Making sense of carbon offsets

Luisa Lombera is an analyst with the Energy and Resources Team and Noah Buhayar is a fellow at Rocky Mountain Institute.

While world leaders continue negotiating about climate change, some individuals and organizations are proactively reducing their own greenhouse gas emissions.

Previously on this blog, Rocky Mountain Institute's Chairman and Chief Scientist Amory Lovins wrote about how to save the climate for fun and profit. He argued that we could eliminate much of our greenhouse gas emissions by saving energy and adopting modern efficiency standards in our homes, factories, cars, trucks, and airplanes.

In most cases, efficiency should be the first (and most important) step to reducing your carbon footprint. In-house reductions represent real improvements and demonstrate a genuine commitment to helping the environment. Better yet, many energy efficiency improvements can actually save you or your organization money.

Carbon offsets
But what about carbon offsets? Whether touted or attacked, offsets have garnered a lot of attention in recent years. But the problem for the average person is making sense of all the offset ins and outs.

Roughly defined, a carbon offset is a contract to reduce emissions, by a specified amount, within a specified time, to a specified degree, from an entity that is not already legally bound to make such reductions.

Since eliminating all direct and indirect emissions entirely is rarely feasible for most people or organizations, purchasing credits and offsets is one way to further reduce or eliminate net emissions.

Some requirements and criteria
Calculating and measuring reductions from offset projects is often complicated because offset credits represent avoided emissions.

"Avoided versus what?" you may ask. That's the rub: To calculate avoided emissions from a project, you first calculate the emissions that would have been generated in the absence of the project.

As you might expect, calculating hypothetical "business-as-usual" emissions requires making a few assumptions. Making valid assumptions is the key to ensuring the validity of the carbon offsets.

One of the most important criteria is that the reductions be additional to reductions that would have happened otherwise. Offsets should also be real, meaning that reductions in one place don't just mean an increase in emissions elsewhere.

Verification is also important. With any offset, an outside party should review the activities and calculations and confirm that they are valid and accurate.

Reductions from offset projects also need to be permanent. This is sometimes hard to prove in offsets from, say, planting trees. In the case of such projects, additional trees will indeed capture additional carbon. However, if the trees were to burn down, the carbon they had captured would again be released. And the carbon credits that were generated from the trees would no longer represent actual reductions in atmospheric carbon concentrations.

Evaluating the options
Ensuring that voluntary offset credits meet the criteria mentioned above can be difficult and may depend on the amount of information provided by vendors. In recent years, there have been efforts to standardize and provide oversight to the voluntary carbon market.

For instance, various credit certifiers have sprung up to help buyers select credible offsets. With an abundance of certification standards, however, it can be difficult to determine which one meets your needs.

A good resource for wading through these options is "The State of the Voluntary Carbon Market" (PDF) published by New Carbon Finance.

Other considerations
If buyers don't want to delve into the intricacies of different offset providers and certifiers, another option is to look into purchasing the most rigorous compliance-based credits. Such credits include credits eligible for trading under the Kyoto Protocol or the European Union Emission Trading Scheme.

In those cases, too, there are some additional attributes that you may want to consider when selecting offset credits. For instance:

• Do you want to fund a particular type of offset project (e.g., renewable energy vs. methane capture vs. forestry projects)?
• Do you want to support a specific region through the offset purchase (e.g., local vs. international communities or resources)?
• Are additional attributes more attractive to you (e.g., preserving wildlife habitats vs. helping low-income households)?
• Are the offsets intended to help meet current or future compliance requirements?

The bottom line
While different offset projects may have different attributes, the net effect of real reductions on the global climate should be the same despite how or where the reductions take place. That's because the climate is a global system and greenhouse gases affect it regardless of whether they originate in your home or halfway across the planet.

In the absence of regulation ensuring emissions reductions, you can take it upon yourself to voluntarily reduce your contribution to global warming.

Offsets provide a market-based means of ensuring that valuable, cost-effective emissions reductions take place. However, offset options should be carefully reviewed to ensure that they represent real and valuable reductions. Some good resources for learning more are New Carbon Finance, Point Carbon, and Environmental Finance.

Remember, though, purchasing offsets should not replace, but rather supplement, your efforts to reduce the energy consumed and emissions generated by you or your organization.