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Carbon offsets

What are carbon offset project vintages and do they matter?

Published on
October 27, 2021

The vintage of a carbon offset refers to the year that its associated credits were issued. It can also refer to the year in which the greenhouse gas emission reductions occurred. Generally speaking, carbon credits are issued once they complete a third-party verification. The exact timeframe these credits are issued differs depending upon the particular offset project. Some credits are issued annually, but others are issued every few years. Generally speaking, your organisation should seek out carbon offsets with vintages around the same timeframe as the emissions you are looking to offset. As such, many companies today find offsets with vintages of 1 - 3 years to be the most appropriate for their organisations.


Why the vintage of an offset matters

The vintage of an offset matters because it could be indicative of the quality of the project. It also influences the offsets price. For example, older vintage carbon offsets are, on average, sold for a 24% discount. This is true even when accounting for different sectors and offset locations. The general rule of thumb is the older the vintage, the cheaper the price per credit. Despite the discount, however, offsets with older vintages can raise some concerns for some organisations. It could be that a project had difficulty selling its credits, indicating that the project is of lower quality. Companies like Microsoft, for example, have a policy of purchasing carbon credits that were issued more recently for this reason.


Nevertheless, the vintage of a carbon offset does not definitively indicate a low-quality offset project. For instance, the Gold Standard, a major offset verification organisation, has the following position regarding offset vintage. So long as a project can align with the criteria of a reputable and legitimate offset standard, the vintage should not matter, no matter if the GHG reductions occurred one or five years ago. In addition, because of the urgent need for rapid decarbonisation and the lingering effects of carbon emissions in the atmosphere, it can even be said that offsets with older vintages are even more valuable. After all, these offset projects did reduce GHG emissions in the past - emissions that would otherwise be negatively affecting the climate today. If organisations neglect offset projects solely because of an older vintage, they may be unintentionally punishing those project developers who organised their projects at earlier dates than others or those projects that take longer amounts of time to develop and implement. 

 

Should you use vintage when selecting offsets?

Generally speaking, you should always be cognisant of the vintage of the carbon offsets you choose. Nevertheless, it is not recommended that you use the vintage alone to make your choice. Even so, if a particular carbon offset has an older vintage, it could suggest the project is of a lower quality, so long as these circumstances are also true:  

  • The carbon credits have not been sold for a significant amount of time, 
  • The project developers are selling the carbon credits themselves while continuing to operate their projects without selling many carbon credits.


Offset vintages in light of AR6

Following the publication of the IPCC’s sixth assessment report regarding the state of climate change, there is no denying: the emissions reductions that occur this decade are more vital than ever. The “Emissions Gap” report by the UNEP states that GHG emissions must immediately start dropping 7.6 percent every year if global warming is to be limited to the 1.5C target. Unfortunately, offset projects with significantly older vintages are not necessarily helping to achieve this goal. If the world wants to meet the Paris Agreement targets, there need to be drastic reductions now and well into the future. Because of this, your company or organisation may decide to go the way of major firms like Microsoft and Salesforce, which, as we mentioned previously, are purchasing credits from newer offset projects. 


The carbon offset market has grown significantly in recent years. Not only that, it is projected to continue doing so for some time. Unfortunately, not all of that expansion will contribute to the emissions reduction necessary to limit warming to 1.5C. By some estimates, approximately 600 - 700 million tonnes of older carbon credits will make up that growing offset market. For context, this is nearly seven times the current annual demand for offset credits, which stood around 95MtCO2e in 2020. Considering older vintages typically come alongside a cheaper price, many companies and organisations may choose to buy up these cheap credits that have little additionality. As such, it could be that companies buy millions of tonnes of offset credits with little benefit to the climate and the Paris Agreement Reduction targets.


Sources for reference.

  • Source BloombergNEF, Unlike Fine Wines, Carbon Offsets Get Worse With Age, 2020
  • Source Gold Standard, CARBON PRICING: Why do prices vary by project type?, 2020
  • Source Carbon Offset Guide, Weaker Methods: Relying on Price or Vintage
  • Source Consequence, Leading Your Business Through Climate Change, 2021
  • Source United Nations Environment Programme, Emissions Gap Report 2019
  • Source Turner, Guy; Grocott, Harry, The Global Voluntary Carbon Market - Dealing With the Problem of Historic Credits, 2021
  • Source Trove Research, Future Demand, Supply and Prices for Voluntary Carbon Credits – Keeping the Balance, 2021

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