Carbon Offset

A carbon offset is a financial instrument aimed at a reduction in green house gas emmisions. Carbon offsets are measured
in metric tons of carbon dioxide equivalent (CO2e) and may represent six primary categories of greenhouse gases. One
carbon offset represents the reduction of one metric ton of carbon dioxide or its equivalent in other greenhouse gases.

There are two markets for carbon offsets. In the larger compliance market, companies, governments, or other entities buy
carbon offsets in order to comply caps on the total amount of carbon dioxide they are allowed to emit. In 2006, about $5.5
billion of carbon offsets were purchased in the compliance market, representing about 1.6 billion metric tons of CO2e
reductions.

In the much smaller voluntary market, individuals, companies, or governments purchase carbon offsets to mitigate their
own greenhouse gas emissions from transportation, electricity use, and other sources. For example, an individual might
purchase carbon offsets to compensate for the greenhouse gas emissions caused by personal air travel. In 2006, about
$91 million of carbon offsets were purchased in the voluntary market, representing about 24 million metric tons of CO2e
reductions.
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