In today’s post, Green Inc. asks the question: “Do carbon offsets cause emissions to rise?” 

Offsets allow companies and governments in the wealthy world to pay developing nations to make their carbon reductions for them.

In theory, these offsets allow companies to reduce emissions more cost efficiently abroad then they would do at home. And on balance, one ton of carbon cut in Asia — where many of these offset programs are based — should have the same effect on the climate as cutting a ton of carbon in Europe.

But whether offsets work in practice is a heated debate. Environmentalists have harshly criticized many offset programs for failing to deliver genuine carbon reductions, and for making claims about reductions that are difficult to verify.

As with most public policy, the devil is in the details. The efficacy of carbon offsets and emissions trading depends on the credibility of the offset provider and whether the carbon reduction would have occurred in any event. In this regard, carbon credits offered by industries or countries in decline result in no net benefit.

Rewarding losers for doing what they would do anyway is not the basis for good policy. Moreover, in purchasing such credits, purchasers can avoid taking substantive action on reducing their emissions. This is what is happening in Europe.