What Makes a High-Quality Carbon Offset?

Exclusive Claim to GHG Reductions

Carbon offset credits must convey an exclusive claim to GHG reductions. Imagine if two different companies laid claim to the same 100 tonnes worth of CO2 reductions. Together they would claim a total of 200 tonnes of reductions, but the actual reduction would only be 100 tonnes. Again, climate change would be made worse, compared to a situation where both companies simply reduced 100 tonnes of their own emissions. This type of “double counting” can happen in three ways:[1]

  • Double issuance occurs if more than one offset credit is issued for the same GHG reduction. For example, a carbon offset program can mistakenly issue two credits to the same project for one tonne of CO2-equivalent reductions. More likely, however, is that a program issues credits to two different projects, each of which claims the same reduction. An example would be if both the producer and consumer of biofuels claim GHG reductions associated with using the same liters of fuel – and a program issues offset credits to both of them without realizing the overlap. Established carbon offset programs are generally good at avoiding this error within their system, but a somewhat greater risk is that two different programs issue offset credits for these kinds of overlapping claims (not realizing that another program has recognized the same reductions).
  • Double use occurs if two different parties count the same offset credit towards their GHG reduction claims. Again, most carbon offset programs have procedures to prevent this from happening. The most likely way for it to occur is for an unscrupulous seller to represent to multiple buyers that the credit was retired on their behalf. To avoid such fraud, it is essential for carbon offset programs to require that the purpose of any offset credit retirement is clearly recorded in their registry systems – including on whose behalf the retirement was made.
  • Double claiming can happen if offset credits are issued to a project, but another entity (e.g., a government or private company) then counts the same GHG reductions towards its own GHG reduction goal. For example, double claiming would occur if an energy efficiency project obtains offset credits for reducing emissions at a power plant covered by a (regulatory or voluntary) emission reduction target. In this case, both the project and the power plant would claim the same reduction: the project through offset credits, and the power plant, through a reduction of emissions relative to its target. Such overlapping claims must be carefully avoided. As described in Sticking to lower risk project types, a potentially significant double claiming issue could arise under the Paris Agreement. Specifically, unless governments agree not to count an offset project’s GHG reductions towards their national mitigation targets, the reductions will effectively be double claimed.

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[1] See Schneider et al. (2015) for a fuller explanation of double counting issues with carbon offsets.