Carbon offsets

Who should you trust when it comes to buying carbon offsets?
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01 .Introduction


In this investigation, we look at the voluntary carbon offset market. 

Can consumers trust that validated carbon offsets are genuine, or is it still the Wild West out there?

Do consumers trust carbon offsets?

A decade ago, British band Coldplay released its hit record A Rush of Blood to the Head. Reportedly concerned about the carbon emissions produced by the album, the band decided to offset this by having 10,000 mango trees planted in India.

In theory, this sounded great – the trees would absorb the carbon, the mangoes would feed villagers, and Coldplay felt good about their green credentials.

Alas, it was not to be. A few years later, it was reported that many of the mango saplings had died, and that much of the water and money promised to the villagers for caring for the saplings never arrived.

So it’s no surprise that when CHOICE asked its members if they had considered offsetting their carbon emissions, several said they were put off because of a perceived lack of accountability and oversight in the industry.

Angela Veerhuis said: “I’d be concerned about paying for it now as I’m not sure about industry regulation. Until I know what kind of planning goes into these arrangements, I won’t participate.” Ben Archer told us, “[I] haven’t and won’t, unless I find a company that actually does something to offset. Most claim [to do it], but don’t prove it.” 

Even CHOICE member Simon Reus, who has bought offsets, questioned their efficacy. “I have done it multiple times over the years when flying or hiring a car, and I’m happy to do it, however I have always wondered who regulates these programs to ensure the money goes where it should.”

Carbon standards

The Verified Carbon Standard (VCS) is an international standard that ensures carbon reductions meet quality standards and are independently verified, numbered and listed in a central database.

The Gold Standard (GS), established by the World Wildlife Fund (WWF), certifies offset projects that demonstrate greenhouse gas reductions and positively impact the economy, health, welfare and/or environment of the community where the project is located.

The Carbon Farming Initiative (CFI) is a voluntary Australian Government carbon offsets scheme that enables farmers and land managers to generate carbon credits by reducing agricultural emissions, such as nitrous oxide and methane, and sequestering carbon in vegetation and soils. These credits can then be sold to individuals and businesses wishing to offset their own greenhouse gas emissions.

The Government’s National Carbon Offset Standard (NCOS) verifies claims of carbon neutrality in Australia. To verify carbon neutral claims, the NCOS specifies that organisations must buy their offsets from projects verified under eligible schemes. These include credits issued under the CFI, VCS and GS, among others.

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There are different quality offsets around and... the buyer has to beware. It's a matter of making sure the offsets you're buying are certified.
Alan Pears, VCMA Board member

The question that begs to be asked is can consumers trust that offsets validated under the two main standards – VCS or GS – are genuine, or is it still the Wild West out there?

CHOICE spoke with several industry experts who told us that, while offsetting has a sketchy past, the majority of providers in Australia now are legitimate as a result of stringent standards.

Alan Pears is an adjunct professor at RMIT University and a member of the Board of Voluntary Carbon Markets Association (VCMA) and the Advisory Board of the Climate Alliance. He believes standards set in Australia and internationally are providing more certainty in the market. “It is certainly improving,” he says.

“There are different quality offsets around and, at the moment, the buyer has to beware. It’s a matter of making sure the offsets you’re buying are certified.”

Martijn Wilder, head of Baker & McKenzie’s global environmental markets practice and professor of Climate Change Law at the Australian National University, agrees. “There used to be more rogue traders, but there are very few these days as the market is much more regulated and buyers are more educated. There are formal approval bodies and formal registry systems, there is greater government regulation and the ACCC has been active in enforcement.”

Freddy Sharpe, CEO of offset provider Climate Friendly, says the process for having projects verified under the standards is rigorous. “You need to submit a plan for approval, it must be constructed and then verified [to ensure] it works, then later audited to make sure it’s been operating as planned. All those reports by auditors are available [online] on public registries. They’re verified by internationally approved auditors – the same ones who validate Kyoto projects.”

While some projects verified by reputable standards are riskier than others, the riskier the project the more of a buffer zone that is built into it. For example, Wilder says that for forestry projects that traditionally involve planting trees, there is a risk that trees may be destroyed before the project reaches maturity. For this reason, project operators must plant more trees than necessary to generate their carbon units, and must provide alternative credits to consumers in case of project failure.

carbon-offsets-plant-moneyTricky business

There is heated debate surrounding whether Australians ought to buy carbon offsets locally or if they are better off buying internationally as a result of our Kyoto obligation to cut emissions. 

