What to Know About Buying Carbon Offsets
The purchases help consumers address climate change by seeking to ease the emissions impact.
3 min
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Some consumers might feel eco-guilt about the takeout containers they have been throwing away or the additional packages they have been shipping from Amazon. Offsets are emerging as a way for people to mitigate the effects of shopping, shipping and travel.
There is no way to take back the carbon you have put in the air through activities such as driving your car or heating your house, and the surest way to reduce your carbon footprint is to drive, fly or buy less. Carbon offsets, created about 20 years ago, claim to provide a way for consumers and institutions to balance out their carbon footprint by investing in environmental projects that remove carbon-dioxide emissions from—or avoid adding them to—the atmosphere.
Offsets are easier than ever to buy online. The coming climate-change summit in Glasgow, called COP26, could put offsets on the radar of more consumers.
It is a tricky topic to navigate, though. The market for offsets isn’t regulated and the quality and authenticity of projects vary widely. It is difficult to know whether offsets purchased will actually make an impact on emissions, said Travis Miller, a stock analyst at Morningstar who specializes in energy and utilities.
Here is what to know about assessing and buying offsets now.
Who sells carbon offsets?
Carbon offsets are credits purchased from projects that are designed to reduce emissions of planet-warming greenhouse gases. These can include investing in a reforestation project in California or constructing cookstoves in Honduras, said Peter Miller, a director of climate and clean energy at the Natural Resources Defense Council.
Nonprofits are among the most reputable providers from which consumers may buy offsets, said Clint Henderson, senior news editor at The Points Guy travel website. Nonprofits such as Cool Effect and Carbonfund.org act as a bridge between people and the organizations that create and maintain carbon-reducing projects.
Offsets are measured and sold in metric tons of carbon-dioxide equivalent. One metric ton of carbon-dioxide equivalent is roughly equal to the size of a two-story house, said Dee Lawrence, co-founder of Cool Effect, which sells offsets to consumers.
Why do people buy carbon offsets?
Consumers can buy offsets to lessen carbon emissions for things as diverse as their vacation, the type of car they drive and the size of their house.
First, they can estimate the impact of their lifestyle—such as how much waste they dispose of, or how many loads of laundry they wash in hot water—by using an online calculator, such as the one from the Environmental Protection Agency or the Nature Conservancy. They could then buy offsets from a provider that sources emissions-reducing projects.
For example, if you fly 10,000 miles, you could buy offsets on Carbonfund.org for $20 to compensate for that flight’s emissions. The price of air-travel offsets is usually dependent on the length of the flight and the class of service, said Mr. Henderson at The Points Guy.
American Airlines gives fliers the option to buy offsets through a partnership with Cool Effect, such as when they purchase their tickets or after the flight. You can get an estimate of your air-travel emissions on Google Flights.
When an individual buys carbon offsets, that person’s money is typically pooled with others’, in a practice somewhat akin to crowdfunding. Together—by funding, say, a wind farm in rural Indiana—Mr. Miller at Morningstar said consumers can collectively reduce the amount of carbon going into the air.
How to know the value of an offset
Valuing offsets can be a bit “squishy,” said Mr. Henderson at The Points Guy. Consumers might never see the project firsthand, and they trust that the project they support is actually effective in reducing emissions.
To identify legitimate projects, look for those that clearly specify how emissions are reduced and reported, said Tensie Whelan, director of the Center for Sustainable Business at NYU Stern School of Business.
Generally, Prof. Whelan said, stay away from individuals selling offsets to their personal projects over social media or claiming to run an offset project that doesn’t have third-party oversight. Each metric ton of emissions consumers buy should have a unique serial number. That number helps ensure reductions aren’t resold and double counted, Prof. Whelan said.
Check that the project has permanence. For example, a project for fast-growing eucalyptus that will be cut down in 10 years would lack permanence. Also, make sure the project has independent third-party certification.
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4 min
To break the day-trading habit that cost him friendships and sleep, crypto fund manager Thomas Meenink first tried meditation and cycling. They proved no substitute for the high he got scrolling through investing forums, he said.
Instead, he took a digital breath. He installed software that imposed a 20-second delay whenever he tried to open CoinStats or Coinbase.
