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What the heck are Carbon Credits?

"A central authority (usually a government or international body) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emissions must buy credits from those who pollute less." -Wikipedia

These credits are basically treated like a commodity and traded on their own markets (think of carbon credits like gold, heating oil, or pork bellies)

The basic premise behind the creation and trading is the following:
Lets say we have a series of companies and we're each allowed to produce 1 ton of carbon emissions yearly. In my company I invest in "green technology" that reduces my carbon footprint to .5 tons a year. I can then sell the remainder of my "carbon credits" on the open market.

We all win right?

Well..kinda

The big benefits with this system.

It makes everyone involved look at the bottom line of their business and it's impact on the environment.
It IS regulated. Countries manage the credits and their allowances through their own national 'registries', which are required to be validated and monitored for compliance by the UNFCCC^[5].
Overall it shows a positive effort to help the environment.  

The problems with this system:

When you look at the TOTAL number of carbon emissions vs the caps vs the number of businesses etc.. etc.. The numbers that govern this system are all best guesses with a lot of assumptions rolled in. No one is 100% sure that we've set the right amounts to solve the overall problem.
This is a newer business model so there's going to be a lot of exploitation in this market until everything is 100% hammered out Internationally. Enforcement of emissions caps are difficult based on the sheer volume of businesses involved vs the number of people enforcing the laws etc.. etc.. There are already many carbon credit scams in the business world.
Assessing penalties is varied through the US and in some cases the penalties are less than the associated cost of the carbon credits encouraging people to try to get away exceeding their caps.

Ok that explains what are Carbon Offsets then?

As they apply to individuals/public donations etc..They are usually just scammers taking your money and preying on your desire to do something good.

This is called "Voluntary Carbon Offsets" or "Personal Carbon Offsets", "Personal Carbon Negation", what have you,...this is basically you giving people money and in return they do pretty much nothing.

Companies on the web that offer "carbon offsets" do things like Plant Trees, or invest in eco-friendly businesses, or fund cleanup and/or recycling projects. You say "that doesn't sound so bad!" but here's the hook,..

What they're actually doing is preying on the lack of information about global warming carbon footprints, how to offset carbon emissions etc.. and they usually do it two ways:

I. Plant a tree! It reduces your carbon footprint!!
Again, not really,...these people take your money, pocket most of it, then pay some 3rd world workers a few pennies to plant a bunch of trees and tell you that you just offset tons of CO2. The statistics they sell you are based on the tree being 100% perfect and living 100% of it's lifespan. This is called "forward selling" (as there's no guarantee that this, the "offset" will actually happen) There's no money paying for tending the trees, or paying for not letting them be cut down, cleared, burned etc..

Again,..the statistics they sell you are based on the tree being 100% perfect and living 100% of it's lifespan. As there's no way to be sure of this, the "offset" that they give you is based on a technique called "forward selling" Sometimes they report the total carbon offset of the project to each person as if it was only applied against their footprint (as opposed to the fractional amount they would actually see).

There's nothing wrong with planting trees, we plant trees in our members names all the time, but we do it on land that we supervise, WE tend these trees, WE know how much they grow etc.. etc.. and if they die/are cleared etc... we remove them from our positive impact calculations. So the trees that we plant have a really good chance of making it all the way to maturity before anything would ever happen to them.

II. Give us money, we'll invest it in a "Green Business"!
Again,..this sounds great, but unlike the companies that sell legitimate carbon credits, these people can invest in *ANY* green technology (including thier own company that sells carbon offsets) These companies are usually fly by night startups that aren't researched, don't prove that they can make a positive impact on the environment etc.. etc.. Some of these companies merely take donations plant trees, pay themselves and  repeat over and over.

Again there's nothing wrong with investing in green technology, we wish more people wanted to help out with investment dollars for green projects but throwing money at any company that says they have a "green" product or service just so you can say you did it, is a crap shoot at best. We research the companies we invest in and look at their long term impact, we show you the long AND short term return on your contribution and maintain those statistics over time. Those stats are merged with your personal impact stats for things you personally do to make an impact. We also allow you to input information from other sources as well.

Are all carbon offset companies a scam?

Well no, not all of them,...

People with the very best of intentions are in such a huge rush to save the planet that they're willing to invest in anything that even remotely claims to do so. There are plenty of people out there willing to push fads, products, laws, codes, services, infrastructures etc..under the guise of helping the environment, when in fact they don't, or in some cases they make the problem worse.

There are a few "legitimate" carbon offset companies like terrapass.com but the problem with those sites is that their business model is to let you pay in advance for the sin of environmental overindulgence.  So you can purchase a giant SUV that pollutes like crazy gets 10 miles per gallon but put a terrapass decal on your window and let you feel good about yourself. They don't really care if you pollute like mad, as long as you give them enough $$$'s to say you offset your pollution. We think that's a little too narrow minded.

There is a LOT of "Forward Selling" going on at most sites (even the legitimate ones) and when all is said and done they basically just want your money. They go do whatever they want with it,...you're left out of the process (But hey you do get a nice magnet for your car!)