Introduction to Offset Policies
The policy section of the CORE web site provides in-depth analysis and up-to-date information about offset design and policies. It aims to foster offset programs and policies that maximize their potential benefits, while minimizing their potential risks.
We greatly appreciate the time taken by many individuals, including staff from each of the offset programs included here, for their clarifications and enrichment of specific report sections. We welcome your suggestions and comments. Please write to firstname.lastname@example.org
The policy section material is based on work originally supported by the U.S. Environmental Protection Agency and published in the book Handbook of Carbon Offset Programs: Trading Systems, Funds, Protocols and Standards. All views expressed are those of the authors alone and should not be attributed to the U.S. EPA.
Current climate science suggests that global greenhouse gas emissions must decline by as much as 80% by mid-century to avoid unacceptably high risks. To achieve this goal, we must dramatically transform how we produce and use energy, manage land, and value the climate in our economic system. Such a transition will require far-reaching local, national and international climate policies, with support and participation from businesses and communities.
What role can carbon offsets play in meeting this profound challenge?
Carbon or greenhouse gas (GHG) offsets have long been promoted as an important element of a comprehensive climate policy approach. By virtue of enabling emission reductions to occur where costs may be lower, offset projects and programs can reduce the overall cost of achieving a given emission goal, a finding supported by many economic analyses. Furthermore, offsets have the potential to deliver sustainability co-benefits, spur technology development and transfer, and develop human and institutional capacity for reducing emissions in sectors and locations not included in a cap-and-trade scheme or a mandatory government policy.
As experience with offset markets grows, however, a number of risks have become more widely apparent and have caught the attention of the mainstream media. Most fundamentally, offsets can pose a risk to the environmental integrity of climate actions, especially if issues surrounding additionality, permanence, leakage, quantification and verification are not adequately addressed. Depending on how offsets are used, they could delay investment and innovation in lower-emitting technologies in key sources and sectors of the economy (e.g. those covered by a cap-and-trade scheme). They may provide desirable near-term cost advantages, but at the risk of “locking-in” higher emissions infrastructures and higher costs in the longer term. Where the cost of implementing offset projects is significantly lower than the market price of offsets, as is the case for many non-carbon dioxide (CO2) types of project (e.g. HCFC destruction projects), offsets may provide a useful transition mechanism but ultimately other mechanisms, such as direct incentives or regulation, could achieve deeper reductions more quickly and at lower cost.
The challenge for policymakers is clear: to design offset programs and policies that can maximize their potential benefits while minimizing their potential risks.
Given the number and complexity of offset issues and interactions, this challenge is considerable. At the same time, well designed offset programs may be one way out of the conundrum of needing to achieve steep global emission reductions while at the same time allowing poor nations to develop. To address the climate imperative, we need steep domestic reductions in rich countries, as well as significant financial flows to support the low-carbon transition in nations with less capacity or historical responsibility to reduce emissions (for a comprehensive policy approach, see Greenhouse Development Rights Framework). Offset programs can also help to tap mitigation opportunities in sources and sectors that are difficult to address through other policies, and, in so doing, develop knowledge and institutional capacity that can enable more effective strategies in the longer term. To maximize their effectiveness, offsets will need to be rigorous, regulated, and defined broadly to support local programs and policies, not just individual projects.