Carbon Management - Offset

Written by: Sonia Hegarty and Kim le Cerf, EPA Victoria

Each of the previous seven editions of Carbon Matters has included a regular article about one of the Carbon Management Principles and how you can apply them to your business. This article looks at the eighth principle: Offset.

The principles comprise eight steps:  

1. measure emissions
2. set objectives
3. avoid emissions
4. reduce emissions
5. switch to alternative energy sources
6. sequester emissions
7. assess residual emissions
8. offset what you can't avoid

After having applied the 'measure', 'set objectives', 'avoid', 'reduce', 'switch', 'sequester' and 'assess' principles, the final step for a business may be to purchase offsets to reduce their remaining carbon emissions, depending on their organisation's strategy and objectives.

What is a carbon offset?
A carbon offset is any project that indirectly "reduces" greenhouse gas (GHG) emissions at one source by investing in GHG emissions reductions elsewhere. Offset products most typically involve projects that invest in forestry/biosequestration, energy efficiency, methane avoidance, industrial gas and renewable energy. Offset credits can be purchased from an offset provider.

Business wishing to buy offsets should be mindful that offsets should meet accreditation requirements. It is important to conduct appropriate research to ensure that products have been appropriately verified at delivering the environmental outcomes claimed by a third party.  A variety of quality standards have emerged internationally, including the Clean Development Mechanism (CDM), the Voluntary Carbon Standard (VCS) and the Gold Standard, all for voluntary emission reductions.

Why would I purchase carbon offsets?
Carbon offsets can provide a legitimate means of lowering your residual GHG impact and may be purchased for a range of reasons, including:

• becoming carbon neutral
• reducing your carbon footprint as part of a carbon management strategy
• preparing for an emissions trading scheme or other regulatory mechanisms, including gaining market experience
• enhancing brands and/or differentiating products and/or services in the market
• attracting investors particularly in light of increasing awareness of risks associated with GHG emissions in a carbon constrained future
• engaging employees on environmental issues.

What should I consider when buying a carbon offset product?
Before investigating offsets:

• Make sure you consider offsetting in the context of the step-by-step approach set out in the Carbon Management Principles, which first identifies onsite emissions avoidance and reduction opportunities. This will help to provide long-term environmental and financial benefits to your business and reduce the need for offsetting.

When investigating offsets:

• Consider cost constraints (offset prices can range from less than $10 to more than $50 per tonne of carbon dioxide equivalents), preferences for a certain type of project (e.g. biosequestration versus renewable energy) or preferences for a particular project location (domestic versus international).
• Evaluate each offset's key characteristics to determine exactly what is being offered. This can be done by requesting the project design documents (PDDs), which provides a detailed overview of the important offset characteristics, which will help to decide which offsets to purchase. Key characteristics include: additionality, permanence, leakage, double counting, timing of emissions reductions, monitoring and verification and co-benefits.

It is important to understand how the offset project saves the amount of emissions it claims. Consider how the project will deliver the claimed savings over its lifetime; what are the risks of non-performance? Ensure the claimed savings come from a project that has been specifically created to deliver carbon savings and is not a by-product of a project that would have happened anyway.

Further information
A range of products is emerging to help companies, governments and the community offset their GHG emissions. EPA, in partnership with Global Sustainability at RMIT, has developed an informative Carbon Offset Guide, a website to give companies an overview of carbon offsets and provide helpful hints to navigate the marketplace. The website provides information on the range of international and Australian standards and guidance, including information on the Australian Government's National Carbon Offset Standard (NCOS), which came into effect on July 1st 2010.

More information on the National Carbon Offset Standard is also available in the April Carbon Matters article: Implications of the National Carbon Offset Standard – The Changing Landscape for Carbon Offsets and Carbon Neutrality.

Don't forget to communicate your actions to your staff, stakeholders and customers. Be transparent about which offsets you purchased, the standards to which they were accredited and the steps you took to purchase them.

We are reviewing the Carbon Management Principles to ensure that they remain relevant and applicable to business.  If you have any feedback or would like to be involved in the review process then please contact us at carbon.innovators@epa.vic.gov.au.