Climate change: Carbon offsetting - Frequently asked questions
We have broken up this information into the following sections:
- General information on carbon offsetting
- Mechanisms for offsetting
- What Government is doing about its own emissions
General information on carbon offsetting
1. What is carbon offsetting?
Our everyday actions consume energy and produce carbon emissions, for example driving a car, heating a home or flying. Offsetting is a way of compensating for the emissions produced with an equivalent carbon saving. In this way it lessens the impact of a consumer’s actions. However, it is important to note that offsetting does not actually reduce the emissions contributing to climate change which is why it is important that we all also reduce and avoid consuming energy.
- Carbon offsetting involves calculating your emissions and then purchasing ‘credits’ from emission reduction projects that have prevented or removed the emission of an equivalent amount of carbon dioxide elsewhere.
- Due to the fact that greenhouse gases have a long life-span and tend to mix evenly in the atmosphere, it doesn’t matter where gases are emitted in the world: the effect on climate change is the same. To make up for unavoidable emissions increases, e.g. heating your home, equivalent emissions reductions can be made elsewhere meaning the overall effect is zero.
- Emission reductions can be made by investment in technology projects, e.g. in renewable energy and energy efficiency. For example, a fossil fuel burning generator could be replaced with a wind turbine, or a community could be fitted with solar water heaters and insulation to reduce its energy use and therefore produce lower CO2 emissions.
2. Will offsetting solve climate change?
Government acknowledges that carbon offsetting is not a cure for climate change but it can help raise awareness of the issues and reduce the impact of our activities.
- When carried out in a robust and responsible manner, for example through the purchase and cancellation of CERs, offsetting can lead to a reduction in CO2 emissions in the area local to the offsetting project. On a global scale, offsetting seeks to maintain a balance between emissions creation and reduction.
- Offsetting projects such as those under the Clean Development Mechanism (CDM) can provide a means for investment in clean technology in the areas which lack it the most. Such investment can lead to the spread of low-carbon development across entire regions, further reducing climate change impacts.
3. How can I offset my emissions?
There are a wide range of organisations who offer offsets. Some organisations offer offsetting when you buy goods and services, such as flights, electricity or a new car. Once an offset is officially accredited under our Code of Practice, they will be added to a list available on the Defra website, as well as a dedicated website run by the accreditation body. This will enable consumers to see which offsets meet the robust and verifiable standard set out in the Code. Accredited offsets can be marketed using the dedicated quality mark, which will again make it easy for consumers to know whether they are purchasing an assured product.
4. What actions can I offset?
Individuals and businesses can offset the fuel used to power and heat their homes or offices, and can also offset their transport emissions from road, rail and air travel. It can be for a particular action, for example a car journey, or activities over a period of time, for example a person’s annual mileage. Consumers can offset any action that produces emissions of greenhouse gases.
5. Is the Government saying that offsetting makes carbon intensive activities sustainable?
We believe that carbon offsetting is not a substitute for reducing emissions at source but is:
- the ‘next best’ solution for mitigating remaining emissions from essential activities after all practical steps have been taken to reduce them;
- a means of raising awareness of travel climate change impacts and encouraging the choice of less carbon intensive alternatives, and;
- consistent with UK policy that the environmental impact of the aviation industry should be reflected in the cost of air travel.
6. What guarantee is there that the emissions reductions actually take place?
This depends upon a rigorous assessment of the emissions reductions generated by a given project in comparison with a baseline scenario which assumes that the project does not take place. For Certified Emission Reduction credits (CERs), this assessment is ultimately made by the Executive Board of the Clean Development Mechanism (CDM), a mechanism of the UNFCCC Kyoto Protocol. For Voluntary or Verified Emission Reduction Credits (VERs), this assessment is made by a third party organisation chosen by the project developer, i.e. not at this stage through an internationally agreed body.
7. Isn’t offsetting just about planting trees?
It is possible to offset emissions in a number of different ways, including using credits that derive from renewables and energy efficiency projects.
