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How to Genuinely Offset Your Emissions

3p Contributor | Friday September 5th, 2014 | 2 Comments

By Emil DimantchevWind power

The practice of offsetting carbon emissions by purchasing carbon credits has come under some deserved criticism.

Instances of fictitious carbon credits have created understandable skepticism — which, coupled with information barriers, can make it difficult for us to confidently purchase a carbon offset. This is a shame because carbon offsets can effectively reduce our environmental impact or that of our companies. But to do this, offsets must be carefully selected and used for the right reasons.

A genuine carbon offset

The purpose of a carbon offset is to reduce greenhouse gas emissions to compensate for, or “offset,” emissions that are practically unavoidable, such as flights on important personal or business occasions. To represent a genuine reduction of emissions, a carbon offset must be permanent, additional and third-party verified. ‘Additionality’ implies that a carbon offset must result in emission reductions which would not have occurred without the offset payment.

There are two ways to genuinely offset emissions: buying an offset credit generated from a high-quality offset project, and buying a CO2 permit from a credible emissions trading system.

Offset credits rule No. 1: Look for high-quality standards

Offset credits are offered by a number of organizations, which develop projects to reduce emissions and sell the corresponding reductions in the form of credits. Offset standards are meant to ensure that a project’s emission reductions are permanent, additional and verified by an independent third party. There are many existing standards that aim to ensure offset quality, but how well they do this varies from one to another.

The strictest offset standard is the Gold Standard, initiated and supported by NGOs, which consult and participate in the project development process. A Technical Advisory Committee overlooks the third-party verification process, helping ensure that third-party auditors carry out truthful assessments. In addition to emission reductions, the Gold Standard requires that projects deliver additional environmental and social benefits to local communities.

The Verified Carbon Standard (VCS) is another widely-used, internationally-recognized standard, developed in consultation with scientific committees and NGOs. VCS projects, however, are approved directly by their third-party auditors. The lack of an oversight committee means that verifiers might face a conflict of interest as they are paid by the project developer. While such cases have not been documented to exist, there is potential for misalignment of incentives. Purchasing a VCS credit may therefore require a closer scrutiny on behalf of the customer. If purchasing a VCS offset, look for one that is also certified by the Climate, Community and Biodiversity Alliance, which ensures the project benefits local communities and valuable ecosystems.

Offset credits rule No. 2: Be mindful of companies’ incentives

Relying on standards alone may be enough in most cases, but may fall short of a 100 percent guarantee that all of your money is going in the right place. This can be due to conflict of interest problems or because not all emission reductions resulting from an offset project are additional. Proving additionality is extremely difficult. It requires that project developers make a future forecast of what would have happened without the project — a counterfactual scenario that inevitably involves some degree of subjectivity.

A solution to these issues is to be aware of the incentives facing your carbon offset provider. Companies that develop a carbon offset project purely for profit reasons have the incentive to minimize costs and do as little as they can to achieve a certification. Many organizations involved in carbon offsets, however, are driven by different goals, such as mitigating climate change and helping communities in need. These organizations are the ones to make as conservative assumptions as possible when estimating potential emission reductions or when proving additionality, thereby plugging any holes that might exist in the certification process. Such organizations are often environmental non-profits, but exceptions exist.

CO2 permits from credible emissions trading systems

The second way to genuinely offset emissions is to purchase a CO2 permit from an established and credible emissions-trading system. This is, for example, the European carbon market, which places a firm cap on emissions by handing out a limited number of CO2 permits to participating companies. Robust and accurate monitoring and verification rules ensure that a company cannot emit a ton of CO2 without holding a corresponding permit. Therefore, buying a CO2 permit and retiring it — so it cannot be used again — effectively prevents a ton of CO2 from being emitted. This will result in an additional reduction of CO2, as we can be certain that a company will have used the permit otherwise. Individuals can purchase a CO2 permit from the European carbon market through the non-profit Sandbag. The only disadvantage is that this method of offsetting emissions does not result in any supplementary benefits for communities in need.

Finally, be aware of your own motivation

As Lindsay Wilson at Shrink That Footprint points out, carbon offsets are an effective emission reduction tool only when we have the right motivation for offsetting our emissions. As we attempt to reduce our carbon footprints or those of our companies, we must first do what we can to achieve reductions internally, and purchase carbon offsets as a last resort. The use of carbon credits to offset emissions that we could have reduced anyway only serves to superficially ease our conscience and can actually result in a rebound effect, whereby we increase carbon-polluting activities.

The bottom line

To genuinely offset carbon emissions, consider your motivation and how the carbon offset fits within a broader strategy that focuses on internal emission reductions. For a genuine carbon offset credit, look for one certified by high-quality standards and inspect the motivation driving your offset credit provider. If you are simply looking for an effort-free and genuine way to offset your emissions, and are ready to forgo the multiple benefits generated by a carbon offset project, buy emission permits from a credible emissions trading system such as the European carbon market.

Image Credit: Jason, Flickr

Emil Dimantchev is a carbon market analyst at Thomson Reuters Point Carbon. The views expressed in this article are his own, unless stated otherwise. You can follow Emil here: https://twitter.com/EDimantchev


▼▼▼      2 Comments     ▼▼▼

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  • Aldo Cerda

    Given the fact that:
    a) in some cases allowances from the European market come from “hot air” negotiations to favour countries like Russia and others (in order to buy them in), and
    b) There is no need to prove any additionality for crediting an emissions’ reduction in regulated industries (so, allowances represent a pollution permit, not an additional reduction on emissions)

    Then, in order to fulfill a credible practice of offsetting, just the first option (use of certified emissions reductions) constitutes a “genuine compensation”.

    Addditionally, why don’t consider CERs emitted from the UN’s CDM system as good as GS and VCS standards?
    Best
    Aldo

  • Emil Dimantchev

    Hi Aldo,

    Thanks for your comment.

    a) Russia is not part of the EU carbon market. You are confusing the EU emissions trading system with the Kyoto carbon market. “Hot air” is commonly used to refer to emission reductions which are not real because they have been measured against an unrealistic base year. This is what happened with Kyoto credits from eastern European countries, which is what I think you are referring to. The EU carbon market has nothing to do with this.

    b) Additionality is guaranteed when you buy a CO2 permit from the European carbon market. To prove this, we must begin by asking the following question: would this ton of CO2 be emitted if I did not buy the permit? The answer is always yes, because if this permit was on the market, a company would have every incentive in the world to use it sooner or later. This is because the cap (the total amount of permits) in the market is decreasing over time and will at one point become so strict that no company will leave a permit sitting around. While, a company can save (or “bank”) permits for a period of time, it will have to use them in the long run. If you buy a permit, it means that there will be a company out there that will not be able to use that permit to emit a ton of CO2. Therefore your purchase will represent an additional reduction of a ton of CO2.

    Finally, CDM has been generating many non-additional offsets. The price for a CDM credit is now so low (and the revenue from selling the offsets therefore such a negligible percentage for a project developer) that additionality is even harder to prove. Of course, it is possible that there are genuine CDM offsets out there. However, for a consumer who is unable to spend time and effort on doing their own quality assurance, simply choosing Gold Standard or VCS provides a filter through which only the best projects emerge.

    Emil