The characteristics of a good offset project
The fundamental purpose of a carbon offset project is to allow organisations to neutralise GHG emissions they could not avoid creating. As such, any genuine carbon offset project credit must produce the same result as if the organisation reduced its carbon footprint to the same degree.
When discussing the "quality" of a carbon offset project, what we are referring to is the degree of confidence that the carbon credits sold genuinely lead to the reductions in GHG emissions claimed. While this may seem like a simple concept at first, as you will see, determining the quality of an offset project is a challenging and nuanced affair. Many characteristics make a good carbon offset project. Projects should issue credits representing one metric tonne of GHG emissions that are additional, permanent, and verifiable. They should also avoid any significant negative social or environmental impacts where they are implemented.
With all this in mind, it may feel overwhelming when trying to discern the quality of the carbon offset projects you are considering. At Consequence, we both manage offset purchases for our customers and allow customers to purchase independently. Our core IP sits across Calculation - Monitoring - Target setting and Reductions - Reporting. That's why we wrote this guide, to help clarify and guide you through the characteristics of a good carbon offset project.
First and foremost, any legitimate carbon offset project is characterised by additionality. This means that the GHG reductions associated with an offsetting project would not have happened if the offset project with its carbon credit funding did not exist.
If the GHG emission reductions would have happened anyway, the project is not additional.
Additionality is, perhaps, the most critical characteristic of a good offset project. If a company or organisation purchases carbon credits that are not additional, they are not making any legitimate efforts to reduce GHG emissions. In doing so, these efforts may indirectly worsen the climate crisis.
Despite the importance of additionality, it is difficult to determine whether GHG reductions are, in fact, additional. This is mainly because actions or activities that reduce emissions occur very frequently. Many times, emission-reducing activities occur with no consideration towards carbon credits at all. For instance, many landfills, as a matter of protocol, install specialised equipment to reduce methane emissions. In other cases, actions to reduce emissions happen because they are profitable to do so. Not only that, but renewable energy sources such as solar and wind may be cheaper than fossil fuels.
All of these factors, and more, make it challenging to determine whether emissions reductions are additional. It could be such, for one of these reasons, that reductions would have occurred anyway, without any carbon credits involved. Ultimately, however, if the revenue gained from selling carbon credits is instrumental for the implementation of an emission-reducing project, then that project is additional. This is a critical piece of a high-quality offset project.
Proper counting and estimation of emission reductions
High-quality offset projects also properly estimate and count their emission reductions. In the past, some low-quality projects have overestimated their impacts to sell more carbon credits. In these cases, project developers are selling credits that do not reduce emissions. This is called "overestimation." This happens for many reasons, such as overestimating baseline emissions.
The proper counting and estimation of GHG reductions is another important characteristic of a good offset project.
Unfortunately, the GHG emissions that global society produces today stay within the atmosphere for hundreds or even thousands of years. As such, high-quality offset projects are those that result in permanent emission reductions.
The term "reversal" refers to GHG reductions that are reversed and re-emitted into the atmosphere. In many cases, offset reversals are nearly impossible, but this is not necessarily the case. For instance, if a carbon offset project is focused on planting trees to capture carbon, but the forest later burns down, the captured GHG emissions will be re-emitted into the atmosphere. Such a project's emissions reductions, then, are not permanent.
For carbon offsets to be considered "permanent," it only needs to ensure GHG emissions are kept out of the atmosphere for at least 100 years. Ultimately, permanence has more to do with guaranteeing the prevention of reversals rather than the length of time GHG emissions are kept out of the atmosphere. Either way, a good carbon offset project can make GHG reductions over significant periods with little to no risk of emission reversals.
Exclusivity of GHG emissions
A critical characteristic of a high-quality carbon offset project is an exclusive claim to their associated GHG reductions. If two companies are claiming the same reductions, one is “double counting”.
Like the case in overestimating emissions, this would result in credits being purchased that have no positive effect on mitigating climate change. This situation is referred to as "double counting".
Most commonly, double counting occurs at a national level when the host country of the offset project also claims the emission reductions of carbon credits sold to organisations from another country.
High-quality carbon offset projects, on the other hand, lay an exclusive claim to their associated GHG emission reductions.
No associated social or environmental harm
While an offset project may be effective in reducing GHG emissions in some way, it is still possible for the implementation of the project to have harmful social or environmental effects in other ways. This is especially true considering many offset projects are implemented in the developing world. High-quality offset projects are those that do not have negative effects on the local populations or environments.
For instance, large-scale projects like hydropower dams or major solar farms could conceivably displace or harm local people. An example of such a project is the Alto Maipo Hydroelectric Project in Chile, which sells carbon credits under the CDM. According to the Centre for International Environmental Law (CIEL), this hydroelectric project has negatively affected local water and land used by local communities. The dam has also affected glaciers in the area, having a detrimental effect on desertification of the local environment.
However, high-quality carbon offset projects avoid or minimise social and environmental harm as much as possible.
Third-party oversight and certification
Last but certainly not least, any carbon offset project worth its salt will be verified or certified by a recognized offsetting standard.
These standards also provide third-party oversight of the offset project and its GHG reductions. At this point, there are many different verification/certifications standards, such as the CDM, the Gold Standard, and the Voluntary Offset Standard, that provide verification and oversight to dozens of offset projects. To learn more, you can read our article about certification and verification here.
High-quality carbon offsets are always certified or verified by a reputable offset standard such as these. If organisations are looking to reduce their carbon footprint using offsets, they should always be sure to choose those that are verified to ensure that the GHG reductions are authentic.
How to avoid low-quality offset projects
Needless to say, there are many qualities of a good carbon offset project. Many of which may be harder to determine if you do not know what to look for. However, always ask the essential questions regarding these characteristics before purchasing any carbon credits for your organisation. Your organisation can perform this due diligence itself, or you can hire outside consultants.
There are also many kinds of carbon offset projects that carry a lower risk regarding evaluating their quality. For instance, the additionality of projects that destroy greenhouse gases like methane or N2O is usually easier to determine, so long as they are not mandated by local legislation. Other projects, on the other hand, such as energy-efficiency initiatives or forestry/land-use projects may be more challenging to evaluate.
Ultimately, there are no hard and fast rules in determining the quality of carbon offset projects. There will always be some level of subjectivity in evaluating project quality. Organisations should decide, for themselves, what qualities are most important to them before purchasing carbon credits. However, organisations and companies should always place a special emphasis on the additionality and estimation of emissions.
Sources for reference.
- Source Carbon Offset Guide, Additionality, 2021
- Source Rivera, Ramon, EPA Takes Steps to Reduce Methane Emissions from Landfills, 2021
- Source Cusick, Daniel, How Companies Could Cut Greenhouse Gas Emissions and Make Money, 2013
- Source Masterson, Victoria, Renewables were the world’s cheapest source of energy in 2020, new report shows, 2021
- Source Carbon Offset Guide, Avoiding Overestimation, 2021
- Source Carbon Offset Guide, Permanence, 2021
- Source Gold Standard, Our new double-counting guidelines, 2021
- Source CIEL, FACT SHEET: Chile’s Alto Maipo Hydroelectric Project (PHAM), 2017
- Source Consequence, How are offset projects certified and why it’s important, 2021
- Source Slattery, Gram, Lenders, auditors raise red flags at Chilean hydro project, 2017
- Source Carbon Offset Guide, Conducting offset quality due diligence, 2021
- Source Carbon Offset Guide, Sticking to Lower-Risk Project Types, 2021