Getting carbon offsets right: a business brief on engaging offset providers

A guide for organisations through the carbon offset market

Authors: R. Schuchard; E. Stewart
Publisher: Business for Social Responsibility , 2007

This report is a retail guide for businesses interested in exploring partnerships in the rapidly growing carbon offset market. The guide includes an overview of the key business benefits and costs, criteria for assessing providers, a profile of the 50 top players, and suggestions for partnerships. The report argues that offsetting should be part of a three-pronged approach to climate change which also includes internal reductions and investment in renewable energy.

The report argues that there are a number of costs and benefits to participating in the offset market. Benefits include:

• improved reputation and environmental credibility, particularly for customer-facing companies
• increased experience in voluntary carbon markets in anticipation of a carbon-constrained economy, particularly for large companies and those in emissions-intensive sectors
• enhanced credibility, dialogue and networks with industry groups and regulators in order to gain a hand in shaping policy
• more internal attention on the environmental balance sheet
• employees who are inspired and prepared to conserve and innovate
• opportunities to become a net emissions reducer and sell offsets to retail or compliance markets at a profit

Despite these benefits, however, offsetting presents costs and risk including:

• research into appropriate offset projects and providers, which may take months
• corporate offset program design and administration, which may require additional staffing
• unit offset costs, which range from US$5/ton for nonstandard, unregulated verified (VER) offsets to over US$50/ton for high-quality certified (CER) offsets sourced from compliance markets
• brand risk from being potentially accused of “greenwash
• Negative environmental publicity may both lead to significant business costs and dissuade further investment in environmental leadership

The report argues that the selection of offsets should be guided by the following principles:

• additional: reductions are “surplus” offsets that would not have occurred under "business as usual”
• real: offsets are sourced from tangible, physical projects with evidence that they have or will imminently occur
• measurable: reductions are objectively quantifiable by peer-reviewed methodologies within acceptable standard margins of error
• permanent: reduction streams are unlikely to be reversed, with safeguards to ensure that reversals will be immediately replaced or compensated
• verifiable: performance is monitored by an independent third-party verifier with appropriate local and sector expertise
• enforceable: offsets are backed by legal instruments that define offsets’ creation, provide for transparency and ensure exclusive ownership
• synchronous: offset flows are matched to emission flow time periods

The final section of the report provides a listing of major offset providers and guidelines for partnerships.

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