With the recent presidential push for climate change legislation, it is now more important than ever to understand the underlying fundamentals of a key aspect common across all climate bills – the issue of carbon offsets. The most recent bill, the American Power Act (APA), proposed by Senator John Kerry and Senator Joe Lieberman, specifically provides for up to 2 billion offsets/annum spread across international and domestic projects. That’s a significant volume, considering that it translates into almost 40% of the total cap and trade expected until 2020. It will be one of the largest and most intensely scrutinized markets of all time apart from being one of the key mechanisms by which emission reductions are actually achieved. The sheer variety of project types, locations and, standards frequently make carbon trading appear to be as complex as astrophysics for most of us on the ground.
Fortunately though, the last few years of carbon trading and project development in voluntary markets and as part of the Kyoto Protocol have clarified the essential characteristics of good projects. These common principles define good and reliable emission reduction projects from not-so-desirable ones. Faced with a multitude of carbon offset standards (administered by as many independent certification bodies that certify carbon offsets according to a list of predefined criteria), it is important to keep one’s eyes on the prize – real, verifiable emission reductions. In other words, a carbon offset must represent a verified actual ton of CO2 reduced uniquely, without adverse effect on the socio-economic environment, and in addition to any emissions that may have been reduced as a matter of course.