them can happen through other means.

“We know that the most effective way to protect and restore ecosystems is by protecting the rights of local and Indigenous communities, because they’re the ones that actually look after and are the best at safeguarding the ecosystem.”

“We know that the most effective way to protect and restore ecosystems is by protecting the rights of local and Indigenous communities because they’re the ones that actually look after and are the best at safeguarding the ecosystem,” said Teresa Anderson, climate policy coordinator with Action Aid International.

“[C]reating incredibly complex offset systems that tend to create all sorts of distortions, divide communities … end up having a perverse impact within the community,” she said.

To improve offsets and avoid colonial dynamics, Gifford said, wealthy, high-polluting countries could invest in projects within their own borders, in areas where a fewer number of people use the forest for their livelihoods. 

Other improvements include doing projects at larger scales, Searchinger said.

Offsets should only come as a last resort, said Davis, with South Pole.

“[W]ith those emissions you simply can’t get rid of, come into the carbon offset market to purchase those,” he said. 

“Some days I wake up and I’m like, we just need to throw offsets away because there’s no way to regulate it, because of that uncertainty and all that subjectivity and all of the pressures…”

Barbara Haya, at the University of California, Berkeley, who has studied offsets for decades, still isn’t sure whether offsets will ever be a great solution.  

“Some days, I wake up and I’m like, we just need to throw offsets away because there’s no way to regulate it, because of that uncertainty and all that subjectivity and all of the pressures,” Haya said.

“And then some days, I wake up and I’m like, no, we just need to tighten up the rules and get the registries to really assure the buyers and the public that those credits are real.”

There’s consensus among experts, though, that reducing emissions should be the priority and that offsets shouldn’t distract from those efforts.

“We need governments and corporations to be radically cutting their emissions,” said Anderson, with Action Aid International. 

“There’s no avoiding it. We need to see deep structural transformation across our food, transport, energy, economic systems, and we need it soon.”

Correction: A previous version of this story inaccurately referenced the number of offset projects that the Green Gigaton Challenge plans to secure. It has been updated.