"Green" is the No.1 buzzword in business today. From solar energy and ethanol to compact fluorescent light bulbs, proposed solutions to global warming and oil dependency are popping up everywhere. Indeed, the green market has become hot as a solar flare as more and more companies strive to take big steps while leaving a small carbon footprint.

Going green isn't easy, however, and well-meaning attempts at saving precious resources—Sheryl Crow's campaign to end toilet paper use, for example—sometimes don't add up. Such appears to be case for one of the more popular ideas circulating through the environmental movement: carbon offsets. The basic idea behind offsets is this: you get to keep operating your business however you wish, but you make payouts to others who do something positive for the environment, such as planting a tree. To put it another way, with carbon offsets, a polluter's sins are offset by other entities whose eco-conscious alms are for sale. The concept seems too good to be true, but the market for carbon offsetting is booming as scores of companies make a push to become "carbon neutral."

But is the carbon offsets model too good to be true? A scathing review on emissions trading by The Financial Times' Fiona Harvey asserts that companies and celebrities spending millions on carbon credits are caught in a "carbon smokescreen"—net yielding few to no environmental benefits. Some organizations, the Times reported, pay into emissions-reduction programs that take money from big businesses without delivering any offsetting environmental service in return. BusinessWeek columnist Ben Elgin likewise reports that many offsets brokers and retailers have not been trustworthy. In one instance cited by Elgin, Renewable Choice Energy of Boulder, Colo., refused to disclose emission-reducing benefits offered to corporate clients. Westward a bit, San Francisco-based TerraPass Inc. took responsibility for methane reductions at an Arkansas garbage dump, though landfill officials and state regulators refuted the claim.

Dealings like these could be legion in the emerging $100 million U.S. carbon-offsets market. Some groups aren't too worried, however. Businesses wanting to appear "green" may continue buying offsets as a way to avoid negative publicity and prevent costly legal battles with environmental lobbyists.