Here is part of the Carbon Offset entry at Wikipedia:
A carbon offset zeros out (offsets) all or part of the carbon dioxide emissions of a party, by reducing the emissions -- or increasing the carbon dioxide absorption -- of another party. This reduces net greenhouse gas emissions with the aim of combating global climate change. Effectively offsetting the emissions of an activity makes that activity "carbon neutral".
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Offset activities can vary widely; the most frequent are planting trees, followed by various energy conservation activities, sometimes certified as CDM credits, but may also include buying allowances from the EU ETS. Carbon offset providers often provide a "carbon calculator" for individuals to estimate the carbon dioxide emissions arising from their consumption of electricity, petrol, air travel, etc. - a sort of ecological footprint for global warming.
The NYTimes recently described some of these activities in Europe (Paying the Freight ...):
WHEN HSBC, Europe’s biggest bank, flies its executives around the world, it pays for the carbon dioxide emissions of every flight in the form of offsets, or investments in nonpolluting energy projects. The busy London-Hong Kong route, for example, produces 2.76 metric tons of carbon dioxide per passenger, which the company offsets for roughly $4.45 a ton, adding around $25 to the ticket price. (The amount varies with the price per ton of emissions.) Of the bank’s total carbon emissions this year, 10 percent will come from business travel, resulting in a fee of $310,000 in offsets. HSBC will pay $3 million more in offsets to achieve carbon neutrality, the first major bank to do so.
Offsetting has its critics, who say that emissions must be reduced rather than offset, and that some companies have adopted the practice to make a show of their green credentials. Nevertheless, offsetting is becoming increasingly popular.
I don't understand this criticism. Isn't carbon neutrality a step in the right direction? Plus, internalizing the costs of emissions will eventually lead to a reduction in emissions as the cost of carbon offsets begins to bite. The article goes on to talk about efforts that industry is making towards reducing business travel:
Despite a slow start in the early 1990’s, videoconferencing holds the greatest potential for reducing business travel. British Sky Broadcasting has invested in videoconferencing suites. At Ikea in Sweden, 1 of 10 meetings are being replaced by a videoconference. And Credit Suisse has increased it by 14 percent.
See? I told you so.