Twenty seconds might not seem like much, but feels excruciating in smartphone time, he said. As a result, he checks his accounts 60% less.
“I have to consciously make an effort to go look at stuff that I actually want to know instead of scrolling through feeds and endless conversations about stuff that is actually not very useful,” he said.
More people are adding friction to curb all types of impulsive behaviour. App-limiting services such as One Sec and Opal were originally designed to help users cut back on social-media scrolling.
Now, they are being put to personal-finance use by individuals and some banking and investing platforms. On One Sec, the number of customers using the app to add a delay to trading or banking apps more than quintupled between 2021 and 2022. Opal says roughly 5% of its 100,000 active users rely on the app to help spend less time on finance apps, and 22% use it to block shopping apps such as Amazon.com Inc.
Economic researchers and psychologists say introducing friction into more apps can help people act in their own best interests. Whether we are trading or scrolling social media, the impulsive, automatic decision-making parts of our brains tend to win out over our more measured critical thinking when we use our smartphones, said Ankit Kalda, a finance professor at Indiana University who has studied the impact of mobile trading apps on investor behaviour.
His 2021 study tracked the behaviour of investors on different platforms over seven years and found that experienced day traders made more frequent, riskier bets and generated worse returns when using a smartphone than when using a desktop trading tool.
Most financial-technology innovation over the past decade focused on reducing the friction of moving money around to enable faster and more seamless transactions. Apps such as Venmo made it easier to pay the babysitter or split a bill with friends, and digital brokerages such as Robinhood streamlined mobile trading of stocks and crypto.
These innovations often lead customers to trade or buy more to the benefit of investing and finance platforms. But now, some customers are finding ways to slow the process. Meanwhile, some companies are experimenting with ways to create speed bumps to protect users from their own worst instincts.
When investing app Stash launched retirement accounts for customers in 2017, its customer-service representatives were flooded with calls from panicked customers who moved quickly to open up IRAs without understanding there would be penalties for early withdrawals. Stash funded the accounts in milliseconds once a customer opted in, said co-founder Ed Robinson.
So to reduce the number of IRAs funded on impulse, the company added a fake loading page with additional education screens to extend the product’s onboarding process to about 20 seconds. The change led to lower call-centre volume and a higher rate of customers deciding to keep the accounts funded.
“It’s still relatively quick,” Mr. Robinson said, but those extra steps “allow your brain to catch up.”
Some big financial decisions such as applying for a mortgage or saving for retirement can benefit from these speed bumps, according to ReD Associates, a consulting firm that specialises in using anthropological research to inform design of financial products and other services. More companies are starting to realise they can actually improve customer experiences by slowing things down, said Mikkel Krenchel, a partner at the firm.
“This idea of looking for sustainable behaviour, as opposed to just maximal behaviour is probably the mind-set that firms will try to adopt,” he said.
Slowing down processing times can help build trust, said Chianoo Adrian, a managing director at Teachers Insurance and Annuity Association of America. When the money manager launched its online retirement checkup tool last year, customers were initially unsettled by how fast the website estimated their projected lifetime incomes.
“We got some feedback during our testing that individuals would say ‘Well, how did you know that already? Are you sure you took in all my responses?’ ” she said. The company found that the delay increased credibility with customers, she added.
For others, a delay might not be enough to break undesirable habits.
More people have been seeking treatment for day-trading addictions in recent years, said Lin Sternlicht, co-founder of Family Addiction Specialist, who has seen an increase in cases since the start of the pandemic.
“By the time individuals seek out professional help they are usually experiencing a crisis, and there is often pressure to seek help from a loved one,” she said.
She recommends people who believe they might have a day-trading problem unsubscribe from notifications and emails from related companies and change the color scheme on the trading apps to grayscale, which has been found to make devices less addictive. In extreme cases, people might want to consider deleting apps entirely.
For Perjan Duro, an app developer in Berlin, a 20-second delay wasn’t enough. A few months after he installed One Sec, he went a step further and deleted the app for his retirement account.
“If you don’t have it on your phone, [that] helps you avoid that bad decision,” he said.
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