There is clear evidence that the permanent creation of new woodland removes carbon from the atmosphere. However, there are some concerns that offsetting through forestry will not store or "sequester" carbon permanently if the woodland subsequently dies or is lost through land clearance and is not replanted. It is also complicated to determine how much carbon is sequestered. Two types of CER have been developed to cover non-permanent projects such as forestry. Under the CDM, forestry projects are awarded temporary credits to take into account the nature of carbon sequestration in trees, and which expire after a set period of time. The Code of Best Practice allows these credits to be used, to support best practice in forestry. However, offset providers must guarantee that the credits will be renewed or replaced once they expire. This will ensure consumers receive the carbon saving they purchase.
There are also many good reasons for supporting forestry other than for carbon offsetting. e.g. Defra are highly supportive of the work of the Forestry Commission and others carry out. There can also be significant poverty reduction impacts from promoting the sustainable use of forestry in developing countries.
8. I have been offsetting my flights under existing schemes. Have I been wasting my money?
Not at all - individuals and providers have helped to blaze a trail. But as the market is expanding it is necessary to provide some clarity. Later this year we will be launching a Code of Best Practice that will provide consumers with greater clarity on carbon offsetting. Offsetting products meeting the requirements of the Code will be assigned with a particular quality mark which providers will use on their website and other materials related to that specific product. Initially, only offsetting products usng compliance credits can be certified, as these provide the clearest assurance to consumers.
However, we recognise that credits from the unregulated market may be innovative and of a very high standard. So we’re leaving the Offsetting Code open to high-quality voluntary offsetting products, provided the industry can provide a similar level of assurance about the standard of the credits. The challenge to the offsetting industry is clear: to establish a clear, rigorous standard for voluntary projects that deals with all the concerns people have raised. We will support them in developing that standard – and when we have the necessary guarantees, we’ll include high-quality voluntary credits in the Code.
9. Will it be possible for credits from UK projects to be used under the Code?
At least in the first phase of the voluntary Code, only compliance credits will be accepted and these do not currently allow for UK-based projects.
If industry choses to pick up the challenge of developing an industry standard for voluntary credits then they will need to consider whether or not credits from UK-based schemes should be permitted. We will contribute to such discussions. We have made clear that the principles that must be addressed by an industry standard include one of “additionality,” meaning that the carbon savings must be in addition to reductions that would be made anyway. This is particularly challenging for UK-based projects.
10. Will forestry projects be possible under the Code?
In the first phase of the Code, it will be possible to use two types of CER credits that have been developed to cover non-permenent projects such as forestry. The Code of Best Practice will allow these to support best practice in forestry. If industry chooses to develop and implement a common industry standard for voluntary credits. Then they will need to consider what status forestry projects should have. We will contribute to such discussions.
11. Will avoided deforestation projects be possible under the Code?
Use of credits from such projects will not be possible under the Code initially. However, industry will be able to consider whether or not, and if so how, they could be included under a common standard for VERs. We eill contribute to such discussions.
12. Will the UK implement the Joint Implementation (JI) mechanism, allowing the UK-based compliance projects?
The UK has not taken any decision to implement JI.
13. Will the Code apply to Scotland, Wales and Northern Ireland?
Any company can apply to have its offsetting products accredited under the Code irrespective of where they are based.
We are working closely with the Devolved Administrations on the development of the Code. The Devolved Administrations are keen to work with Defra as they support the industry's development of a standard for VER credits. This will require further consideration of issues around the use of domestic and international projects, and of how to meet the principles of additionality, non-leakage, avoiding double counting, permanency, independent verification, transparency and certification (i.e. ex-post certification and having a registry). Once the industry standard has been in operation for a period of at least six months, it will need to be audited. Providing it is shown to provide a similar level of assurance to the consumer as compliance credits, the use of VER credits meeting that standard could be allowed under the Code.
14. When will the Government publish its final impact assessment?
The final impact assessment will be published at the same time as the final Code.
15. When will the Code be launched?
We hope that the final Code will be launched to offsetting providers by the end of April. This should mean that it will be possible for consumers to purchase accredited offsetting products by the middle of the year.
16. Why aren’t you requiring the use of a radiative forcing factor?
There is currently uncertainty in the scientific community on the relative impacts of non-CO2 emissions from aviation although it is generally accepted that aviation’s climate change impacts are greater than its CO2 emissions alone. Offsetting providers vary in terms of whether or not they use a factor, and if so, which factor.
