General Features of Offset Programs

In our Review of Offset Programs (pdf) we compared the most pertinent features of all offset programs, protocols and standards in five comparison tables. For an overview of all the tables go here.

Table1 summarizes the general fueatures of offset programs, including Regional Scope, Type of program, Start of program.

Mandatory Systems

Mandatory systems require regulated emission sources, by national, regional or provincial law, to achieve compliance with GHG emission reduction requirements.  For regulated emissions sources, offsets serve as an alternative compliance mechanism to allowances or direct emissions reductions that emission sources can use to meet these requirements.  In most cases, these sources are regulated under cap-and-trade emission trading regimes, such as the Regional Greenhouse Gas Initiative (RGGI) or the EU ETS. 

The two international mandatory project-based offset mechanisms established under the Kyoto Protocol, the CDM and JI, were established in 2001 and began issuing registered offsets in 2005.  The participants in the EU ETS, the governments of the EU member states and the Japanese government and industry are the principal buyers of CDM and JI offsets.  The remaining mandatory programs that use offsets are located in North America and Australia. Many of these programs only recently got underway or are still under development. A notable exception is the New South Wales Greenhouse Gas Reduction Scheme (NSW GGAS), which has operated since 2003.

Voluntary Systems

The voluntary offset market includes a wide range of programs, entities, standards and protocols.  Voluntary emission reduction programs such as EPA's Climate Leaders and the CCX set participating entities' emission targets, which can partly be met through offsets certified through their respective protocols. 

Offsets generated through voluntary markets, known as Verified or Voluntary Emissions Reductions (VERs), have been promoted as an opportunity for experimentation and innovation. They have the general advantage of lower transaction costs than offsets generated for use in mandatory compliance programs.  However, the lack of quality control – and the resulting attention attracted by substandard offset credits in the voluntary market – have generated concern from the wider offset market.

Voluntary Offset Standards

In response, carbon market actors along with key business and environmental interests have launched several efforts to create standards and protocols to improve the quality and credibility of voluntary offsets.  These standards and protocols differ significantly in their goals and the services provided. At one end are complete standards that provide rules and administrative bodies for accounting, quantification, monitoring, verification, certification and registration of offsets.  These full-fledged standards tend to build on existing rules and procedures in compliance markets, most notably the CDM.  These standards are designed to provide offset providers with quality assurance certification for their products and offset consumers with greater transparency and confidence in the credibility and integrity of certified offsets.

At the other end are offset protocols which are more limited in scope, such as the International Organization for Standardization (ISO) standard 14064 and the WRI GHG Protocol for Project Accounting. These protocols provide common definitions, accounting frameworks and quantification options that can be adopted or adapted by individual offset programs or standards.   In this sense, these protocols can be viewed as building blocks for the development of offset standards and programs. 

There are other institutions, standards, and criteria that provide a mix of services for designing, screening, certifying or registering offsets.  The Green-e Climate Program audits and certifies carbon offset retailers and ensures that their marketing claims are truthful.  Other standards, such as the Climate, Community and Biodiversity Standards provide design criteria to ensure robust project design and, particularly in this case, local community and biodiversity benefits. 

The proliferation of standards, protocols and other programs reflects the significant flux and experimentation in today’s voluntary offset market.  Some consolidation of standards may occur in future years.  At the same time, because of the differing objectives of many voluntary market participants, especially with respect to the local impacts and benefits of offset projects, multiple standards and screens are likely to remain lasting features of the voluntary market.

Table 1 summarizes the general features of offset programs, including the regional scope, type of program, and the start of program.