Carbon offsets vs. solar panels breakdown

Carbon offsets can help decrease your net greenhouse gas emissions. That being said, if your primary goal is to benefit the environment, you should start by looking into actions that you can take to decrease your emissions directly. Many of these actions will not only benefit the environment but also save you money.

The construction and operation of buildings contribute to roughly 39 percent of the carbon emissions produced in the United States. When you install rooftop solar, you take a major step towards reducing your own carbon emissions rather than paying money for someone else to do it.

If your goal is "going green," the advantage of rooftop solar over purchasing carbon offsets is that you're directly impacting your property towards decreasing emissions. Installing solar is additional: you're constructing a project that wouldn't otherwise happen. It's also real: you can directly measure the electricity your panels produce. Finally, it's permanent: your solar panels will produce electricity for 30 years or more.

All of the electricity produced by solar panel systems is GHG emissions-free: solar power is clean, renewable energy. A 5-kilowatt system, which is around the average residential installation size in the United States, will produce roughly 150,000 kilowatt-hours (kWh) of emissions-free electricity in its lifetime. That's equivalent to 103 metric tonnes of CO₂ (...or purchasing 103 carbon offsets!). This number will continue to increase as the efficiency of solar panel systems increases and will be even higher if you install a larger solar panel system.

A solar panel system isn't free – just as with carbon offsets, you have to pay for your environmental benefits. However, solar is also a form of investment. When you install solar, you receive financial benefits (in the form of lower electricity costs) for 25 to 30 years.

Purchasing carbon offsets simply won't save you money like solar can. While the overall cost of a solar panel system will be higher upfront compared to carbon offsets, you'll see savings over the system's lifetime because of the avoided costs of paying for your electricity bill from the grid.

If you buy a solar panel system outright, your typical "break-even" point (also known as your payback period) in the U.S. is probably between six and eight years. That said, depending on how you finance your purchase, you could start seeing savings from day one – $0-down solar loans, and solar leases are widely available for solar-interested homeowners.

Your overall savings from purchasing and installing a 5 kW system after 20 years can range from $7,000 to $30,000 (depending on your geography, the cost of the system, and how much you pay for electricity). This number will be even higher if you install a larger system. Homeowners and businesses with the highest electricity bills benefit the most from solar electricity.

Depending on your geography, there may be additional financial benefits to installing solar depending on incentives in your area. Some states have solar renewable energy certificate (SREC) markets that will provide additional income to homeowners who are producing solar electricity in their homes. In many areas, there are also cash rebates or state tax credits available to help you install solar. Property owners across the U.S. are also eligible to claim the federal solar tax credit (ITC), worth 26 percent of the cost of the system if you own your system, regardless of the state you live in.

If your home is not suitable for solar because of shade or lack of space, or if you don't own your property, it's a good idea to explore your community solar options. With community solar, you purchase solar electricity from an off-site solar energy system. As a result, you can benefit from solar panels at a remote location and still save money on your electricity expenses. Your savings with a community solar option can vary depending on the type of arrangement (whether it's a subscription model, framed like a power purchase agreement (PPA) or lease, or whether you're actually purchasing the panels at a remote location).

Another option to consider before purchasing offsets to lower your carbon footprint is to schedule an energy audit and see if you can take steps to decrease your electricity and gas usage through energy efficiency. Recommended measures may include installing new windows, insulating your attic, and replacing your light bulbs with LED lights.

Even after installing a solar panel system and implementing energy efficiency measures in your home, you likely still have a positive carbon footprint. Carbon offsets can be a good way to take care of those additional emissions to be more carbon neutral. If you've already taken measures to neutralize your carbon emissions, purchasing offsets will still positively contribute to combating global climate change.