4 tips for developing a robust offsetting strategy

Carbon offsets are becoming a popular tool to indirectly reduce emissions. Before we get to the offsetting stage though, you should focus on addressing direct and indirect emissions in your business and along you supply chain. Investing in low carbon and energy efficient equipment and processes can be more cost effective than buying many offsets year on year. Installing solar panels or revising operating procedures can result in improved operational efficiencies. Reducing your own emissions first also means that you need to purchase less offsets. What’s more, the money for buying offsets can come from achieved cost savings. Once you have exhausted all cost-effective measures to reduce your carbon footprint, it is time to consider your offsetting strategy. Here are 4 tips to get you started:

1. Establish a reason for buying offsets

Why are you buying offsets? Are you participating in a voluntary program, such as the National Carbon Offset Standard Carbon Neutral Program? Is it because you would like to improve your brand perception and a commitment to corporate social responsibility principles? Or would you like to gain some experience in the carbon market? Knowing and understanding the reason for buying offsets will inform your choices around the type and volume of offsets you will need to buy.

2. Identify the types of offsets you want to buy

Many different types of offset units generated under different standards and methodologies exist, such as ACCUs, CERs, VCUs, RMUs, or VERs. The type of offset you should buy will depend on your preferences. Do you want to purchase the cheapest offset units available? Do you mind if the offset project is located overseas, or do you insist on domestic offsets? Do you prefer a specific technology such as solar or wind, or do you expect social co-benefits besides the emission reduction?

This is almost the easiest decision you will have to make. It all depends on the offset characteristics you are looking for. Make sure that when you are participating in a voluntary program that the offsets you intend to buy are eligible under that program.

3. Buy good quality offsets

What makes good offsets? Easy! Offsets should be

  • real, meaning that an offset project should have been implemented or will be implemented;
  • permanent, meaning that emissions cannot be released back into the atmosphere;
  • additional, i.e. a response to incentives provided by a carbon offset market and not required by existing legislation. This may also influence your choice of offset project and units;
  • accurately quantified, and supported by appropriate evidence;
  • verified by an independent third-party in accordance with specified, approved methodologies; and
  • unambiguously owned and tracked in a registry.

How much do offsets cost? That depends on several factors, such as the offset standards, project types and locations, volume, contract terms and conditions, as well as delivery guarantees. Having said that, you can buy offsets for less than $1/unit, but you could also spend $25/unit.

Note that not all offset providers clearly differentiate between ex-ante offsets and guaranteed offset purchases. Why is that important? Because guaranteed offsets have already occurred (i.e. are real), but are generally more expensive, while ex-ante offsets have not yet occurred. Not only is this important when substantiating your carbon neutral claim, but forward delivery or ex-ante offsets tend to carry a higher transaction risk as well.

4. Identify offset providers

Shop around. It will be worthwhile. A good offset provider will be able to help you make the right purchasing decision and advise you on the different types of offsets. There are many providers in the market offering different types of offset projects and offset units. Ask them about their service fee. Ask them whether the units they sell are eligible for use under voluntary standards.

If you would like to know more about becoming carbon neutral or have questions about carbon offsets, contact Alex at alex.stathakis@conversio.com.au.


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