What is voluntary offsetting?
Voluntary offsetting is a way of compensating for greenhouse gas emissions from certain emission-intensive activities that cannot be avoided. The party that causes the greenhouse gas emissions by its activities funds activities that lead to a reduction in greenhouse gas emissions elsewhere. This could be done, for example, by co-funding the erection of a wind power station in a developing country. Alternatively, the polluter could create carbon sinks, e.g. by planting woodland. The growing trees will absorb carbon dioxide (CO2) and bind it – usually for several decades.
In an international context, carbon offsetting is considered to be voluntary if the offsetting scheme has not been established in order to reach legally binding targets, such as those imposed on some countries by the Kyoto Protocol.
As far as the effect of greenhouse gases on the climate is concerned, it mostly does not matter where the emissions come from. It is therefore possible to offset a flight from Berlin to Barcelona by funding a project in South America. Practically any activity that involves the release of greenhouse gases could be offset. Service providers offer offsetting for car, train or plane journeys as well as for household consumption of gas, electricity or heating fuel. Apart from using offsetting services, consumers can choose “climate-neutral” goods, events or services. Providers pledge to offset greenhouse gas emissions linked to the production, transport or use of the goods in question. There are, for example, printing companies that offer “climate-neutral” document-printing if the customer wishes. Many such offsetting services are promoted on the Internet.
Workshop 2016: "Leveraging domestic offset projects for a climate-neutral world"
The workshop "Leveraging domestic offset projects for a climate-neutral world" took place on 27/09/2016 in Berlin at the German Emissions Trading Authority (DEHSt) at the German Environment Agency.
Voluntary domestic offset schemes offer great potential as instruments for advancing ambitious climate action and supporting the transformation towards low-carbon economies. At the same time, their scope of action in industrial countries is limited by international, regional and national regulations on climate protection. Mitigation commitments from the Kyoto Protocol, the EU ETS and national or subnational compliance mechanisms increase the risk of different forms of double counting and make it difficult for project developers to prove additionality. Adding to these challenges, the regulatory framework will change after the entry into force of the Paris Agreement.
Last year, an expert conference in Berlin facilitated the dialogue among representatives of different domestic offset initiatives in Europe and was the first step in an effort to foster mutual learning and to establish a forum for coordination. This year’s workshop aimed at providing a continuation of this forum, being divided in three different blocks:
- Presenting preliminary results of the research study “Leveraging DOPs for a climate-neutral world: Regulatory conditions and options”
- Discussing present challenges and opportunities from the experience of real cases
- Looking at the future, discussing how the new climate regime signed in Paris will have an effect in the DOP market.
Finally, the workshop deepened in the understanding of key issues and options for improving the regulatory conditions in order to further develop domestic offset markets across Europe.
Workshop 2015: "Domestic carbon initiatives in Europe – experiences and opportunities"
In the context of the on-going international climate negotiations, countries are free to develop initiatives on their pledges of Intended Nationally Determined Contributions (INDCs). However, an increasing number of companies, organisations and governments are thinking beyond the current UNFCCC initiated mechanisms and markets for climate mitigation. Indeed, in Europe, several initiatives are already exploring the possibility of developing domestic offset systems.
On 19/06/2015, the expert workshop on Domestic Carbon Initiatives organised by the Gold Standard Foundation and the German Environment Agency (UBA) facilitated the dialogue among domestic offset initiatives in Austria, Belgium, France, Germany, the Netherlands, Switzerland, and the United Kingdom. A representative of each initiative presented goals, visions, progress and challenges, thus providing a clear picture on current carbon offset activities in Europe. Market analysts gave insights on consumer preferences and supply patterns and provided a rationale for domestic offset initiatives.
Five working groups discussed the relevance of and options for flexibility mechanisms under the effort sharing decision for post 2020, and positive impacts beyond just carbon reduction. Moreover, experiences from the Californian carbon market were presented and participants discussed on how to account project credits in the national inventory, with particular regard to the double counting issue. Another working group discussed what kind of platform is desired to enhance dialogue and cooperation on carbon offsets in Europe.
How does it work?
The principle behind offsetting is simple. The objective is to make up for carbon dioxide (CO2) emissions that cannot be avoided at one place either by reducing emission elsewhere or by increasing the absorption of CO2 by carbon sinks elsewhere. CO2 calculators have been introduced to determine the exact price for offsetting an activity such as air travel. The calculators work out the CO2 emissions to be offset, based on data and figures such as the amount of CO2 emitted by the combustion of one tonne of aviation fuel. Calculations are also based on a number of assumptions, e.g. the use and average consumption of certain aircraft types.
The German Environment Agency provides a CO2 calculator based on a sound scientific model. Many offsetting service providers also have calculators on their websites.
Once the volume of emissions to be offset has been established, consumers may look at various offsetting service providers to find out how much the offsetting will cost. The offsetting price for one tonne of CO2 may vary, depending on which projects are used to offset the emissions. There are various types of projects.
Certified and verified emission reductions
In the Kyoto Protocol, industrial countries committed themselves to decrease emissions of the three most important greenhouse gases, including carbon dioxide (CO2). The Kyoto Protocol provides three mechanisms that help industrial countries to reach their reduction targets as efficiently as possible. These are international emissions trading, the Clean Development Mechanism (CDM) and Joint Implementation (JI).
While emission reductions from CDM and JI can be used to redeem climate protection commitments as in the European Trading Scheme and are traded on Kyoto-related markets known as compliance markets, certificates from climate projects that did not go through the international recognition process are excluded from those markets. They are classified not as "certified", but only as "verified" emission reductions (VERs) and are traded on the voluntary market. VER projects are assessed (verified) by an independent third party. In order to guarantee a product quality comparable to CDM and JI, various quality standards have been established throughout the voluntary market over the past years. These largely mirror the Kyoto Protocol requirements for CDM or JI. VERs may be used for voluntary offsetting only. Conversely, CERs are more highly valued, as they can also be used for voluntary offsetting. .
Criticism of voluntary offsetting
Critics of offsetting schemes argue that they leave the public under the impression that it is possible to buy their way out of climate-protecting lifestyle changes at apparently low cost. This would, in the long-term, delay urgently needed changes in consumer behaviour. Such an understanding of the offsetting concept would indeed be highly questionable because offsetting, even when effective, does comparatively little to halt climate change. In addition, not all available greenhouse gas offsetting schemes are really effective. Offsetting should therefore only be used if activities cannot simply be modified to reduce or avoid greenhouse gas emissions. Under such circumstances, however, offsetting has two further advantages. Firstly, voluntary offsetting of individual carbon dioxide (CO2)-intensive activities raises individual awareness of emissions caused and brings home the extent of emissions and the cost of a person's individual CO2 balance. Secondly, depending on the project quality, offsetting projects may yield additional benefits for sustainable development in the host countries.