We will not require offset providers to include these impacts when calculating emissions. However, they must make it clear whether or not they are using a radiative forcing index (RFI), and if not, they must make it clear that their product is only offsetting CO2 emissions, and that in some areas there are wider impacts. If providers wish to account for non-CO2 impacts by applying an RFI, they should make clear that the best scientific view currently is that 1.9 is most appropriate. If they do not use this factor they should justify their use of any other factor (which should be greater than 1) and point consumers to linked information on the AEA website for the Code (which would give background on the scientific advice). The Government will keep the use of a multiplier under review and as new evidence emerges, update this best practice guidance accordingly.
17. What does the proposed Code of Practice include?
The Code will set standards for;
- Robust and verifiable emission reduction credits;
- Accurate calculation of emissions to be offset, using statistics and factors published for this purpose by the Government;
- Clear information for consumers regarding the mechanism and/or projects supported;
- Transparent pricing, and
- Timescales for cancelling credits.
The consultation on the Code was published in January 2007. A summary of the consultation responses was published in July 2007. This summary said that we would proceed with establishing the Code and it would include Kyoto-compliant credits. The summary also said that we are considering whether, and if so how, credits from the non-regulated market (VERs) should be included within the Code.
18. How can businesses sign up to the code?
We plan to have the Code published by the end of April. Businesses selling offsets will then be able to choose to seek accreditation for their offsets.
19. Why did the consultation back Clean Development Mechanism (CDM) projects over voluntary schemes?
Government recognises the UNFCCC and the CDM as the highest internationally agreed standard for emission reductions and is choosing to develop a facility to invest in CDM projects. The Government is aware that the number of CDM projects available is limited at present and that offsets are also being offered on the voluntary market. We recognise that the voluntary offset market has value for raising customer awareness of the climate change impact of their activities and may be able to foster the development of particularly innovative projets. We would encourage those in the voluntary sector to adopt measures such that the assessment of their emission reductions mirrors the CDM process to ensure the integrity of the voluntary offsets being offered.
20. Will there be enough CER credits to meet demand, particularly initially?
There are currently around 2.6bn CERs from 2900 CDM projects in the delivery pipeline up until 2012. We expect the flow of these CERs to be greatly improved from 2008, allowing offsetting providers to source them more easily than may currently be the case.
21. Does Government's challenge to the industry to develop a standard for voluntary emission credits mean that they are endorsing one of the standards currently being developed and put in place by industry?
We recognise and welcome the efforts of the industry so far to develop different standards for VERs and are keen for the industry to come together and build on this important groundwork.
Defra is keen to help facilitate industry discussions so that a common standard can be developed and fully implemented which is widely supported by the different types of organisation involved in the offsetting market. This standard will need to meet the necessary criteria for a good quality offset. The Government believes that good quality offsets recognise the following principles: additionality, non-leakage, avoiding double counting, permanency, independent verification, transparency and certification (i.e. ex-post certification and having a registry). We will set up a workshop to help the industry come together and to kick start discussion on an industry standard. To help facilitate discussions we will also appoint an independent moderator. We will then continue to support the industry in its work to develop a standard in an expedited manner to limit uncertainty for business and confusion for customers. After a period in operation, Government will conduct an audit of the projects and procedures to confirm whether credits approved under the industry standard offer a similar level of assurance to consumers as the compliance market, and could be accredited under our consumer Code.
22. The voluntary offsetting market has proposed a number of standards. Why did the government’s proposals create something new?
A number of different standards are being set up by the voluntary market for offsetting. The Government recognises and welcomes these efforts. However, having a number of different standards can be confusing for consumers. The Government needs to show leadership in what is a growing and diverse marketplace.For this reason, we are moving ahead with establishing the Code – which covers both the type of credit used and broader aspects of the way offsets are marketed and sold – while also challenging industry to come together and fully implement a standard for VER credits. Providing this offers a similar level of assurance to consumers as the compliance market, and after being independently audited, it could be implemented under the broader Code.
