Top Ten Tips for Purchasing Carbon Offsets

21 August 2007

The °Climate Group has produced a briefing note outlining the top ten tips for purchasing carbon offsets. To download a printable version click here or read on for more information.


1. Understand What Offsets Are


An offset is a carbon dioxide equivalent ({CO2}e) emissions reduction or removal that is used to counterbalance or compensate for ('offset') emissions from other activities. Offsets can be purchased by countries, companies or individuals to meet their own reduction requirements. The key criterion for an offset is that the {CO2}e reduction or removal that is used as an offset would not have happened anyway i.e. is "additional" to business-as-usual activity, otherwise there will be no net reduction in emissions. In other words, the seller of the offset should be able to prove that the emission reduction would not have occurred if the offsetting payment (in aggregate across the project) had not taken place. This can be done, for example, by showing that the extra revenue made project returns sufficiently attractive or enabled external financing that would not otherwise have been available.


2. Decide How Many Offsets You Need


The first step is to calculate your organisation's carbon footprint. The GHG Protocol, developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), and ISO 14064, developed by the International Standards Organisation provide globally recognised standards for measuring and reporting the carbon footprint of your organisation. Then you need to set your company target, both for internal reductions and offsetting. Your target should take into account the potential for cutting emissions at source - e.g. decreasing energy consumption, improving the efficiency of operations, and purchasing renewable energy electricity - and whether you want to be overall carbon neutral (net zero emissions including reductions and offsets). Remember that for some organizations the largest footprint impacts come from working with the supply chain, employees or consumers. Also, the more you reduce at source, the less you'll have to spend on offsets.


3. Develop a Tailored Offset Strategy


You need a robust strategy for purchasing offsets to meet your target. Here are some questions that you should answer that will help with this process:

  • What are our drivers for offsetting?
  • What are the key audiences we are trying to reach with our offset programme?
  • How important is alignment with government (& other) standards?
  • Do we have particular areas of geographic focus or sectors we prefer?
  • Are there particular types of technologies that we do (or do not) wish to support?
  • How important are sustainable development attributes of projects?
  • What is our budget?


4. Decide How You Plan to Buy Offsets


You should think about whether you want to choose a preferred provider or buy from the market, whether you want a long-term agreement or to buy year-on-year. You also need to decide who will pay for the offsets (making individual units pay can provide an incentive for reductions at source).


5. Choose the Offset Standard That Best Suits You



6. Undertake Due Diligence on Projects


Before and after you purchase offsets, complete your own assessment of projects to ensure that they are delivering what they say. NGOs and consultants can help with this.


7. Talk to Different Sellers



8. Ensure That Offsets Are Retired on a Credible GHG Registry



9. Be Transparent About Your Offset Purchases


There are a number of offsetting standards that suit different needs. The printable PDF document contains a summary . If you are choosing voluntary offsets, The °Climate Group recommends offsets approved under the two main international standards: the Voluntary Carbon Standard (VCS) and the Voluntary Gold Standard.

Offset prices generally increase as you go up the offset supply value chain. Average prices charged by offset retailers are US$8.04/t{CO2}e compared with $6.03 for brokers, $5.31 for wholesalers and aggregators and $3.88 for project developers. Ask sellers to disclose how much of your money goes directly to the project and how much covers their administrative costs. You may also want to consider directly developing offset projects yourself. While this increases your exposure to project risk, it should also decrease offset costs.

To ensure that offsets are not used more than once you should require that they are retired on a credible GHG registry. There are several registries that currently offer these services and many offset retailers also operate internal registries that are independently audited.

Any offset strategy should be transparent and publicly communicated. Disclose information on your carbon footprint calculations, emissions reduction activities, the type of offset being used, where offsets have been retired and any uncertainties related to these issues.


10. Review Your Approach to Offsetting on a Regular Basis


Your organisation's carbon footprint and approach to carbon management will no doubt change over time. The carbon market is also likely to change over time. With this in mind, ensure your review your approach to carbon offsetting on a regular basis to ensure it is still in line with best practice.


Facebook icon
Twitter icon
LinkedIn icon
e-mail icon
Google icon