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Carbon Offsets: An Introductory Guide

What are carbon offsets?

A carbon offset or carbon credit is a certified emission reduction or removal equivalent to one ton of CO2, this means that each credit avoids a new ton of CO2 from being emitted into the air thanks to an emission reduction project. The concept is quite simple; however, it gets slightly more complicated when looking at the many differences between projects themselves, such as the benefits they deliver or the certification bodies backing the projects.

How carbon offsets are created?

Before a project is able to issue credits or offsets it needs to be validated by a carbon offset programme (CDM, VCS, Gold Standard) by meeting their quality criteria specified in the methodology of the specific type of offset set by the carbon offset programme. After that, the project can start implementation and monitoring, and eventually can issue the quantity of emissions reductions or removals it has generated. Once the credits are issued, they can be traded and transferred between accounts of the offset programme registry or be retired in order to use them and claim their associated GHG reduction or removals.

What are the quality signs of a carbon offset?

It is important to note that the more robust the methodologies of the carbon offset programme to quantify the emissions reductions or removals the better the environmental credentials and the quality of the offsets issued. Apart from all the unique characteristics of an offset like those related with; their technology, country of origin, or vintage of issuance. there are some common features that all credits should fulfil and that can help buyers to steer their choices towards better and higher quality credits:

- Additionality

For a project to be additional means that without the revenues generated by the sales of the credits the project couldn’t have taken place . Only in this way buyers of carbon credits can be certain that their credits have avoided a ton of CO2.

- Exclusivity

Carbon offset credits must relate to an exclusive claim to GHG reductions to avoid any sort of “double counting” by issuing more than one credit for a given GHG reduction, or by using the same offset towards more than one GHG reduction claim by the same or different parties.

- Permanence

Some projects’ GHG reductions or removals may be reversed by disturbances or natural catastrophes such as wildfires in forestation projects. To assure the permanence of the carbon reductions most projects create the so-called buffer reserves where credits are set aside every year as an insurance mechanism in case of an event which reverses the carbon reduction /removal of the project.

- Environmental integrity

While a carbon offset project is not obliged to deliver benefits apart from the reduction or removal of GHG emissions it should not contribute to social and environmental harms. Higher quality offsets normally delivers extra co-benefits to the communities and the ecosystems where they are deployed contributing to fulfilment of the UN Sustainable Development Goals (SDGs) .

The most widely known carbon offset programmes

When it comes to carbon offset programmes the most popular due to its long experience and volume of credits issued is the United Nations Clean Development Mechanism (CDM). Defined in article 12 of the Kyoto protocol and operational since 2006 the CDM set the precedent for the first global carbon market of its kind providing standardised emissions offset credits called Certified Emission Reductions (CERs). Another internationally renowned certification body is the Verified Carbon Standard (VCS) operated by Verra founded in 2005 by The Climate Group, the International Emissions Trading Association (IETA) and the World Economic Forum.

Apart from Carbon offsets programmes there are organisations providing an extra level of scrutiny to ensure the carbon offsets feature the highest-level environmental integrity. The most widely recognised is the so-called Gold Standard certification (GS), established in 2003 by the WWF to ensure projects of carbon emissions reductions maximise their impact and contribute to the Sustainable Development Goals (SDGs). Either CERs or VCS credits can have the Gold Standard certification.

What carbon offset should I buy?

As we have seen, carbon offsets are far from being a typical and heterogenous commodity and, despite buying certified credits issued by renowned carbon offset programmes being a good point to start from, is not always a guarantee. Price can sometimes be an indicator of quality, for instance, it could be difficult to argue that a very inexpensive project is truly depended on offsets credit revenue for running, however, this could well be the case if the implementation costs of the project are very low. Similarly a higher price cannot always correlate with higher quality. Buying offsets from trusted retailers that have run due-diligence on the projects and that can provide you with a range of options fitting your criteria is often a good idea, although, in the end the more informed and versed you can get on the topic the better choices you will make.

Ultimately, whichever the offsets you end up purchasing is important to remember that this practice is not a silver bullet in tackling change and that it shouldn’t substitute other ways of becoming more sustainable, or of governments and companies pushing for stronger regulation and carbon pricing.

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