23. Isn’t the introduction of a Code of Practice just more unnecessary red tape because there’s already a Gold Standard recognised by NGOs and other international players?
The Gold Standard is an additional screen for Clean Development Mechanism (CDM) projects which seek to have the highest possible sustainable development benefits. It does not have a bearing on the robustness of the emission reduction element of the project in question.
24. Will all offset providers have to sign up to the code?
The Code of Practice will be voluntary, ie offset providers can choose to seek accreditation.
25. If an offset provider seeks accreditation, must all of their offsets meet the requirements of the Code?
We understand that many offset providers see value in offering a mixed portfolio of different projects and credit types. Similarly, we recognise that it will take time for offset providers to offer, and build upon, products which meet the Code. For these reasons, providers will be able to have individual products badged with the Government ‘quality mark’, while continuing to offer a selection of other options which fall outside the requirements of the Code.
26. Why does the Government recommend to offset providers that they invest in EU Allowances (EUAs)? Isn’t this just removing over-allocated credits?
The first Phase of the EU ETS was designed as a learning phase and does appear to have a surplus of allowances. These issues should be avoided in the second Phase of the EU ETS which starts in 2008. As the Code will be in place from later in 2008, EUAs from Phase one will not be included.
Mechanisms for offsetting
27. What is the Clean Development Mechanism or CDM?
The CDM is a procedure under the Kyoto Protocol through which developed countries may finance projects in developing countries to reduce emissions of greenhouse gases, and receive credits for doing so which they may apply towards meeting mandatory limits on their own emissions. Further information can be found on the Kyoto mechanisms pages of the Defra website, or from the UNFCCC website.
The CDM is supervised by an executive board consisting of ten members. The CDM EB was established by the UNFCCC and is responsible for oversight of CDM operations and the release of Certified Emission Reductions (CERs) to projects which have met all requirements of the CDM process.
28. How does the CDM process ensure the integrity of credits/offsets?
Additionality, and its assessment, is crucial to the integrity of any offsetting scheme. For a project to deliver real reductions that could be used to offset emissions elsewhere, it is important that it is additional to what would have happened under a business-as-usual scenario. This can be viewed in two parts:
- Project additionality is the extent to which the project would only have taken place in order to generate credits or offsets. This must be a marked departure from business-as-usual. For example, in most of the developing world energy production is largely based on fossil fuels therefore any projects that use renewable energy would be deemed additional.
- Contribution additionality is the extent to which the individual or organisation can make a real difference either to the existence or outcome of a particular project. For example a small contribution will make little difference to the design or outcome of a large project (several million tonnes of carbon dioxide emissions reductions and several million pounds of investment) at an industrial site. By contrast a small scale project, such as solar water heating in tropical countries, could be significantly funded by a reasonably small contribution.
29. The Clean Development Mechanism (CDM) is too bureaucratic and expensive. Aren’t CDM projects therefore unsuitable for many poorer countries?
Up until COP/MOP1 in Montreal (December 2005), the CDM Executive Broad was dependent on voluntary contributions from Parties to support its work. This meant that funding was patchy and the Board found themselves with insufficient resources to carry out their work. To compound this, Board Members were only part-time. The Board came in for a lot of criticism particularly from business and also from developing countries. At COP/MOP1 a share of proceeds was agreed to help fund administrative expenses that should enable the Board to become self-financing. The rate has been set at 20c per tonne, with a concession of 10c per tonne for the first 15,000 tonnes per annum. Parties also pledged some $8.8 million to fund operational costs of the CDM Executive Board in 2006. The EU’s share is over $5 million, the UK will give $740,000 to the CDM for 2006.
30. What is meant by the Voluntary and Kyoto Compliant sector?
- The Voluntary sector refers to emission reduction projects that are developed outside of the UNFCCC Clean Development Mechanism and which provide emission reductions verified by third party organisations. These are called voluntary reductions because they are purchased by organisations which wish to make voluntary emission reductions for Corporate Social Responsibility reasons, rather than for the purpose of complying to targets under the EU-ETS for example. The VER emission reductions do not have any tradable value.
