GHG Offsets: Buyer Beware
A recent study by the General Accounting Office found that over 600 businesses have sprung up across the U.S. to sell voluntary carbon offsets. The supply of voluntary offsets has grown from the equivalent of 6.2 million tons of GHGs in 2004 to 10.2 million tons in 2007, with the number of projects producing offsets increasing from 93 to over 200 over the same period.
Quality assurance and standardization have not kept up with this booming market. Some offset providers provide a wealth of information assuring the quality of their offsets, others provide very little. Accordingly, offset buyers should exercise significant due diligence in making sure they are getting what they are promised for the money spent on carbon offsets.
While this offset market currently is limited to a relatively small market of voluntary buyers, the issue of offsets will soon loom much larger as the Western Climate Initiative (WCI) resolves how to incorporate offsets into its GHG cap-and-trade program. The recent WCI proposal for the cap-and-trade program offers little concrete guidance on how member jurisdictions can separate the wheat from the chaff of carbon offsets, and how regulated emitters can use offsets to meet their GHG cap obligations.
Several quality control programs for offsets exist, including Clean Development Mechanisms (CDMs) under the Kyoto Protocol, the California Climate Action Registry (CCAR), and others. Because one can't see an offset (short of visiting the site where the offset occurs, not often practical for potential buyers), standardization of qualitative evaluation methods for offsets is crucial. It will both maximize the GHG reduction benefit from money spent on offsets, and also avoid a backlash against the idea of offsets that will likely result if buyers find that they didn't get what they paid for.
Post authored by David J. Petersen, partner practicing in the Sustainability and Real Estate and Land Use Groups.
