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Do you know about carbon offsets? A voluntary carbon credit, or carbon offset, represents a reduction of one tonne of carbon from the atmosphere. This can be achieved by many types of projects, ranging from reforestation to renewable energy and direct air capture. All these projects need to follow a rigorous protocol before they are certified by organizations with legitimacy, such as Gold Standard, Verra, Climate Action Reserve and American Carbon Registry, among others.

The lifecycle of a carbon offset:

  1. A “project developer” works with a “project owner” to develop a carbon offset project. The developer must bring in scientists/consultants to verify and certify their plans, and they submit 100+ page project description document to a “registry” a. There are few major registry programs such as Verified Carbon Standard from Verra, Climate Action Reserve (CAR), American Carbon Registry (ACR), and Gold Standard are recognized in the industry.
  2. During their certification process the ‘registry’ will make sure that each project displays six features.1
    • The project needs to have measurable results,
    • Prevent leakage (reducing emissions rather than moving them elsewhere),
    • Have additionality (reducing emissions beyond business as usual),
    • Be considered permanent (emission are kept out of the atmosphere for a reasonable length of time),
    • Follow protocols (the monitoring of the project is documented), and
    • Be verified by independent third parties.
  3. Once the project is approved by the registry, the project developer develops the project (e.g. plants the trees, carbon capture and storage, change a landfill to capture the methane, etc.).
  4. Usually, a third party comes out to verify if everything in the project is legitimate. An independent validation and verification body (VVB) audits the project to confirm that things have gone according to plan.
    • The VVB validates the following elements of a carbon offset project from the developer’s document: baseline scenarios, monitoring process, and methodologies for calculating emission reductions.
  5. Then the VVB issues a report that is used by the certifier to review the whole project. Once the certifier has done so, they issue a certified SDG impact statement that leads to the issuance of a voluntary carbon credit by the chosen certifier.
    • Each set of SDG (Sustainable Development Goals) Impact Standards are based on four standards:
      • i. Standard 1 (Strategy): Embedding sustainability and the SDGs in purpose and strategy is important because it drives attention, focus and resources to what matters most and where the organization can have the most significant impact on important outcomes – including by reducing negative ones.
      • ii. Standard 2 (Management Approach): Integrating responsible business practices and managing for impact into organizational systems and decision-making helps organizations generate options and make more informed choices between options to optimize their contribution towards sustainability and achievement of the SDGs. Operating responsibility and sustainably and contributing to the achievement of the SDGs is not an add on to what business gets done, it’s how all business is done.
      • iii. Standard 3 (Transparency): Being transparent is an important element of being accountable to Stakeholders – all interested parties including those affected or potentially affected in the future by the organization’s decisions and activities. It also helps Stakeholders make more informed decisions, for instance about whether they want to work with or for the organization, invest in or lend to the organization, or buy or use the organization’s products and services
      • iv. Standard 4 (Governance): Governance is an essential element of embedding responsible business and managing for impact practices into organizational decision-making. The organization’s informal and formal governance mechanisms define expectations of behaviour, how decisions are made and how the organization holds itself accountable for its decisions and actions in accordance with its values, principles and policies.
  6. A year after commencing (depending on the project), the registry may “issue” carbon offsets. Each represents one ton of CO2 either sequestered or prevented from being emitted in the first place.
  7. Each of these offsets has a unique serial number and is tracked in public databases such as Terrapas or UC Berkeley. Once it’s issued, it can be bought/sold like any other commodity.
  8. Finally, when any client (a household, a business, etc.) wants to claim those offsets against their carbon footprints, the registry “retire” the offsets on a client’s behalf. This means the offsets are taken out of circulation and can’t be bought/sold by anyone else.
    • a. Retirement of offsets also means their death. They should not be around anymore and are not for resale. They must serve their emission reduction purpose only once to avoid double counting. That also means removing them from the marketplace and labelling them as retired in any records.