A carbon offset is a financial tool that represents a reduction in greenhouse gas emissions measured in metric tons of carbon dioxide-equivalent. The consumer pays a third party to remove a quantity of carbon (in the form of a greenhouse gas) equal to what he or she emits. Theoretically, despite one's best efforts to reduce their carbon footprint, it is impossible to eliminate all carbon emissions. The average U.S. resident emits 21 tons of carbon emissions per year. Carbon offsets counteract unavoidable carbon emissions by funding projects that remove carbon dioxide from the atmosphere.

Individuals, companies, and governments can 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. The money to purchase the carbon offsets, with prices typically ranging from $4 to $40 per ton, primarily goes toward emissions-reducing projects, such as wind farms, hydroelectric farms, or biomass energy. Other common projects include energy efficiency projects, forestry projects, and the destruction of agricultural byproducts, industrial pollutants, or landfill methane.

Simply writing a check to clean up one's carbon footprint may sound good but there are questions as to how a consumer can rest easy that their money is having the intended effect, not to mention the risk of falling prey to a scam. Experts believe that when done carefully, offsets can make a difference and even raise environmental awareness.

However, offsets also encourage climate protection that may have happened regardless of the buying and selling of offsets, thus potentially diverting attention and resources from more effective measures.  Furthermore, fraud has become a concern with rapid growth of the offset market. In January, the Federal Trade Commission began a series of hearings reviewing the offset business in response to concerns for consumer protection as well as worries from environmentalists that the burgeoning industry is little more than "greenwashing."

According to Craig Diamond, Director of Strategy and Operations at Climate Trust, a Portland-based nonprofit organization dedicated to providing solutions to stabilize the
rapidly changing climate, offsets do work.

"There has to be strict quality criteria applied," he said.

Because the regulatory market involves companies and organization that must adhere to caps, Diamond says the public demands that the quality criteria for these be high and that the quality of the offsets is increasing over time. According to Diamond, you have to do some research to really know one way or the other.

Diamond also says there will soon be more transparency so people will understand what they are buying and that transparency and standards will continue to improve.  
Even with higher standards, critics say that carbon offsets are an easy out for those unwilling to take the arduous and sometimes inconvenient step of significantly cutting their own emissions of carbon dioxide; all they have to do is pay someone else to curtail air pollution or develop "renewable" energy sources.

"Organizations and individuals should first look at their behavior to reduce their imprint; offsets are a secondary option," Diamond said. "I don't really believe offsets make it an easy out for people; people who want to change their behavior are going to do so whether there is an offset market or not. We need to have all the options that can contribute to solutions."

In addition to higher standards and ensuring consumer protection, another concern is that offsets may persuade consumers and businesses that preventing climate change is easy and inexpensive. Anja S. Kollmuss, outreach coordinator of the Tufts Climate Initiative (an advocacy group affiliated with Tufts University) says, "We cannot solve the climate crisis by buying offsets and claiming to be climate-neutral. Nature does not fall for accounting schemes."