What it means. Carbon offsets are a market-based solution to mitigate greenhouse-gas emissions. The concept is that you offset the carbon emissions your lifestyle generates by funding projects that reduce carbon emissions.

The main purchasers of carbon offsets typically are governments and corporations; the Vatican, Fiji water, and Google, for example, have all announced plans to go “carbon neutral.” But you as a consumer might consider paying to offset the amount of CO2 your day-to-day living produces as a way to erase—or at least clean up—your environmental slate.

Organizations such as Carbonfund.org, NativeEnergy, and TerraPass sell carbon credits in the form of tree planting, conservation and renewable-energy  projects (like the Lamar, Colorado, wind farm shown), and methane-trapping programs, among other efforts to which they funnel your money. Even credit cards offered by GE and Bank of America allow you to earn points toward offsets.

Carbon credits have gained in popularity as consumers become aware of their own carbon footprints. Remember, all of us have a carbon footprint, though those who live in energy-inefficient McMansions or drive solo in gas-guzzling SUVs probably have bigger footprints.

Carbon offsets are worthwhile only if they have the net effect of reducing your overall carbon emissions. Simply using them to justify a more carbon-intensive lifestyle won’t result in overall carbon-emission reductions.

Why the buzz? While carbon footprints might seem like a good way to help the environment—and alleviate the guilt from your environmental sins—recent media investigations have shown that in some cases offsets have gone to pay for projects that would have happened anyway and that middlemen often pocket a large chunk of the money. In other words, you’re not getting what you pay for.

This past January, the FTC held a workshop on the advertising claims of carbon-offset purveyors and asked for public comment. In response, the attorneys general from 10 states sent a joint letter on January 25, 2008, outlining their concerns. “The lack of common standards and definitions, along with the intangible nature of carbon offsets, makes it difficult if not impossible for consumers to verify that they are receiving what they paid for and creates a significant potential for deceptive claims,” the attorneys generals wrote.

Until some standards are set, instead of paying someone to reduce your carbon footprint, try doing it yourself. The Consumer Reports Global Warming Solutions Center offers some tips.—Chris Fichera

Essential information: Read more about carbon offsets in “Another Inconvenient Truth,” by Ben Elgin, in BusinessWeek and take a look at Consumers Union’s recommendations to the FTC (PDF) on steps to reduce marketplace deception.