Tuesday, February 07, 2023

C&G Emission Offsets at a Glance

For individuals or larger entities interested in reducing and mitigating their impact on the environment, there are two important strategies.  One is reducing energy use.  This can include switching to alternative or fuel efficient modes of transportation, utilizing energy efficient appliances and fixtures, setting back the thermostat at night, and making purchases from “green” companies.  A second strategy for reducing one’s emission footprint is acquiring emission offsets.  Offsets are reductions in emissions in one place that can be used to compensate for emissions elsewhere, and are usually denominated in tons of emission reduced or megawatt hours of renewable energy produced.   By purchasing an offset, one is in essence paying someone else to reduce their emissions, and the purchaser then owns that environmental benefit.  If the purchaser uses the offset to reduce their own inventory of emissions, they must permanently retire it so that it can never again be bought or sold.  A good way to look at these two paths for reducing emissions is through a comparison to how we acquire food.  We may grow some (if we garden), and we pay someone else to grow the rest (when we buy food at the store or market).

Emission offsets come from a number of different types of projects.

Emission reduction projects:

  • Renewable energy projects.  This may include wind, solar, hydro, and other forms of renewables.  By supplying emission-free electricity, these projects reduce emissions by replacing electricity from conventional power plants.  Because power plants typically combust fuel that releases a variety of greenhouse gas and other emissions related to health, replacing this electricity with renewable generation serves to offset all of these emissions.  Sometimes these offsets are called Renewable Energy Certificates (RECs).
  • Energy efficiency projects.  These projects create offsets (also called white tags) by reducing energy use below a “business as usual” baseline.  These projects also offset the whole range of emissions that would have resulted from the energy use that was avoided.
  • Methane destruction.  Methane (CH4) is a greenhouse gas 25 times more potent than carbon dioxide.   Methane is emitted from landfills, coal mines, and animal waste in agricultural operations.  When this methane is captured and flared, it is largely converted to CO2, and therefore results in a reduction in greenhouse gas emissions.

Sequestration projects:

  • Forestry and agricultural soil projects.  Vegetation absorbs CO2 from the air, and forestry projects include both the sustainable management of existing forests as well as the establishment of new forest land.  Agricultural soil projects involve employing farming practices that increase the ability of the soil to sequester carbon, such as decreasing tillage and planting grasses.
  • Carbon capture and storage.  In carbon capture and storage projects, CO2 emissions are collected and transported to underground geological or ocean formations.

In the US, greenhouse gas emissions are not yet federally regulated (though this may become a reality in the near future), and accordingly, the market for carbon and other emissions offsets is a “voluntary market.”  This is not unusual since most competitive markets are not subject to major federal regulation.  As in all voluntary markets, it is up to the buyer to make sure that what is purchased is of high quality.  Standards (e.g. Green-e Climate, Gold Standard, Voluntary Carbon Standard, forthcoming LEO-001) are available to assure this quality for emission offsets.

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