The Lifecycle of a Carbon Offset, Part 1

If you’re here and reading this, it’s likely that you’re aware of carbon offsets and what they do. But for those of you who don’t, allow us to refresh your memory a bit: a carbon offset (also called a carbon credit) is a measurement of greenhouse gas emissions reduced from a project or entity, that can be sold to compensate for emissions created somewhere else in the world.

And that “somewhere else in the world” phrase is key here. Because greenhouse gases are all mixed up in Earth’s atmosphere, it doesn’t matter where they’re reduced, so long as they’re actually reduced. Offsets are a way to provide a benefit to the climate and transfer that benefit from one entity to another, regardless of location. Whether you’re actively reducing emissions or helping facilitate a carbon emissions reducing project somewhere else on the planet, Earth feels your impact the same.

High quality carbon projects go the extra mile by also helping struggling communities create jobs, improve local infrastructure, and provide myriad health benefits. And while not all carbon offsets are created equal, they all typically start in the same place.

In this two-part series, we’ll explore where carbon offsets come from, take a look at some different players they encounter during their lifecycle, and dig into how you can ensure the offsets you purchase are real, verified, and effective.

Part 1:

Methodologies, Developers, and Verifiers

Before a carbon offset becomes a carbon offset, it starts its life out as a reduction in emissions on the hunt for a methodology — it may not be the most romantic or inspiring way to begin one’s life, but that doesn’t mean it’s not an important one.

Carbon emission reductions happen all the time, but not every reduction in emissions qualifies as an offset. Before a carbon reduction is considered a carbon offset, it needs to meet a set of highly specific quality criteria based on methodologies specific to whatever kind of carbon project (energy, forests, livestock, etc) created the reductions in the first place.

“Methodologies” may sound complicated, but they’re really just detailed procedures that providers can utilize to help quantify the impact of a carbon reduction. One methodology structure that’s often used, because it was one of the first around, is from the United Nations Clean Development Mechanism, or CDM. The function of methodologies is easy to grasp, but the methodologies themselves can, and should be quite complex, as every carbon project is different and requires one to take multiple variables into account in order to evaluate them accurately.

No two carbon projects are created equally — this picturesque carbon project in Brazil reduces 12,600 metric tonnes of carbon dioxide equivalents by recycling swine waste and converting it into compost.

Once you’ve evaluated the impact of a carbon reduction project using a methodology designed to do just that, you’re now ready to officially develop a project with that data in hand. Individuals or organizations that develop carbon projects are called, unsurprisingly, “Project Developers”.

Project developers start the process by applying to a standard for review of the project against the methodology. Developers not only design the project, taking into account both community benefits and total reduction, but also nurture the project through the many steps involved with gathering the scientific data and having it validated. Using those methodologies we mentioned, they then outline the project activities and establish a baseline assumption of emissions for reduction. Next up, they receive validation for their efforts in the form of a review and certification by an independent, third-party validator who acts on behalf of the standard.

All offset programs require a third-party auditor to validate a project’s baseline as well as its projected and achieved emission reductions. Essentially, validation is the approval of carbon offset projects in their planning stages. It’s at this point projects must submit information on project design, including information on baseline scenarios, monitoring schemes and methodologies for calculating emission reductions. If your project has been validated, congratulations! It’s now ready to be officially registered and approved with a carbon offset program, indicating that it is now eligible to start generating carbon offsets after it begins operation.

Once in operation, tree planting and forest management carbon projects like this one in India use carbon offsets to help provide jobs, training, and additional benefits to the local communities — all while reducing carbon emissions.

But we’re not done yet. Once your project has been validated, you still need to verify it via a third party. From a high level, verification is the aptly named process of verifying that your project is actually doing what you say it’s doing — namely, that it’s reducing emissions. To get a bit more granular on what exactly this entails, we’ll let our friends at SEI walk us through it:

Third-party verifiers have two main responsibilities in the context of a carbon offset program. First, they perform project validation, which entails confirming that a proposed project meets a program’s eligibility criteria. Second, verifiers conduct project verification, which entails confirming that project monitoring data was collected in accordance with a program’s requirements, as well as reviewing calculations to confirm that the project’s GHG reductions were estimated according to the approved methodology/protocol. The verification process usually involves a site visit combined with auditing (or sampling) of monitoring data to confirm with “reasonable assurance” that the data are accurate.

Verifiers are generally paid by project developers, which creates aconflict of interest. To reduce the risk of bias, most carbon offsetprograms review verification arrangements, require verifiers to legally certify that they are free of conflicts, and limit the number of times that the same verifier can verify a project. Programs also regularly audit the work of verifiers to ensure their objectivity.

Verification is key when it comes to ensuring that data reported by projects is honest, transparent, and maintains its integrity. As such, it’s not typically a one-and-done type deal. Projects are regularly verified to ensure the integrity and quality of the data reported are upheld, and that accuracy, transparency, and consistency take center stage.

From methodology to validation to verification, this carbon offset has already been through a lot, and it hasn’t even been purchased yet. In Part 2, we’ll dig into the next phase of an offset’s lifecycle — one that involves Brokers, Buyers, and Providers.