PDF Consumers Guide to Carbon Offsets R20070817F

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Retail carbon offset providers differ markedly in the sophistication of their message, their understanding of carbon offsets and offset quality, and in the information they provide consumers. It is a first step 1 A number of organizations are trying to offer an offset standard to the voluntary market.

Market acceptance of these standards, however, is still limited. The Gold Standard, for example, is quite restrictive being limited to renewable energy and energy efficiency projects , and is characterized by high transaction costs. A much more in-depth review would be required to do this in a robust way or to claim to have reliably rank-ordered the top tier of providers. Consumers can benefit, however, from knowing that the provider they choose meets certain basic criteria.


That is the goal of this report. Using these criteria, each retail provider was evaluated and assigned a score on a scale of 1 to Evaluating 30 retail offset providers on a scale, eight providers earned a cumulative score of more than 5. As a result, it is not possible to categorically state that purchasing offsets from the top tiers of providers will render purchasers carbon neutral. Consumers can and should play an important role in querying retail offset providers with the goal of improving the quality and reliability of carbon offsets being offered to the market.

That report provides a comprehensive review of the retail offset market, but does not provide a qualitative ranking of retail offset providers. Unlike most conventional pollutants, GHGs mix well in the atmosphere and can travel around the planet quickly.

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Carbon offsets are intended to take advantage of the radically different costs and practicalities of achieving GHG emission reductions by sector and geography. CERs are the currency used by the Clean Development Mechanism CDM under the Kyoto Protocol for GHG trading between developing countries countries without emissions reduction targets and industrialized countries those with emissions reduction targets. S and has branched out into Europe and other countries.

The U. CCX members contractually commit to GHG emissions reductions of a certain magnitude per year from their original baseline. Reductions beyond that level can be sold to other CCX members who need additional reductions. A small fraction of the CCX market consists of project-based reductions. It is intended to help Annex B Parties industrialized countries reduce the costs of meeting their emissions targets under the Protocol by achieving emissions reductions in other countries at lower costs than they could domestically. CDM emission reduction projects allow developing countries to advance sustainable development objectives by creating and selling CERs see Certified Emissions Reductions.

A voluntary market version of the Gold Standard has recently been released that does not require CDM project approval; it, too, limits certification to renewable energy and energy efficiency projects. The voluntary standard seeks to apply a standard of review similar to the CDM, but notes that additionality testing procedures are relaxed.

A Short Guide to Carbon Offsets | Ethical Consumer

Chlorofluorocarbons are also powerful GHGs, but are regulated separately as a means of addressing stratospheric ozone depletion. Water vapor is a powerful GHG that responds automatically to changes in temperature and other conditions, but it cannot be directly influenced by human activities.

It is therefore not generally considered a greenhouse gas for global warming mitigation purposes. The Protocol sets GHG targets for countries that sign and ratify the agreement. A corollary to this is that emissions reduction projects in the United States cannot be used for compliance with the Kyoto Protocol. RECs can be used to satisfy regulatory mandates e.

As of December , it is still under development and has been submitted to the public for comment. White Tag: A certificate equivalent to 1 MWh of energy savings. White tags have the goal of commoditizing energy efficiency, much as renewable energy certificates have commoditized renewable energy generation. National and international policy will be pivotal to any successful long-term effort to reduce GHG emissions and to moderate global warming.

At the same time, and partially in response to the absence of such policy, voluntary greenhouse gas markets are proliferating. There are no federal greenhouse gas emissions reduction mandates in the United States. Voluntary carbon emissions reductions and offset projects have played a key role in corporate efforts to demonstrate leadership in addressing global warming, and toward branding themselves as sensitive to the climate issue.

The role of carbon offsets is to neutralize that part of a carbon footprint not addressed through direct emissions reductions, the purchase of emissions-free electricity, or other means. Offsets also can be used to render products, services, and events carbon neutral, or to otherwise influence consumer-purchasing decisions. Figure 1: Achieving Carbon Neutrality Step 1: Step 2: Step 3: Step 4: Step 5: Step 6: Assess carbon footpr int footprint Account for emissionsfree electricity purchases if any Implement emissions reduction measures Compute remaining carbon emissions Purchase GHG offsets Communicate carbon neutrality The retail offsets market is growing rapidly.