Many believe that carbon offsetting projects in Australia reduce the amount by which the big polluters need to cut their emissions in order to achieve the Kyoto targets. 

This may have been true when Kyoto was first signed but that’s no longer the case, says Peter Shuey, chair of the Technical Sub-Committee of the VCMA and executive director of ACXargyle, the operator of Australian CO2 Exchange.

Wilder says that the government is not counting an individual’s reduction in emissions or carbon offsets as part of its compliance with Kyoto. He adds that individuals can feel confident that offsetting their own emissions won’t impact on the compliance targets of governments and large companies.

Gourmet or basic?

In Australia, where there is no mandatory requirement for individuals to reduce emissions, offsets can be bought voluntarily. Consumers can either buy directly through specialised carbon offset retailers, or choose to offset certain activities, including air travel, through third parties such as airline companies.

There are several types of offsets available to minimise your carbon footprint. Whether you choose to tick a box at the time of purchasing a ticket for air travel or offset your carbon on your own, if the offsets are certified by the VCS or GS, they’re likely to be legitimate.

Depending on the type of project, offsetting a tonne of carbon can cost less than $10, while other projects can cost more than $50.

Types of projects include methane removal, renewable energy, energy efficiency, industrial gas, forestry, and co-beneficial projects which go beyond just greenhouse gas reduction.

Sharpe says, “Congee carbon is cheap, gourmet carbon is expensive. Some projects have a very charismatic story, but they’re the most expensive. For example, in Kenya, they’re distributing Life Straws, where you pour water in one end, it comes out the other end, and the filter in the middle traps the bad stuff. You’re saving the fuel used to boil the water to clean it, but [the projects are] very expensive, so it has to cost more per tonne than for a relatively low-cost wind farm”.

Does it add up?

There are several factors to take into consideration when selecting carbon offsets. The Environment Protection Authority (EPA) says that consumers need to consider “additionality”, permanence, and monitoring and verification. These factors are accounted for under recognised standards, such as the VCS and GS. 

“Additionality is a key concept in evaluating whether or not an offset project leads to real and measurable greenhouse gas reductions. To be regarded as a valid offset, a project must be proven to be ‘additional’ to what would have occurred anyway,” according to the EPA.

“Some emission reductions may not be secure or may involve a range of risk. Offset providers should offer some form of guarantee that purchased credits will be maintained, or customers will be compensated if the project doesn’t deliver the expected emissions reductions.”


“Offsets are a legitimate product to make use of. But you don’t just want to use them as a way of getting rid of your guilt for having a high-emission lifestyle,” says Pears.

Will McGoldrick, WWF Australia’s Climate Change policy manager, agrees. “The first step should be [to take advantage of] opportunities to reduce the carbon footprint. Households and businesses have low-cost opportunities to reduce emissions."

"That could be lowering the thermostat on the heater by 1.C, insulating, closing gaps in doors and windows, commuting to work using public transport or choosing a fuel-efficient car. It does make sense, once you’ve done all those things, to continue to invest in offsetting. What you’re demonstrating by doing that is you’re taking full responsibility for your emissions.”

To calculate your carbon footprint, head to the Australian Greenhouse Calculator (AGC), released by the Victorian EPA. Pears, one of the creators of the AGC, says it’s a great tool for calculating your emissions and demonstrating ways of reducing them.

“It draws out the way you use your appliances and the kinds of appliances you have, and by doing that it’s helping you understand what greenhouse gas emissions are associated with certain activities, and how changing behaviour or technology can reduce your emissions and your bills,” says Pears.


What about the carbon price?

As a signatory to the Kyoto Protocol, Australia must ensure its greenhouse gas emissions between 2008 and 2012 are no more than eight per cent above the levels they were in 1990. The government has implemented a number of programs that will help achieve this. 

The carbon price, which is now seeing about 500 of Australia’s biggest polluters pay for the pollution they emit, is one way for Australia to reduce its emissions. However, it does not counter the emissions produced by individuals or smaller companies.

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