Outside the Cap: Opportunities and Limitations of Greenhouse Gas Offsets

Explains the role of carbon offsets in providing flexibility and containing costs in a cap-and-trade program to limit greenhouse gas emissions. Recommends rigorous quantification, verification, and enforcement criteria to ensure the caps' integrity

Methods that equate temporary carbon storage with permanent CO2 emission reductions lead to false claims on temperature alignment

AbstractThere has been renewed interest in equating temporary carbon storage with permanent CO2 emission reductions, both within corporate GHG inventories and for carbon offset accounting. Proposed methods discount future emissions, such that carbon stored temporarily can be accounted for as (some fraction of) a permanent reduction in emissions. These approaches are problematic as long-term temperature change is primarily caused by cumulative CO2 emissions and delayed emissions accumulate in the atmosphere the same as any other emission of CO2. This perspective article uses illustrative examples to show how discounting future emissions results in false temperature alignment and net zero claims. We recommend that emissions and removals should be reported without discounting to ensure that GHG accounts accurately reflect contribution to cumulative emissions. There is value in temporarily storing carbon, e.g. it can reduce peak warming and buy time to implement permanent mitigation measures, but it cannot be treated as equivalent to permanent mitigation, and alternative approaches should be used to convey the value of temporary storage

Lessons learned from the first round of applications by carbon-offsetting programs for eligibility under CORSIA

In 2016, the International Civil Aviation Organization (ICAO) adopted the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). The scheme requires participating airline operators to purchase carbon offset credits to compensate for the increase in their carbon dioxide emissions from international flights above 2019/2020 levels. This paper synthesizes key lessons learned from an assessment of the first 14 applications of carbon-offsetting programs for eligibility under CORSIA, focussing on five out of eight eligibility criteria established by ICAO. The evaluation shows that the degree to which the applicants satisfy the ICAO requirements differs substantially. Some applicants hardly meet any of the requirements and may not even be considered carbon-offsetting programs. However, there are also notable differences in relation to specific criteria. With regard to ensuring additionality and establishing baselines, key shortcomings are that many programmes apply approaches that do not guarantee environmental integrity of the generated credits. Not all programs regularly reassess whether their approaches are still appropriate in the light of new circumstances, such as lower costs of renewable energy technologies, and programs may still need to update their approaches for assessing additionality and establishing baselines in the light of the new context of the Paris Agreement. Some programs also do not require an independent third-party assessment of baseline methodologies. Most programs do not yet have procedures in place or planned for avoiding double counting between CORSIA and nationally determined contributions (NDCs) under the Paris Agreement. However, a few programs are in the process of implementing detailed procedures, based on voluntary Guidelines developed by a multistakeholder group. To address non-permanence, most programs use "buffer" approaches. The duration for which non-permanence is ensured, the avoidance of moral hazard risks of intentional reversals, and the "capitalization" of buffers vary considerably among programs. The Clean Development Mechanism's provisions to address non-permanence were in principle robust but do no longer work, given that the Kyoto Protocol will not have a third commitment period. Lastly, only two programs have a process in place which requires the assessment of environmental and social risks, the adoption of safeguards, and the monitoring and reporting on risks. The paper also identifies several cross-cutting issues. First, we recommend that ICAO only approve programs as eligible for CORSIA once programs have amended their standards and procedures to fulfil all criteria. Second, the evaluation identified that ICAO still needs to clarify several matters that are not explicitly addressed in current criteria, such as what global warming potentials programs should use to convert non-CO2 emissions into CO2 equivalents; whether offset credits will be eligible if the host country does not participate in the Paris Agreement; with what type of international mitigation targets double counting must be avoided; and the treatment of emission reductions not covered by NDCs. Clear international rules on these matters would greatly facilitate the approval of programs and the implementation of CORSIA. Third, we recommend that ICAO adopts a transparent procedure for the initial approval, ongoing supervision, re-approval, suspension and termination of eligibility of programs. This procedure could also address the insufficient level of information in current applications, by requiring programs to provide more detailed information. Lastly, we recommend that the Parties to the Paris Agreement include specific provisions in the international rules on Article 6 for how countries should account for offset credits used under CORSIA

Assessing crediting scheme standards and practices for ensuring unit quality under the Paris agreement

Under Article 6.2 of the Paris Agreement, countries have the option to use existing crediting schemes, including schemes serving voluntary carbon offset markets, as a basis for trading “mitigation outcomes”. Parties to the Paris Agreement engaged in such trading must seek to ensure its environmental integrity, an essential component of which is ensuring the quality of units (or “credits”) transacted. In deciding whether to rely on existing crediting schemes, therefore, countries must be able to assess the relative quality of the credits these schemes issue. Assessing unit quality can be a complex undertaking involving analysis at multiple levels (e.g. institutions, methodologies, and mitigation activities). An essential requirement, however, is for crediting schemes to have robust standards and practices in place for ensuring unit quality. This paper presents a framework for assessing the standards and practices of crediting schemes on aspects related to unit quality, and road tests this framework on six existing schemes. A key finding is that all six schemes have weaknesses in their standards and practices, suggesting the need for ongoing improvement as carbon market institutions continue to evolve under the Paris Agreement

When less is more : limits to international transfers under Article 6 of the Paris Agreement

International carbon markets can be an important tool in achieving countries’ mitigation targets under the Paris Agreement, but they are subject to a number of environmental integrity risks. An important risk is that some countries have mitigation targets that correspond to higher levels of emissions than independent projections of their likely emissions. If such ‘hot air’ can be transferred to other countries, it could increase aggregated emissions and create a perverse incentive for countries not to enhance the ambition of future mitigation targets. Limits to international transfers of mitigation outcomes have been proposed to address this risk. This article proposes a typology for such limits, explores key design options, and tests different types of limits in the context of 15 countries. Our analysis indicates that limits to international transfers could, if designed appropriately, prevent most of the hot air contained in current mitigation targets from being transferred, but also involve trade-offs between different policy objectives. Given the risks from international transfer of hot air and the uncertainty over whether other approaches will be effective in ensuring environmental integrity, we recommend that countries take a cautious approach and pursue a portfolio of approaches to ensure environmental integrity, in which case limits could provide for additional safeguards. Key policy insights Limits to international transfers involve trade-offs between different policy objectives, in particular reducing the risk that countries transfer hot air and enabling participation in carbon markets. Under ‘relative’ limits a country may transfer mitigation outcomes to the extent that its actual emissions are below the limit. Relative limits derived from historical emissions data have significant limitations, and none of the tested approaches was found to be effective for all countries. Relative limits based on emission projections could be a more valid approach, although they are also technically and politically challenging. Under ‘absolute’ limits a country could only issue, transfer or acquire a certain amount of mitigation outcomes. Absolute limits set at sufficiently low levels could prevent countries from transferring large amounts of hot air, but are bluntly applicable to all countries, whether or not they have hot air.</p