Choosing Carbon Offsets

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Choosing Carbon Offsets

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Carbon offsets have emerged as a vital component of corporate strategies around reducing environmental impact. ...

Carbon offsets have emerged as a vital component of corporate strategies around reducing environmental impact.

In our white paper, Choosing the Right Carbon Offsets for Your Organization, we provide insight into the development and deployment of offsets, the offset project certification process, and how your organization can select the certification that is the best match for your environmental impact goals.

Download the white paper now and learn:

- What standards exist for offset projects and how offsets are verified
- The common offset certifications that currently exist
- How to select the right project and certification to meet your goals

For more than a decade, we've been helping our customers navigate the constantly evolving world of renewable energy and carbon offsets. Let us help you do the same!

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  • 1. WHITE PAPER Choosing the Right Carbon Offsets for Your Organization: Find the best solution to meet your environmental and organizational goals. In this white paper we explore the distinctions, options and benefits of the most common carbon offset types and certification methodologies.
  • 2. White Paper: The Certification of Carbon Offset Projects Choosing the Right Project Certification to Meet your Environmental Impact Goals THE CERTIFICATION OF CARBON OFFSET PROJECTS There are two important issues here: one is that all credible projects (and therefore offsets) must be certified to a respected standard, and two, that there are a variety of standards in the marketplace, each unique in its own way. In a previous whitepaper, we discussed the different aspects of carbon offsets, or verified emission reductions (VERs), including the motivations behind organizations’ use of offsets as well as guidance on how to properly mitigate different environmental impacts with appropriate solutions. In this next installment, we provide insight into another important aspect of the development and deployment of VERs: the offset project certification process and how your organization can select the certification that is the best match for your environmental impact goals. All credible offset projects are certified to a particular standard, confirming that the project has met a rigorous set of requirements which lead to its accreditation and the ability to bring the project offsets to market. There are two important issues here: one is that all credible projects (and therefore offsets) must be certified to a respected standard, and two, that there are a variety of standards in the marketplace, each unique in its own way. While all standards have the same goal of creating a methodology that confirms the quality and value of the offset project, the variation in these standards may represent an emphasis on different offset features such as project type, location, and technology as well as additional benefits to the local community or environment. STEPS OF CERTIFICATION – STANDARDS AND VERIFICATION Let’s begin by reviewing what all offset certifications have in common before discussing what differentiates them. The fundamental role of any offset project certifier is to provide a standard to which a project developer can adhere. This assures the consumer that the projects are accomplishing the goal of reducing the volume of greenhouse gases (GHGs) being emitted into the environment. Some projects use the direct destruction of GHGs to reduce emissions; methane capture and flaring is one example. Others use sequestration or the trapping of these gases (such as projects that maintain the integrity of forests). Regardless of the project type, a project developer must choose the certification that they wish their project to adhere to and then go through the process of submitting the project to that certifier for review, documentation, verification, and the eventual retirement of the offsets on behalf of the end user. Regardless of the standard that a project is certified to, you can be sure that the project has been deemed “additional” by the certifying body. Although this is a somewhat technical issue to discuss here, it is important that as a participant in this market you understand the term “additionality” as you will most likely come across it as you review these different standards. CORE, a joint venture of the GHG Management Institute and the Stockholm Environment Institute, describes the concept of additionality this way: “In theory, additionality answers a very simple question: Would the activity have occurred, holding all else constant, if the activity were not implemented as an offset project? Or more simply: Would the project have happened anyway? If the answer to that question is yes, the project is not additional.”1 The first step any project must take is to demonstrate its “additionality” to the normal course of business by proving that the project would not 1 1 | http://www.co2offsetresearch.org/consumer/Additionality.html Renewable Choice :: www.renewablechoice.com
