Carbon Offsets

CDRwiki Dictionary
, , , , ,
1

Programs or policy regimes in which companies or individuals pay for activities that result in emissions reductions or CDR. In voluntary offset programs, individuals or companies pay project developers (or similar) directly to implement some activity that results in emissions reductions or CDR. In compliance offset programs, such as cap-and-trade programs, companies that are responsible for large amounts of emissions are allowed to continue to emit above a certain cap in exchange for projects taking place elsewhere that reduce emissions or remove carbon. In a compliance regime, an offset has no effect on total emissions in the best-case scenario and will result in more emissions than would have occurred otherwise if the project is ineffective in any way (e.g., due to failures of additionality or permanence).

source: J Wilcox, B Kolosz, & J Freeman (2021) CDR Primer; Concepts

The idea of carbon offsets arose from the Kyoto Protocol as an early way to initiate progress toward net-zero emissions; but is not thought to be a feasible model for actually achieving that goal.

lengthy primer on the pros and cons of offests: In-depth Q&A: Can ‘carbon offsets’ help to tackle climate change?

2

On a market-making level, there is a lot of confusion in offset, credit, voluntary and compliance markets around the world. This is due to a mixture of carrots (IRA 45Q credit) and sticks (ETS, CA cap and trade).

On the implementation side, we want to address the buyers and sellers of the marketplace. For example, Amazon was buying $5/ton (low quality) of “credit” to claim their pathway to Net Zero. If I were Amazon, this is a good price, i.e. CDR is $200+/ton. If I were a forest landowner, this is an incremental income. If I were a global citizen who cares about climate change, I would get nothing. We are not solving the problem.

If we could affect the 10k disclosure under Management Discussion and Analysis (MDA) to require clear distinction of offset price, reduction (tpy) and removal (tpy), we have done our deed.