There are many ways to make and sell a carbon credit. One of the ways to take advantage of the emerging carbon economy is to make carbon offsets. Offsets are voluntary reductions that adhere to an established accounting protocol. They are often the only kind of credit available to project managers who make emission reduction projects in places where the government has not established any carbon management policy or rules.
Who Buys Carbon Offsets
Buyers of carbon offsets include companies and organisations that are not required to meet greenhouse gas emissions targets, but want to be seen to do the right thing. These companies are often service-oriented or retail businesses. Prominent buyers include banks, insurance companies and other commercial enterprises that want to distinguish themselves in the marketplace through green marketing and a smart carbon management strategy.
The transportation sector is another major market for carbon offsets. The transportation sector contributes significantly to the amount of carbon emitted into our atmosphere, but it is largely unregulated with regards to emissions caps. Airlines are a major purchaser of offsets. Most major airlines like to offer a guilt-free option to people who realise that their choice of transport contributes to global warming. Offsets are offered to customers to give them a way to minimise the carbon impact of their air travel.
Non-profit groups and large event organisers are a third market for voluntary offsets. These types of organisations are dependent on a climate friendly appearance. By purchasing offsets that match their carbon footprint, they can advertise that their activities are ‘carbon neutral’.
Who Makes Carbon Offsets
Any organisation or business that produces emission reductions is eligible to make carbon credits or carbon offsets. Carbon offsets are usually produced outside of regulatory regimes and are also known as verified or voluntary emission reductions.
Carbon offsets contribute to a positive social impact in the areas where they are produced. They are often small projects that would otherwise be too small to register as certified carbon credits. The types of projects that qualify for offset credits are widely diverse, such as:
- Forestry – plant a tree
- Fuel replacement – using bio-oils instead of scrap wood
- Wind for water pumping
- Solar projects
How to Certify a Carbon Offset
Organisations quantify their greenhouse gas emissions to establish a baseline. Then emission reductions are measured against this baseline to establish how many tons of greenhouse gases have been ‘removed’ from the atmosphere. As the carbon markets continue to grow and standardise, several competing certification protocols have emerged.
Some of the leading certification protocols include:
- ISO 14064
- World Resources Institute GHG Corporate Accounting and Reporting Standard
- Voluntary Carbon Standard
- The Gold Standard
- Carbon Disclosure Project
Carbon offsets are voluntary carbon credits. While they do not command as high a price as their more rigorous cousin, the certified carbon credit, neither do they cost as much to audit and register. Properly certified and marketed, they can represent a considerable cash flow that helps compensate for the cost of emission reduction activities.