  • 3. White Paper: The Certification of Carbon Offset Projects Choosing the Right Project Certification to Meet your Environmental Impact Goals If, in the course of normal business, these emissions would have been avoided anyway, the project is not additional and no offsets may be sold. have happened in a “business as usual” environment. If, in the course of normal business, these emissions would have been avoided anyway, the project is not additional and no offsets may be sold. If you are interested in further exploring how a project clears the various financial, legal and other implementation barriers, please visit the GHG Institute’s guidance on additionality. Once certified to a particular standard, all projects are required to adhere to ongoing verification that the certifier uses to confirm that the project is continuing to perform as expected. In the case of a methane capture and destruction project, that verification would include regular on-site inspections of project activity, equipment, monitoring systems, and so on. In the case of a forestry project, that monitoring would be focused on confirming the preservation and protection of the land that has been set aside for the purposes of both creating a carbon “sink” as well as promoting the natural ecosystem of the set aside land. Once a project has cleared these hurdles, been certified to a standard and the offsets verified, they may be brought to market, sold, and retired. COMMON CERTIFICATIONS In 2008, the development of the Kyoto Protocol lead to the creation of the Clean Development Mechanism, the single certifier of offsets within the protocol for participating governments and entities. Inspired by and built upon this compliance model, the demand for voluntary offsets led to the development of a variety of certifications for projects outside of Kyoto, typically producing offsets for individual and corporate consumers interested in addressing their own emissions. Beyond the CDM, each of the following certifications have taken some guidance from the CDM but also added their own focus and guidance to the general structure. It is worth stating that all of the below certifications other than CDM are considered part of the voluntary--rather than compliance--offset market. Below, we will review the six most common certifications and try to help you decide if there is one in particular, or a group of certifications, which might be most appropriate for your specific goals. THE CLEAN DEVELOPMENT MECHANISM (CDM) The Clean Development Mechanism is a mechanism under the Kyoto Protocol through which developed countries may finance GHG emission reductions or removal projects in developing countries and receive credits for doing so which they may apply towards meeting mandatory limits on their own emissions. CDM credits not used by Kyoto Protocol participants or generated prior to the final registration with the CDM Executive Board can be sold in voluntary markets as voluntary carbon offsets. The CDM is supervised by the CDM Executive Board under the guidance of the conference of the Parties of the United Nations Framework Convention on Climate Change (UNFCCC). Operational since the beginning of 2006, the mechanism has already registered 4470 projects and is anticipated to produce offsets amounting to more than 2.7 billion tons of carbon dioxide equivalent (CO2e) in the first Renewable Choice :: www.renewablechoice.com | 2
  • 4. White Paper: The Certification of Carbon Offset Projects Choosing the Right Project Certification to Meet your Environmental Impact Goals commitment period of the Kyoto Protocol (2008–2012). The mechanism is seen by many as a trailblazer: it is the first global, environmental, investment and credit scheme of its kind, providing standardized emissions offset instrument. The CDM is the reference standard used by the highest quality, voluntary, offset verifiers. THE AMERICAN CARBON REGISTRY STANDARD (ACR) The American Carbon Registry® is a leading, non-profit, U.S. carbon market registry and carbon technical services provider. In 1996, market-oriented environmental experts at the Environmental Defense Fund founded the Environmental Resources Trust (ERT) and launched the GHG Registry, now known as the ACR. The ACR Standard’s intent is to inject quality and integrity into the development of the voluntary carbon market in the U.S. In order to qualify under the ACR Standard, the offsets must meet the following criteria: • Only direct emission reductions are eligible • Emission reductions must demonstrably exceed business-as-usual • All claims should be independently verified and verifiable • Emission reductions should be generated in ways that produce net positive environmental and community benefits The ACR and ERT joined Winrock International in 2007, expanding the Winrock team of climate change, forestry, clean energy, agriculture, and carbon market experts. As the first private voluntary GHG registry in the U.S., the ACR boasts time-tested integrity in high quality carbon offset registration and carbon technical services. The total amount of verified emissions reduction tons issued by the ACR is 34,944,365 metric tons of CO2 and the program has retired 2,897,248 metric tons of CO2. THE GOLD STANDARD CERTIFICATION Based in Switzerland, The Gold Standard is a non-profit t foundation endorsed by over 80 NGOs worldwide. The Gold Standard Certification includes three screens: • Does the project use renewable energy or energy efficiency technologies? • Does the project go above and beyond business-as-usual? • Does the project promote sustainable development? One of the primary differences between Gold Standard Certification and some others is the requirement for sustainable development benefits (e.g. additional environmental, social, and/or economic benefits). Projects with the Gold Standard Certification demand a premium price due to these requirements. Operating on the APX Environmental Market Depository platform, the Gold Standard Registry manages the full lifecycle of a carbon credit, including creation, serialization, 3 | Renewable Choice :: www.renewablechoice.com