Several dozen companies and organizations now offer the public the ability to purchase offsets in the retail marketplace see Appendix A.

These entities generally encourage consumers and small companies to offset their entire personal or business GHG footprints, or to offset specific activities e. Describing the retail offsets market is not easy. The number of entities in the market continues to grow, and the dozens of organizations already involved in the market provide widely disparate marketing and consumer messages.

No one knows how many offsets have been sold into the retail offsets market for carbon neutrality purposes. Includes factory and office electricity, fleet fuel, and corporate air travel. Price competition in the retail offsets market is starting to appear, with some suppliers advertising that their offsets cost less than those of their competitors. Price variety and competition might appear to be a good thing both for consumers and for market expansion; as this report explores later, however, low offset prices can be a double-edged sword from the standpoint of offset quality.

While there is no necessary causal link between the cost of producing a carbon offset and its quality, there probably is a general correlation between price and quality in the retail offset market. As in other arenas, if something sounds too good to be true, it probably is. While it is attractive, for example, to conceive of bundling offsets with products and services at no incremental cost to the consumer as a means of gaining market share, it becomes particularly important to evaluate the quality of the offsets used in any such effort.

The connection can be a financial one, e. Baseline Determination: Once additionality is confirmed, a credible approach would have been used to create an emissions baseline for the project, namely the emissions that would have occurred in the absence of the project. An inflated emissions baseline can easily make it look as if a project is generating more offsets than it really is.

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Benefit Quantification: The quantification of the GHG emissions reductions or sequestration resulting from an offset project relative to baseline emissions would reflect key potential uncertainties, as well as the potential for leakage including the possibility that GHG emissions increase elsewhere as a result of the project. Permanence: The offsets would not be subject to potential reversal in the future as can occur with carbon sequestration projects where the trees might die by fire or pest infestation. Ownership: Ownership of the reductions would be clear, making it less likely that the same offsets might be claimed and sold multiple times.

This is much easier with direct reductions e. Monitoring and Verification: The offset project would be monitored and its offsets verified over time. Registration: The offsets would be registered to provide a paper trail and to reduce the possibility that the same offsets might be sold multiple times. Many retail offset providers offer online assistance through the use of online carbon calculators for consumers to estimate their carbon footprints.

Box 2 describes several calculators that stand out in the field. For the carbon offset market to function not only in the sense of a commodity changing hands, but also in the sense of accomplishing the promised environmental benefit, offsets need to represent quality GHG reductions see Box 3. For example, if offsets are claimed from the collection and destruction of methane at a landfill, what otherwise would have happened to that methane?

Box 4: Focusing on Offset Additionality The concept of additionality is relatively easy to understand, but vexingly difficult to translate into practice. There are many reasons people pursue projects that may reduce GHG emissions; the determination of additionality boils down to what drives a project with GHG benefits to be undertaken.


For the retail offsets market, the question is whether the existence of the market and the associated value attributed to emissions reductions is a primary motivation although not necessarily the only motivation for pursuing a project that leads to GHG reductions. The question boils down to a thought experiment: holding everything else constant, would a project have happened in the absence of the retail offsets market?

Unfortunately, this question has no definitive answer. Even if we could read the minds of project developers, they themselves may not know what they would have done under different circumstances. We are forced to seek a second-best solution — namely, designing questions that are answerable. Even with the best of efforts to screen out nonadditional projects, no additionality standard can be perfect. Financial Test: is the project economically viable without offset revenues? Barriers Test: are there significant non-financial barriers that a project needs to overcome?

Common Practice Test: does the project go beyond common business practice? Timing Test: was the project started after a given date? Each test is characterized by its own advantages and disadvantages; none is universally applicable. As a result, additionality determinations are often best made by a third party with experience in the field. For an in-depth review of the additionality issue as it applies to carbon offsets, see: Trexler, M. Although the retail offsets market has expanded, the information provided by retail providers has not kept pace.

Consumers often do not find the information they need to make effective choices among retail offset suppliers. These providers often do not offer any information to suggest that the reductions they are selling would pass any credible additionality test or broader quality review.