Alternative Energy Solutions  |  Carbon Offsets  |  Costs and Benefits of Carbon Offsets

Costs and benefits of carbon offsets

Last updated 1/22/2018

There is a clear cost associated with carbon offsets – you’re essentially paying for the reduction of emissions somewhere else. Worldwide, the range of carbon offset prices in the voluntary offset market can be anywhere from $0.10 per tonne to $44.80 per tonne. A 2016 study conducted by Forest Trends’ Ecosystem Marketplace reported that the average price of a carbon offset is about $3.30 per tonne of carbon dioxide equivalent, which is lower than in previous years.

Factors that impact carbon offset prices

One factor that can impact carbon offset price is whether or not you’re looking to purchase ones verified by a third party. Most certified carbon offsets are sold at a premium price because of costs associated with certification and the extra assurance that you’re purchasing an offset with a guarantee of value to the environment.

Another factor that can impact the cost of the offset is the supplier offering it to you. Suppliers who are larger and have more offset projects in their ongoing portfolio are typically able to offer more competitive pricing for these projects because they have higher volume of offsets to sell.

Offsets that are generated from projects in developing countries tend to be more expensive. A 2010 study from Yale University suggests that this could be because of wealth redistribution mechanisms in place. In addition, because of institutional complications in many developing nations, there could be issues with offset projects that result in increased costs (lack of formal structures, harder to obtain labor and materials, etc.)

The type of offset project can also impact the cost of a carbon offset. Notably, forestry and tree-planting projects tend to cost less than others. The same Yale study hypothesizes that this is because of the uncertainty of these projects in terms of permanence and additionality. Fewer forestry offset projects are verified in the industry because their long-term impact is uncertain.

Benefits of carbon offsets

A study from the University of Michigan reported in 2014 that the average American had a carbon footprint of roughly 21.5 metric tonnes of CO2 per year. With this stat in mind, along with the average price of carbon offsets, many Americans can purchase offsets and neutralize their carbon footprint for less than $100 a year.

Many carbon offsets are also packaged and priced according to specific actions, making it easy to reduce your impact. For example, if you’re looking to offset your emissions from a flight, the offsets package will be priced according to the duration of the flight, distance traveled, and the carbon emissions that resulted. Other packages available include offsetting emissions of a particular event or for the average household for a year. There are many resources you can use to calculate your approximate carbon footprint if you’re looking to get as close to net zero as possible.

In regards to personal economic benefit, there’s not much when it comes to purchasing carbon offsets. Unlike many other actions you can take to decrease your overall carbon footprint (energy efficiency in your home, purchasing an electric car, installing solar panels), you will not see a monetary return on your investment from purchasing carbon offsets. You’re paying someone or something else to combat your own carbon emissions, which will decrease your net carbon footprint – but it won’t save you money.

The one exception may be if you’re purchasing carbon offsets from a non-profit organization. Under certain circumstances, your purchase could be considered a charitable donation and therefore deductible on your taxes. (This is not the case with the majority of carbon offset providers.) As with anything tax related, it’s worth discussing with an accountant or tax advisor if you’re thinking of purchasing offsets and have questions about your taxes.

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