Explainer Focus
- Offset standards set out procedures for preparing carbon reduction projects.
- They also set down methodologies to measure carbon reduction.
- Standards apply to the entire life cycle of a project.
Offset standards are protocols that govern how investment projects in carbon reductions or removals should be implemented and how the measurement of reductions must be carried out to generate carbon credits.
While offset standards do not cover the construction of a project, they set out procedures for the process of preparing a project; for example, projects that conserve existing forest cover (commonly known as “REDD+” projects) should take the local population and economy into consideration and involve them in the process of establishing the project.
Standards also set down methodologies to consistently and accurately measure the reductions or removals of carbon dioxide. For reduction or avoidance projects, for example, the standards set out how to calculate and set a benchmark against which reductions are measured.
Standards apply to the entirety of a project’s life cycle, from the design of the project through to the end of its carbon crediting period. The project itself may encompass one single installation or a number of sites, and may even involve the use of more than one methodology to calculate reductions.
The process begins with the selection of a methodology for the calculation of reductions. There are at least 14 standards organisations active in the voluntary market, offering thousands of individual methodologies.
(The leading offset standard by size, Verra, has approved more than 1,800 separate methodologies covering more than 170 different types of project ranging from forestry to renewable energy.)
After selecting a standard and a methodology the project must be submitted to the standard for validation, in which the project’s parameters and its proposed methodology for calculation of reductions are subjected to approval.
Once the project has been completed and is generating carbon reductions, these must be regularly monitored and verified by independent auditors, working to templates and rules provided by the standards.
Reductions are calculated for specified time periods, which can range from months to several years, depending on the size of the project and on the cost of seeking more frequent credit issuance.
The monitoring report is then forwarded to the standard along with a request for issuance. Once the standards organisation has approved the request, offsets can be issued into the project’s registry account.
Offset standards are commonly acknowledged to be the guardians of the integrity and transparency of the voluntary offset market, given their nature as self-regulating entities. They must stay ahead of scientific developments in order to maintain their standards and methodologies up-to-date, and must also respond to trends in the search to achieve more ambitious reductions.
They must also respond to changes in the economics of carbon abatement. In recent years the cost of renewable energy has fallen far enough in many countries to make it competitive with legacy technologies such as coal and natural gas.
This means that solar and wind-powered generation has entered the mainstream, and no longer requires special treatment or support. Furthermore, the emissions reductions these technologies are now achieving are part of business-as-usual and do not need the added incentive of carbon finance.
For this reason, offset standards organisations have declined to approve new renewable energy projects for offset generation in most countries.
Standards often target different benefits in addition to the carbon reduced or removed, or focus and this has led to the proliferation of different standards systems.
Some will focus more on sustainable development and will avoid certain project types, while others will focus on a specific project type and develop a variety of methodologies that address specific projects. Some standards even specialise in specific geographical areas.
In those few regulated national and regional carbon markets where offsets are eligible for compliance with a cap on emissions, the system regulator defines the eligibility criteria for offsets, and most markets choose to list certain independent standards as the benchmark for eligibility.
For example, the International Civil Aviation Organisation’s CORSIA carbon market for airlines has listed offsets from specific project types from eight different offset standards as eligible for compliance.
Similarly, California’s cap-and-trade market sets out eight specific project types, under standards administered by three separate standards organisations, that are eligible to earn offsets from its market regulator.
