Carbon offsets were never designed to be a consumer product. They consistently fail to engage consumers. We need new options that overcome their limitations and engage a broader audience.

With the growing sense of urgency around climate change, ‘carbon offsets’ are popping up more frequently. They are increasingly discussed in news articles and offered to consumers when making carbon-loaded purchases. So many people are asking what exactly is a carbon offset?

What, when and why

When the Kyoto Protocol was agreed in the late 90’s, the Governments involved agreed that if Country A could achieve emissions reductions more cheaply than Country B, then Country B could pay Country A to reduce some of its share of emissions too. That transaction needed a technical instrument to define how many emissions were being paid for. The carbon offset (or carbon credit) was created to be that instrument.

A one tonne offset is essentially a digital certificate which represents one tonne of CO2 that was either removed from the atmosphere or prevented from being released into it. For example, if someone installs a windfarm which averts 100 tonnes of CO2 being released by coal power, they can receive 100 carbon offsets. Those offsets can then be sold to a country or organisation that needs to reduce their emissions by a certain amount. It may be cheaper for them to simply buy those offset certificates than to change practices to structurally reduce their own emissions.

From one perspective this is economically rational; the atmosphere doesn’t care where the 100 tonnes of CO2 are from, and so it makes sense to achieve it the cheapest way possible.

From a different perspective, purchasing offsets that are cheaper than making structural changes means organisations can remain locked into high-carbon business models. This may slow the rate of change throughout the sections of the economy they are connected to.

Whatever your view, the point remains that carbon offsets were designed for inter-country and organisation-level transactions of carbon obligations. Most systems for broad-scale carbon mitigation use offsets as a ‘market-based mechanism’ to facilitate emission reductions.

A response to consumer demand

Over the last couple of decades public awareness and concern about climate change has risen dramatically. As has the demand for low carbon options.

Retailers want to meet their customer’s demand for effective solutions. Let’s use airlines as an example. On a single flight from Brisbane to Hong Kong an Airbus A350 burns enough jet fuel to generate around 135 tonnes of CO2. Most passengers on that flight care about carbon emissions and want a solution. However, without electric powered planes or a commercial-scale supply of renewable fuels, the airline is stuck. It needs a viable solution to offer its customers.

In the absence of strong carbon pricing policy, carbon offsets have been cheap and in ready supply. So, it was relatively simple for retailers like airlines to respond to that customer demand by purchasing offsets and offering them for sale to those customers.

And so voluntary offset programs emerged. Today there are a wide range of different voluntary offset types and different bodies that certify them. But are these offsets doing the job of meeting consumer demand?

Failing to engage

Generally, if you want to buy an offset for your unavoidable emissions you need to go hunting for it. Understandably the general uptake rate is therefore very low, and not a good test for how well offsets can meet consumer needs.

However, some airlines have been directly offering carbon offsets within their booking process for years. Australia’s two major airlines, Qantas and Virgin, have been selling them for about 10 years. You can add your baggage, buy your travel insurance and offset the emissions of your flight. And as part of the federal government’s Carbon Neutral program, their carbon offsetting reports are publicly available.

It’s important to note these figures do not include offsets purchased elsewhere, such as if you booked a flight and then went to a 3rd party to buy your own offsets. And they include the emissions of flight tickets sold via travel agents who do not directly offer carbon offsets. But they do give an indication of the general level and trend in offset engagement among airline passengers.

The two charts below show the total reported volume of flight emissions against the number of offsets sold under each airline’s Carbon Neutral program:

Virgin Australia Total Emissions vs Offsets Sold Chart
Source: https://www.climateactive.org.au/buy-climate-active/certified-members/virgin-australia
Chart of Qantas emissions vs offsets sold
Source: https://www.climateactive.org.au/buy-climate-active/certified-members/qantas

Between 2015 and 2018 only around 1% of these airlines’ total flight emissions were offset through their Carbon Neutral offset option. That is consistent with other published reports of airline passenger offset uptake rates.

Over the same timeframe general public concern about climate change has risen to an all-time high of 81% in 2019. The majority of people are concerned and are looking for a solution, however a very small percentage are actually buying offsets when offered.

It seems very clear; offsets are simply not engaging consumers. This is a problem not only because people are clearly left frustrated and unsatisfied, but also because anyone using offset uptake as an indicator of public concern is interpreting a false message. By trying to sell people a product that isn’t meeting their needs, we aren’t hearing the full strength of the signal and are missing the opportunity to be doing more.

If we want to improve offsets as a consumer option we need to understand the specific reasons they are failing to meet people’s needs. In reading all the published consumer research we could find and conducting hundreds of interviews with airline passengers ourselves, we identified several common problems:

  • They are hard to understand
  • The value of an offset is very abstract and intangible
  • You don’t see any real-world response when you buy one (a digital certificate is retired)
  • They have no impact on the underlying cause of the emissions; there is no link between your purchase and the airline making any changes to reduce their future emissions
  • It doesn’t feel fair that you’re the one paying when the airline is creating the emissions
  • Buying an offset is a one-off purchase with no continuity or sense of ownership
  • You generally don’t get any choice in type or location of the offset
  • Your purchase is invisible and isolated (is anyone else doing it?)
  • And because of all this, it’s difficult to trust that your money is doing any good.

What would a better solution look like?

If we designed a consumer-focused solution from scratch – rather than re-packaging a technical carbon trading instrument – it would look different to an offset in a number of important ways (whilst retaining the same integrity that comes from being a regulated and certified product). The key features people report that they would prefer are:

  • To have a tangible and visible impact on emissions
  • To see the result of their action in real-time, and to receive feedback
  • To have choice of the type and location of their impact
  • To feel like their action is shared and collaborative
  • To influence change in the source of the emissions
  • To know that their action had real value.

If we offer people solutions that meet those needs we are likely to see the rates of uptake and engagement fall into line with the high level of public concern. This will send a powerful message that will ripple out through supply chains and up to the boardrooms where decisions about the sustainability of the goods and services we buy are being made.