The Big Question: Does carbon offsetting really help in the fight against climate change?

Why are we asking this question now?

The tardy admission from Downing Street this week that Tony Blair will redeem the carbon dioxide created by his family's flight to Florida for a Christmas holiday - at a cost of £89.82 - has once more put the usefulness of offsetting on the agenda. Aviation is centre stage in the global warming debate. The industry produces 5.5 per cent of the UK's carbon dioxide but it is predicted to become one of the largest single sources, accounting for up to 25 per cent of the UK's emissions by 2050.

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The climate change minister, Ian Pearson, caused fury in the industry by criticising airlines for failing to do enough to reduce their output, describing Ryanair, in particular, as the "irresponsible face of capitalism". The Stern report on the economic impact of climate change put the level of CO2, the greatest single cause of global warming, at 430 parts per million, compared to a historic level of 280ppm. Anything above 550ppm would have a huge impact on the climate, and campaigners argue aviation would be a key contributor as passenger numbers rise inexorably. Carbon offsetting is touted by its supporters as one of the ways that individuals can reverse that damage, by reducing their contribution to global warming.

How does it work?

The principle of offsetting is to redeem the amount of CO2 generated by a particular activity - from a flight to Sydney to cooking the Christmas turkey - by paying a sum to be invested in a project that will remove or prevent the equivalent amount of CO2 from being released into the atmosphere.

A succession of companies have been set up on the internet to provide offsetting services, by presenting consumers with a calculator to work out their CO2 "debt" and a range of options to neutralise their emissions. The companies, the majority of which operate for profit and are based in America and the UK, then invest their customers' cash in projects that range from planting trees in Scotland to building wind turbines in India.

Is it popular?

Offsetting is one of the fastest-growing areas in a global carbon trading industry worth £15bn. About 1.5 million Britons were estimated to have offset one or more flights last year. The internet travel company lastminute.com and ABTA, which represents 70 per cent of British travel agents, last month became the latest organisations to offer offsetting schemes, increasing the potential market by 27 million customers. Lastminute.com, which is the first company to incorporate an offsetting option into its ticket-booking page, said 10 per cent of its customers were using the service.

But this is not just about carbon-intensive flying, which doubles its effect on global warming by emitting its CO2 at altitude. Anything from a baby's nappies to living in a listed building can be offset. The industry is tipped for dramatic growth, from a global turnover last year of £60m to £480m by 2009.

Will planting trees save the planet?

No. Even the most ardent supporters of offsetting admit it is impossible for the world to plant its way out of climate change. In Britain alone, it would be necessary to plant a forest the size of Dorset each year to offset the UK's annual CO2 emissions.

Offsetting companies claim that planting a tree locks in carbon by absorbing CO2 over its lifetime, normally over a period of 90 years. But environmentalists argue that planting trees should be excluded from the products offered by offsetting companies.

Some offset companies have been accused of buying carbon rights for trees that have already been planted or would have been planted anyway. Charlie Kronick, climate campaigner for Greenpeace, said: "There is nothing wrong with sustainable forestry per se, but what it won't do is solve climate change, and it is disingenuous to claim otherwise.

"It is very, very difficult to quantify accurately the amount of carbon that is sequestrated by a tree over its lifetime. There are no guarantees that a new forest will be permanent, and even then that CO2 is released back into the atmosphere when the tree dies and rots away."

Recent research in America has also suggested that planting trees in northern climes can contribute to climate change by absorbing the sun's heat, rather than allowing the earth's surface to reflect it.

What should be done instead?

Campaigners are calling for offsets to meet the Gold Standard, run by an independent body that certifies high-quality projects and rejects all forestry schemes. Leading offset companies, such as the Oxford-based Climate Care, say they are slashing their reliance on forestry projects. Climate Care said only 5 per cent of its portfolio consists of forestry. The CarbonNeutral Company, another big offsetting firm, which is owned by a City investment fund, has cut its forestry portfolio from 80 per cent to 20 per cent.

Instead, offsetting companies offer investment in renewable energy and development projects in developing countries. Projects include building bio-gas digesters in India, installing energy-efficient light bulbs in Kazakhstan or buying efficient stoves for villagers in Honduras.

A spokesman for Climate Care said: "Carbon offsetting makes real greenhouse gas reductions that would not have happened otherwise. It also helps people to quantify and better understand the impacts of their activities on the climate."

How much CO2 is offset each year?

Precise numbers are difficult to obtain but the total will represent only a tiny proportion of 24 billion tons of CO2 produced worldwide each year. Replanting a hectare of rainforest is calculated to remove 400 tons of CO2 per annum. A single fuel-efficient stove will reduce CO2 by 1.5 tons a year and an efficient light bulb will remove 100kg in its lifetime. The amount of CO2 offset in the UK per annum by consumers is estimated to be about 50 million tons - less than 1 per cent of Britain's annual emissions.

So what is the way forward?

Experts argue the future could lie in individual carbon allowances, which would replace offsetting by giving people an annual "share" of CO2 emissions. The allowance would be traded for energy and any surplus could be sold on to other people or businesses. David Miliband, the Environment Secretary, has described the idea as "compelling".

Then there is the moral imperative, which simply and compellingly says: just avoid activities that are particularly harmful to the environment. Don't fly; take those holidays in Britain. Or go by ship to Australia, or train to Italy. And don't drive to work, if a bike journey will take you there as easily.

Does carbon offsetting work?

Yes...

* The offsetting industry is funding diverse projects in the developing world that make real reductions in greenhouse gases

* Offsetting is a "gateway" to encourage consumers to take fewer or shorter flights, and raising their awareness of carbon emissions

* The aviation and travel industries are increasingly ready to offer offsets to passengers and engage in the climate change debate

No...

* Offsetting does not cut total CO2 emissions and is a distraction from deciding how to reduce CO2 at the inter-governmental level

* Forestry projects do not offer guaranteed carbon sequestration as trees eventually die and release their carbon as they decay

* Offsetting leads air travellers to forget their flights are still emitting CO2, rather than considering not flying at all