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Carbon Offset Credits: Making Them Credible in Climate-Change Policy

Carbon Offset Credits
Reported by
Christine Van Lenten

Posted May 11, 2010

Presented By

Green Science & Environmental Policy Discussion Group and the Environmental Sciences Section


Enthusiasm for market-based solutions to environmental problems may have dimmed a bit with the financial markets' collapse in 2008 and subsequent damage to the economy. But the 2009 global carbon market was estimated at $136 billion, and market-based approaches survive in 2010 in proposed U.S. climate legislation. The basic aim is to harness market forces to drive greenhouse gas (GHG) emissions and compliance costs down.

Under regulatory cap and trade schemes, GHG emissions in designated economic sectors are capped. Emission allowances—each one representing the right to emit one metric ton of CO2-equivalent (CO2e)—are sold or allocated to regulated entities. An entity with more allowances than it needs to remain within the cap can sell its surplus to other regulated entities who may find it cheaper to buy allowances than to achieve compliance by reducing their own emissions. The market sets the price. Over time, caps are ratcheted down, reducing emissions.

Offset programs can augment cap and trade. They award credits to projects that avoid or reduce GHG emissions, or sequester carbon, in sectors not subject to mandatory emission caps. Offset projects can sell their credits, at market prices, supplementing the supply of emissions allowances that capped entities can buy. In theory, because it is often cheaper to reduce emissions in uncapped sectors than within a capped facility, the goal of reducing compliance costs is served; other goals may be, too.

But while simple in concept, both technically and politically offset programs are fiendishly complex and controversial. Powerful cases can be made for and against them. At a March 11, 2010, event, "Carbon Offset Credits: Making Them Credible in Climate-Change Policy," experts representing two of the most influential NGOs in the climate policy arena presented searching examinations of the subject and answered probing questions from the floor. The result was a rigorous intellectual exercise in thinking through the challenge of designing climate policy that stimulates technological innovation and is cost effective, efficient, fair, and politically viable.

However U.S. climate policy evolves, understanding offsets can greatly deepen insight into the tremendous difficulties—and drama—of shifting our carbon-based economy toward a low-carbon future.

Use the tabs above to find a meeting report and multimedia from this event.

Web Sites

Carbon Fund
Want to buy some offsets? Here's one organization's portfolio and its assurances of quality standards.

Center for American Progress
Its March 22, 2010, report on RGGI, which New York is a party to, links to many other sources of information. See too a July 2009 post in its "Climate Action Progress" blog: CDM: Rip-offsets or real reductions?

Climate Action Reserve
This national offsets program works to ensure integrity, transparency, and financial value in the U.S. carbon market.

Its Emissions Trading pages offer hard-core global coverage.

Greenhouse Gas Management Institute
This nonprofit trains and supports a global community of qualified professionals to work on GHG measurement, accounting, auditing, and management.

Natural Resources Defense Council
This leading environmental advocacy group's policy briefs include "Reducing Pollution Outside of the Carbon Cap: The Role of Offsets and Complementary Policies."

Offset Quality Initiative
Founded in 2007 to provide leadership on GHG offset policy and best practices, OQI draws from the formidable expertise of The Climate Trust, the Pew Center on Global Climate Change, the Climate Action Reserve, the Environmental Resources Trust/Winrock International, the Greenhouse Gas Management Institute, and The Climate Group.

Point Carbon
This company provides in-depth coverage of global carbon and energy markets, as well as analysis and consulting services. It also sponsors conferences and training sessions. Some content requires a subscription, but much is free.

The Climate Trust
Founded in 1997, the Trust promotes climate change solutions by providing "high-quality carbon offset projects and advancing sound offset policy." Its Offset Portfolio includes 9 project types and 16 offset projects.

Winrock International
Created in 1985, this nonprofit has a broad global agenda. Its carbon programs design land use management to sequester carbon. It also advances the use of affordable aerial imaging technology for carbon assessment, verification, and monitoring. See its American Carbon Registry for technical information on offsets.

World Resources Institute
This Washington, D.C., environmental think tank, founded in 1982, "goes beyond research to find practical ways to protect the earth and improve people's lives." WRI offers a dozen papers on offsets. See too, its climate, energy, and transport program.

Publications & Video

The sampling of views on offsets offered below is intended to indicate how widely those views can range.

Annie Leonard Presents Cap & Trade
This animated video, narrated by the author of The Story of Stuff, presents a lay critique of cap and trade and offsets.

Bóhm S and Dabhi S (editors). 2009. Upsetting the Offset — The Political Economy of Carbon Markets. Mayflybooks. Full Text
These case studies and critiques examine "the scam of carbon markets," contend that they do more harm than good, and offer alternatives. Chapter 23 contends the commodification of "ecosystem services" is a corruption of our relationship with nature.

Friedman TL. 2007. Live Bad, Go Green. The New York Times (July 8).
A dark view of offsets.

Government Accountability Office. 2009. Climate Change: Observations on the Potential Role of Carbon Offsets in Climate Change Legislation (March 5).
GAO cautions that offsets "may compromise the environmental integrity of mandatory programs to limit emissions and should be carefully evaluated."

Hurowitz G. 2009. Not your daddy's offsets and Understanding offsets. Grist (Sept. 16 and May 9).
A fan of offsets contends they should be part of any climate legislation.

Marshall C and CLIMATEWIRE. 2009. Agriculture Offsets — a Savior or a Boondoggle? The New York Times (June 12).

Mukerjee M. 2009. Is a popular carbon offset method just a lot of hot air? Scientific American (June).

The Economist. 2010. Cap-and-trade's last hurrah: The decline of a once wildly popular idea (March 20).


Alexia Kelly

World Resources Institute
e-mail | web site

Alexia Kelly is a Senior Associate in the World Resources Institute Climate and Energy Program. Her work focuses on greenhouse gas emission markets and federal climate change mitigation policy. She is also a faculty member of the Greenhouse Gas Management Institute, where she co-developed and teaches a course on greenhouse gas project accounting. Prior to joining WRI she served as Policy Program Manager at The Climate Trust, where she managed the organization's policy engagement and initiatives.  While at The Climate Trust she also managed the Offset Quality Initiative, a consortium of six leading nonprofit organizations working to promote high-quality greenhouse gas offsets.

Kelly holds a BA in Planning, Public Policy, and Management, and a Master of Community and Regional Planning and a Master of Public Administration from the University of Oregon.

Sasha Lyutse

Natural Resources Defense Council
e-mail | web site

Sasha Lyutse is a Welch Environmental Innovation Fellow at the Natural Resources Defense Council's Center for Market Innovation. Prior to joining NRDC, she worked as an analyst at Goldman Sachs, providing client relationship management, custodial, financing, and reporting services for hedge funds, as well as at U.S. embassies in London and Paris.

Lyutse holds a Bachelor's of Science in Foreign Service from Georgetown University and a dual Master's in Public Administration from the London School of Economics and Sciences Po University in Paris.

Christine Van Lenten

Christine Van Lenten has written about public policy issues and technical and scientific subjects for federal and state agencies, nonprofit organizations, and private sector firms.