  • 5. White Paper: The Certification of Carbon Offset Projects Choosing the Right Project Certification to Meet your Environmental Impact Goals transfers, and retirement. The registry ensures the transparency, quality, reliability, and security of each offset. The Gold Standard has certified more than 700 projects in over 50 countries. Gold Standard projects have saved the carbon equivalent of taking 1.5 million cars off the road for 1 year. THE VERIFIED CARBON STANDARD (VCS) The VCS program (formerly known as The Voluntary Carbon Standard) provides a comprehensive, global standard for the approval of voluntary carbon offsets. The VCS is the largest growing voluntary standard in the world, and follows the Kyoto Protocol and the United Nations CDM. This standard is recognized as credible due to its stringent qualification requirements and worldwide support from both industry and NGOs. In order to qualify under VCS standards, offsets must meet the following criteria. Offsets must have already been put in place, occur beyond simply business-as-usual practices, and be measurable, permanent, independently verified, and unique. VCS carbon offsets are issued held and cancelled in VCS registries. VCS has approved three independent registries: NYSE Blue, Caisse des Depots and Markit. A total of 866 projects have been registered and VCS has issued 100,151,553 Verified Carbon Units (VCUs), which is the unique name for the program’s voluntary offsets. VCS has retired 25,843,553 VCUs, the equivalent of 25,843,553 metric tons of CO2. THE CLIMATE, COMMUNITY, AND BIODIVERSITY ALLIANCE (CCBA) The CCBA is a partnership of international NGOs and research institutes seeking to promote solutions to global environmental issues. Launched in 2005, the CCBA has developed voluntary standards to help design and identify land management activities that simultaneously minimize climate change, support sustainable development, and conserve biodiversity. The CCBA standard is unique as a credible means for identifying projects that simultaneously counter multiple global problems. The CCBA encourages carbon project developers to use the standards when designing, developing and implementing projects. CCBA certification can help projects garner international credibility and locate additional support and resources. In conjunction, the CCBA encourages governments, investors, carbon portfolios, development agencies, and private entities to support projects that meet the standards. Similar to the Gold Standard, the additional attention paid to the co-benefits of these “charismatic” projects may make them more desirable to some organizations and therefore carry a premium price. Renewable Choice :: www.renewablechoice.com | 4
  • 6. White Paper: The Certification of Carbon Offset Projects Choosing the Right Project Certification to Meet your Environmental Impact Goals THE CLIMATE ACTION RESERVE (CAR) CAR began as the California Climate Action Registry, which was created by the State of California in 2001 to address climate change through voluntary calculation and public reporting of emissions. As one of the premier carbon offset registries for the North American carbon market, CAR encourages action to reduce GHG emissions by ensuring the environmental integrity and financial benefit of emissions reduction projects. CAR establishes high quality standards for carbon offset projects, oversees independent third-party verification bodies, issues carbon credits generated from such projects, and tracks the transaction of credits over time in a transparent, publiclyaccessible system. The CAR program demonstrates that high-quality carbon offsets foster real reductions in GHG pollution, support activities that reduce local air pollution, spur growth in new green technologies, and allow emission reduction goals to be met at lower cost. CAR’s expertise and insight helped inform the development of the State of California’s cap-and-trade program, which adopted four of the CAR protocols for use in its regulation. Many of California’s largest corporations are currently focusing on CAR certified offsets to address emissions caps implemented around the AB32 requirements managed by the California Air Resources Management Board. As a result, CAR projects which focus on methane capture and forestry are currently carrying a premium price in the market. Additionally, CAR certifies organic waste composting, coal mine methane, nitric acid production, and landfill projects. SELECTING A PROJECT TO SUPPORT As the above certification descriptions make clear, this is a complex universe of project types, locations, benefits, and certifications, all of which should be considered during your offset selection process. For example, if your organization is focused on understanding compliance issues and markets, offsets generated under programs like CAR or CDM may be the most appropriate. If your focus is more toward the additional benefits a project may have on the local ecology and economy, certifications such as the Gold Standard and CCBA might be right for you. While this ever-changing landscape can feel overwhelming at times, fortunately you don’t need to navigate it alone. The team of professionals at Renewable Choice have years of experience working with leading international companies to help you define and prioritize your goals when it comes to managing or offsetting your carbon footprint. This primer is a starting point to help you in this critical process of beginning or further developing your organization’s climate strategy. At Renewable Choice, we work with you to help you to move your organization’s sustainability initiative forward, whatever your goals may be. Talk with one of our business development consultants today to see how we can assist you in this process. 5 | Renewable Choice :: www.renewablechoice.com