Getting the Most Out of Carbon Offsets

Thanks to recent House passage of legislation that would cap the amount of greenhouse gas emissions companies would be allowed to produce, the clock may soon start ticking for businesses to develop an effective way to manage carbon emissions.

Approved by the House in June, the American Clean Energy and Security Act (more commonly known as the Waxman-Markey bill), which passed the House on June 26, marks the first time either chamber of Congress has passed legislation to curb greenhouse gas emissions. The intention is to cap, and then reduce, total carbon emissions companies are allowed to make annually, and impose a system of pollution permits that businesses would be required to buy (and then sell or trade).

During a July 29 Webinar, sustainability experts shared ideas for getting the most out of a carbon-offset program. Christina Moretti of the Responsible Purchasing Network said the first step is to pinpoint the source of your company’s greenhouse gas emissions. “Once you know where your emissions are coming from, it will be more feasible to set goals for your corporate action plan,” she said.

The emissions typically come from one of three places:

Direct emissions from on-site stationary sources, such as combustion boilers, furnaces, and fleet vehicles;

Indirect emissions from purchased electricity, such as electricity emissions from desktop computers; and

Indirect emissions from purchased products. These emissions are generated from energy to extract raw materials, as well as to manufacture and transport those goods. Examples include transportation from non-owned fleets such as corporate travel, and emissions from shipping.

“Knowing the sources of these emissions will help you determine where immediate reductions can be made and will also help you communicate your efforts later on,” said Moretti.

Companies should also assess what type of project they want to pursue. Moretti noted that carbon offset projects mainly come from four categories:

Renewable energy projects (usually solar or wind power);

Energy-efficiency projects;

“Once you know where your emissions are coming from, it will be more feasible to set goals for your corporate action plan.”

—Christina Moretti,

Fellow,

Responsible Purchasing Network

Forestry projects (such as planting trees or preserving forests); and

Methane-capture projects. For example, a power company could earn credits by helping farmers capture methane emitted by animal waste.

Carbon-capture projects should also come in addition to other energy-saving programs, Moretti said, to reduce and simplify the company’s need to capture carbon in the first place.

Carbon Offset Providers

Corporations have no shortage of vendors trying to win business helping them with carbon offsets. Retailers such as CarbonFund.org, for example, do everything from helping a company calculate its carbon footprint to ensuring that the project is verified by an outside party. Other vendors include brokers, who buy and sell carbon offsets; aggregators, who usually have a specific portfolio of carbon offsets; and developers, who implement projects and plant the trees in the ground.

Which vendor is best will depend on each company’s particular situation, said Joel Levin, vice president of the Climate Action Reserve. For example, if a company only wants to buy and use carbon offsets, it’s easiest to go through a retailer, he said. If a company wants to buy, hold, or resell larger “quantities” of carbon emissions, it would do well to open its own trading account.

PLANNING REQUIREMENTS

Greenhouse Gas Emissions Reductions Through Transportation Efficiency—an excerpt from the American Clean Energy and Security Act:

IN GENERAL—Each State shall:

(1) not later than 3 years after the date of the enactment of this section, submit to the Administrator goals for transportation-related greenhouse

gas emissions reductions; and

(2) as part of each transportation plan or transportation improvement plan developed under title 23 or title 49, United States Code, ensure that a plan to achieve such goals, or an updated version of such a plan, is submitted to the Administrator and to the Secretary of Transportation (in this section referred to as the ‘Secretary’) by each metropolitan planning organization in the State for an area with a population exceeding 200,000.

TIMING. —The Administrator shall:

(A) publish proposed regulations under paragraph (1) not later than 1 year after the date of the enactment of this section; and

(B) promulgate final regulations under paragraph (1) not later than 2 years after such date of enactment.

GREENHOUSE GAS REDUCTION GOALS

(1) CONSULTATION. —Each State shall develop the goals referred to in subsection (a)(1) —

(A) in concurrence with State agencies responsible for air quality and transportation;

(B) in consultation with each metropolitan planning organization for an area in the State with a population exceeding 200,000 and applicable local air quality and transportation agencies; and

(C) with public involvement, including public comment periods and meetings.

(2) PERIOD. —The goals referred to in subsection (a)(1) shall be for 10- and 20-year periods.

(3) TARGETS; DESIGNATED YEAR. —The goals referred to in subsection (a)(1) shall establish targets to reduce mobile source greenhouse gas emissions in the covered area from levels projected under a business-as-usual scenario. The targets shall be designed to ensure that the levels of such emissions stabilize and decrease after a designated year. The State shall consider designating 2010 as such designated year.

(4) COVERED AREA. —The goals referred to in subsection (a)(1) shall be established—

(A) on a statewide basis; and

(B) for each metropolitan planning organization in the State for an area with a population exceeding 200,000.

ENFORCEMENT:

If the Administrator finds that a State has failed to submit goals under subsection (a)(1), or to ensure the submission of a plan under sub-section (a)(2), for any area in the State (irrespective of whether the area is a nonattainment area), the Adminis-trator may impose a prohibition in accordance with section 179(b)(1) applicable to the area. The Administrator may not impose a prohibition under the preceding sentence, and no action may be brought by the Administrator or any other entity alleging a violation of this section, based on the content or adequacy of a goal or plan submitted

under subsection (a)(1) or (a)(2).

Source

American Clean Energy and Security Act (March 31, 2009).

Also, some vendors work only in specific regions; Levin’s group, for example, only handles projects in the United States right now.

Burman

Paul Burman of CarbonFund.org also suggested thinking about other services the company might need from a carbon-capture vendor (for a fee, naturally). Does the company want to publicize its carbon-reduction efforts in the press? Does it want to handle most carbon-offset purchases or trades itself, or through an outsourced provider? The answers to questions like these will help a company understand what vendors it may or may not want.

Third-Party Verification

All that being said, carbon regulation still has not passed, which leaves the carbon-offset market still a voluntary, unregulated field. Burman said companies should therefore consider having any carbon-reduction projects audited or certified by third parties to demonstrate the project’s legitimacy and effect. Carbon-offset vendors themselves should also be audited annually to ensure transparency and accuracy.

Burman advised that companies ask carbon-offset vendors or consultants the following questions:

Do you have periodical organizational auditing?

Do you have third-party standards and verification?

Do you have retirement procedure for your offsets, so they’re not double-counted?

Are your offsets registered?

Are your financial reports available?

Several standards exist that all have protocols and methodologies for determining a quality project. They include:

Voluntary Carbon Standard;

Gold Standard;

Climate Action Reserve Protocol;

American Carbon Registry; and

Chicago Climate Exchange.

Carlson

Third-party endorsements will be especially important in future years, said Eric Carlson, president of CarbonFund.org, as the world “gets into an international system and set of rules that we can all agree to. You simply would not allow an international trading system that allowed project developers or carbon-offset providers to self-certify, self-validate, and self-define key terms.”