What ever we do, from driving the car to even just breathing, releases various forms of carbon into the atmosphere. This looks like it might have various negatives effects on the atmosphere and associated processes. We say 'might', as the exact scientific process that makes a clear link between carbon and global warming has not been established - rather we depend upon the results of several computer models to establish a future cause and effect dependency; currently there is no proven direct linkage between the level of carbon and temperature as a causal relationship from carbon to temperature.Now assuming carbon is actually a problem, there are two ways we can deal with this release of carbon into the atmosphere. Firstly, we can choose processes or products which produce less carbon. Secondly, we can invest in processes which consume carbon out of the atmosphere.
A carbon offset is a financial instrument used to reduce carbon emissions. Carbon offsets are measured in metric tons of carbon dioxide-equivalent. One carbon offset in effect represents the reduction of one metric ton of carbon dioxide or its equivalent in other greenhouse gases.
So by buying carbon offsets a company or individual can make themselves carbon neutral by buying as many carbon offsets equal to the units of greenhouse gas emissions they produce. Often these purchases occur in two markets: the large compliance market for governments and the like, and then the smaller business or individual can buy credits in the voluntary market. The difference between the two markets is in the name, the first is a mandatory market, they have to buy; the second market is down to individuals or businesses to decide to purchase.
The mandatory market has usually come about as a direct result of the Kyoto Protocol.
The Kyoto Protocol has sanctioned offsets as a way for governments and private companies to earn carbon credits which can be traded on a marketplace. The protocol established the Clean Development Mechanism (CDM), which validates and measures projects to ensure they produce authentic benefits and are genuinely "additional" activities that would not otherwise have been undertaken. Organizations that are unable to meet their emissions quota can offset their emissions by buying CDM-approved Certified Emissions Reductions.
Carbon offsets are usually classified by three features: vintage, source and certification regime.