Criteria for Carbon Offsets
Carbon offsets can feel overwhelming, whether you’ve been around them for years or you are just starting out. There are numerous projects available with many nuances between them, and some voluntary corporate buyers don’t know where to start. This series is intended to provide a framework for thinking about 4 different criteria among voluntary offsets.
2. Price and Technology/Project Type
The technology types used to mitigate greenhouse gases numbers in the hundreds and includes the more popular methods of forest carbon sequestration, methane avoidance from various sources, improved appliance manufacturing and hydrofluorocarbon leak detection to name a few. Pricing can vary tremendously between technologies, but why is this the case since each produces the same unit of measurement (1 metric ton of CO2-equivalent)?
For example, forestry projects tend to command a much higher price (in the range of $8-$12 per metric ton wholesale) than landfill gas (which can be as low as $2-$5 per metric ton wholesale). In this instance, forest landowners must be compensated an amount in carbon revenues that is similar to what they would have earned from more aggressive timber harvesting, cropland development or conversion of their land for development. Without a sufficiently high carbon price, those other less environmentally friendly actions are going to be the default. Buyers also often prefer the wealth of co-benefits that can arise from forest carbon projects.
Projects that reduce the emissions of highly potent greenhouse gases like methane, nitrous oxide or hydrofluorocarbons may involve advanced technological improvements with high capital costs, but the reductions earned can be in significant volumes, resulting in less expensive offsets. Because buyers are typically managing to a budget, many purchase a portfolio of credits from multiple projects that include some high-cost and low-cost options to achieve a feasible average cost per ton. Buyers may want to familiarize themselves with the basics of some of the more popular project types so that they have an idea of which they prefer as they enter the marketplace.