Defining Carbon Markets and Offsets 

Carbon markets have become a cornerstone of global climate policy. But what exactly are they, and do they really reduce emissions? 

At their core, carbon markets are systems where carbon emissions are assigned a price and traded. They aim to encourage polluters to cut emissions by putting a financial value on every ton of carbon dioxide or equivalent greenhouse gas released. 

These markets are used by polluters to continue destroying the climate while paying farmers, foresters, and others to ostensibly offset their greenhouse gas emissions through “trapping carbon” in soil and trees. 

For instance, a private forester could claim to have sequestered, or trapped, carbon in their trees, and then say that it “offset” its carbon emissions. In practice, the forester may have bought credits without changing its own emissions or practices. 

Types of carbon markets 

Compliance carbon markets 

These are regulated by governments. Companies must comply with caps on emissions: 

• Cap-and-trade programs: Governments set an emissions cap and issue allowances. Companies that reduce emissions can sell excess allowances to others. 
• Examples: EU Emissions Trading System (EU ETS), California Cap-and-Trade Program. 

Voluntary carbon markets 

These are optional and often driven by corporations or individuals seeking to offset emissions: 

• Companies purchase carbon credits to compensate for emissions from flights, shipping, or operations. 
• Common projects include forest protection (REDD+), renewable energy, or methane capture. 

How carbon markets work 

• Carbon pricing: A price is placed on each ton of CO₂ emissions. 
• Credit creation: Projects that reduce or remove emissions generate carbon credits. 
• Trading: Companies can buy or sell credits to meet compliance or voluntary goals. 
• Offsets: Credits are “used” to offset emissions, theoretically reducing overall atmospheric carbon. 

The problems with carbon markets 

More than a decade of carbon trading has shown that carbon markets are ineffective at reducing climate pollution. They have been plagued by fraud and a lack of environmental integrity. 

Carbon markets face several challenges: 

• Greenwashing: Companies pay for offsets instead of reducing their own emissions.  
• Overestimation: Most credits do not reflect real or permanent emission reductions. Carbon markets have benefited polluters, failed to decrease emissions, and even led to increased emissions in many cases. 
• Equity concerns: Projects can displace local communities or harm ecosystems. This is because carbon trading has worsened pollution hotspots in low-income communities and throughout developing countries by allowing corporations to continue to pollute. 
• Limited impact: Without strict oversight, markets allow polluters to continue emitting freely.  

Carbon markets are not a substitute for systemic changes in energy, transportation, and industry.  

Real-world examples 

• EU ETS: A regulated system covering power plants, factories, and airlines in Europe. 
• California Cap-and-Trade: A state-level compliance market incentivizing emission reductions. 
• REDD+: Forest conservation projects that generate voluntary carbon credits. 
• Corporate offsets: Companies like airlines and tech firms purchase voluntary credits to claim “carbon neutrality.” 

Carbon markets and pesticides 

Carbon markets also allow Big Pesticide corporations to increase their power over the food system. Companies like the Bayer-Monsanto define carbon markets and offsets in a way that promotes their own genetically engineered seeds and pesticides. For example, pesticide companies assert that conventional no-till agriculture is a regenerative agriculture practice that increases soil carbon sequestration, but the latest science debunks this assumption. And yet, companies like Bayer are generating lucrative carbon credits by paying farmers to do conventional no-till, which depends heavily on Bayer’s proprietary genetically engineered seeds and toxic herbicides.  

These programs are often not designed for smaller farms or farms using ecologically regenerative agriculture practices. Generally, the largest farms have the most to gain from carbon payments, which could worsen the trend of consolidation leading to fewer farmers overall and bigger industrial farms. To participate, farmers must contractually commit to years or even decades of more expensive practices to produce ostensible carbon offsets for Big Pesticide corporations with minimal guarantees they’ll make money themselves.   

Why this matters 

Relying too heavily on offsets can delay urgent emissions reductions, allowing corporations to continue polluting while claiming climate responsibility. 

At Friends of the Earth, we advocate for real, systemic change, not shortcuts.