Tuesday, 19 April 2011

10 Questions to Ask Your Carbon Offset Vendor

Investing in carbon offsets is an efficient and cost effective way to quantifiably reduce the environmental impact of your organization. Such investments also demonstrate a strong commitment to combating climate change. Having said that, navigating the world of carbon offsets as a novice can be overwhelming. Even as an educated buyer, market jargon persists, and new standards and offset vendors must constantly be evaluated.

To provide clarity surrounding carbon offset purchases, below are 10 questions you should ask your offset vendor prior to purchasing credits. The questions were developed by Canadian environmental organization, the David Suzuki Foundation, and can be found in their report ‘Purchasing Carbon Offsets’. In reproducing them here, I’ve provided context and/or answers to help you understand what to look for in responses.

1. What are the specific offset project type(s) in your portfolio, and where are they located? (project types refer to wind farm, methane recovery, etc.)

Asking this question will help you to select vendors who can supply credits from projects and places that match your brand identity. For example, a transportation company might be interested in a transportation carbon reduction project, or a company with operations globally might want to support a project in a country where they operate.

2. Have your carbon offsets been certified to a recognized standard (Gold Standard, CDM, VCS, Climate Action Reserve to ensure quality? If so, please list the standard(s).

Make certain the credits you purchase are from third party verified projects of the highest quality and whose reductions are monitored annually by outside, independent auditors. The standards above are widely considered the market’s highest.

3. What steps have you taken to ensure the carbon offsets you are sell are additional?

Additionality is a key indicator of whether or not a project is high quality. It is the concept that a project could only occur because of the funds generated by the sale of the offset credits. If the project could have proceeded without carbon finance, then the project is not truly ‘additional’ and does not go beyond a business-as-usual scenario. In other words, your money is contributing to a project that would have gone on without your additional investment. If the project could not have gone forth without carbon financing, then the project passes the Clean Development Mechanism (CDM)’s additionality test. Find out if your vendor’s projects pass the CDM additionality test.

4. How do you ensure that the greenhouse gas reductions that your carbon offsets represent were quantified accurately?

Here again, look for credits that have been certified to well-recognized standards that monitor project performance on an annual basis. Refer to question 2.

5. Are 100% of your offsets validated and verified by accredited third-party auditors?

If this is not the case, you risk having your vendor offset a project that is not third party verified on your behalf. Having third party verification by independent auditors will ensure the project is actually happening and its reductions are real and ongoing.

6. If you are selling offsets that will be created in the future (i.e., through forward crediting), what mechanisms (insurance or otherwise) have you put in place to ensure those offsets will actually be delivered?

Sometimes carbon credits are forward sold, meaning they are sold before completing the certification process. This is because forward selling generates funds to operate the project in the present term, and offers a cost effective option for buyers, as not-yet-certified credits are typically cheaper than their certified counterparts. If buying forward credits, make certain that your vendor provides guarantees to deliver in the event the project fails and the offset you purchased never came about. Such guarantees might include offering you credits of equal value if your forward credits do not materialize.

7. What percentage of your portfolio (by tonnes of CO2e) is made up of offsets from tree planting or agricultural soils projects? If it is a significant percentage (more than 20% of your portfolio), how do you attempt to address permanence risks?

While trees are great for the environment, sequestering carbon as they grow, they do not necessarily make good carbon offset credits. The reason for this concerns permanency. Trees eventually succumb to death due to logging, natural decay, or natural disasters like a forest fire or hurricane. Their presence is not permanent on the landscape, meaning sequestered carbon will eventually be reversed. If you do buy from a tree planting project, make sure your vendor has a mechanism in place to address permanence risks, like holding a certain number of credits in the portfolio that will not be sold, acting as a buffer.

8. Do you use a publicly accessible registry to track and retire your offsets? If yes, list the websites. If no, how do you ensure your offsets are only sold to one buyer?

Purchased credits should be retired in a recognized carbon market registry to guard against double counting (selling the same credit twice). In today’s voluntary carbon market, there are a few key registries used among retailers. For those companies that sell VCS certified offsets, the APX and Markit registries are used to issue, track and retire credits. Find out where your vendor retires credits and if desired, request proof of retirement (e.g. a web screen shot of the registry noting your specific credits as retired).

9. What is your organization doing to educate consumers about climate change and the need for government policy to deal with it?

A top quality vendor not only sells offset credits, but also emphasizes reductions in the consumption of greenhouse gas emissions internally within an organization. Doing this typically means the vendor is committed to more than just selling you offset credits, and wants to contribute more widely to climate change education.

10. Are you a member of the International Carbon Reduction and Offset Alliance (ICROA), which has a Code of Best Practice that members must adhere to?

ICROA is a non-profit formed by leading project developers and retailers of carbon offset credits to drive up industry best practice and provide market credibility. The hallmark of the organization is a code of best practice, to which all members must publicly report. The code requires practices like selling only credits of the highest market quality, taking a measure, reduce and then offset approach towards emission reductions, and offering reduction advice for clients. Visit ICROA’s website to learn more at www.icroa.org

If you are interested in purchasing offsets for your business or organization, Carbon Clear can help identify projects that will meet your offsetting needs. We are both project developers and retailers of carbon credits and thus have an intimate knowledge of the market. Contact us today to learn more.