General Features of Offset Programs
Table1 summarizes the general features of offset programs, including Regional Scope, Type of program, Start of program.
The distinction between protocols, programs, registries and standards can be confusing, since the terms are often loosely defined. Click here for a discussion of how we have categorized the different offset systems featured on this site.
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 schemes, 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. In Australia, the New South Wales Greenhouse Gas Reduction Scheme (NSW GGAS) has operated since 2003.
The voluntary offset market includes a wide range of programs, entities, standards and 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 standardized quality criteria has generated concern from the wider offset market.
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 programs that have developed standards, including rules, requirements and administrative systems for accounting, quantifying, monitoring, reporting, verifying, certifying and registering offsets. The standards developed by these full-fledged programs tend to build on existing rules and procedures from compliance markets, most notably the CDM. These programs are designed to furnish 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 standards which are more limited in scope, such as the International Organization for Standardization (ISO) standard 14064-2 and the WRI GHG Protocol for Project Accounting. These standards provide common definitions, accounting frameworks and quantification options that can be adopted or adapted by individual offset programs. In this sense, these standards can be viewed as building blocks for the development of offset programs.
There are other institutions, standards, and criteria that provide a mix of services for designing, screening, certifying or registering offsets (e.g. 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 and pre-compliance market participants, especially with respect to the local impacts and benefits of offset projects, multiple standards and programs 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.