- The Kyoto compliant sector refers to emission reduction projects and measures provided for under the Kyoto protocol. These are collectively known as flexible mechanisms and consist of the Clean Development Mechanism (CDM), Joint Implementation (JI) and international emission trading schemes. Countries with Kyoto targets to reduce their emissions can use the flexible mechanisms to help them achieve those targets.
- The air travel emissions being offset by the Government are not currently captured by the EU-ETS and the decision to purchase Kyoto compliant CERs has been taken to ensure the integrity of these reductions rather than because of the tradable value of the CERS. The purchased CERS will be cancelled to make the offset.
31. What is the difference between VERs and CERs?
CERs (Certified Emission Reductions) are emission reductions of unit equal to one metric tonne of carbon dioxide equivalent which may be used by Annex I countries towards meeting their binding emission reduction and limitation commitments under the Kyoto Protocol. CERS must come from projects that have been approved by the CDM executive board (a 10 member board which supervises the CDM). As such the integrity of CERs is assured by the UNFCCC process.
VERs (Verified Emission Reductions) are generated by small scale projects which are assessed and verified by third party organisations rather than through the UNFCCC. Their purpose is to offset emissions where compliance with binding targets is the not the primary motive. Projects can be relatively cheap and based in the UK, unlike CDM projects which must be hosted in developing countries (Annex II, UNFCCC).
32. Why do different company websites give different emissions calculations?
Emissions figures can vary due to the different sources of data used by an offsetting provider, and different methodologies employed to calculate emissions. Some companies may calculate actual figures and others may used averages. In the case of aviation, discrepancies may arise depending on the choice of multiplication factor for converting between the number of miles flown and the resulting carbon dioxide emissions, and whether or not the added effect of emissions at altitude are taken into consideration.
The Code of Practice for offsetting providers will set a standard for the accurate calculation of emissions by households and transport. A database of Government recognised statistics and factors will be drawn up and published annually.
33. Why do different companies give different prices to offset emissions from the same flight?
In addition to the conversion factor above, there are variations in the price of offset credits. Contributions to this cost come from the different types of project supported, i.e. in type and in scale, plus an added transaction or service fee paid to the offset provider. For several organisations, this leads to a minimum transaction fee for shorter flights.
34. Government seems to be pressing very strongly for offsetting in the aviation sector, why is this?
Offsetting is not a substitute for the Government's wider policy on aviation. We believe that the best way of ensuring that aviation contributes towards the goal of climate change stabilisation will be through a well designed, open international emissions trading regime. We are however seeking to take advantage of the infrastructure in place for the EU ETS and show EU leadership by pressing for the inclusion of aviation as soon as possible. Offsetting is a complimentary interim measure for tackling the climate change impacts from aviation, which could be promoted to the wider travelling public to be taken up on a voluntary basis.
35. Does the Government believe that carbon offsetting for road transport is the way forward in curbing carbon dioxide emission growth from the transport sector?
The Government believes that carbon offsetting can help raise awareness of the impact of road transport on climate change and can be used in addition to other actions to actively tackle carbon emissions from travel. It is important though that offsetting is not used as an alternative to other actions that individuals can take to reduce their emissions. We would look to offsetting companies/providers to help communicate to their customers the importance of actually reducing their own carbon emissions before turning to offsetting. Offsetting should therefore form part of a systematic approach to making more sustainable travel choices:
- reducing the need to travel (e.g. through the use of video-conferencing). If this is not possible then;
- using the most sustainable form of transport (i.e. trains and/or buses) when travelling is absolutely necessary;
- encouraging consumers to use the personal choices available to them in the best possible way, including purchasing a low carbon vehicle, car sharing and eco-driving.
- mitigating remaining carbon dioxide emissions through carbon offsetting.
What Government is doing about its own emissions
36. Is Government taking steps to reduce its travel related emissions?
Government aims to reduce travel and carbon emissions overall, challenging assumptions about the need to travel in the first instance where appropriate and feasible alternatives exist. Video and telephone conferencing facilities are available and are under review to ensure that these facilities are state of the art and utilised appropriately.
When procuring travel services, Government will place sustainability at the heart of travel procurement and contract management, influencing our suppliers and their supply chains.
Where travel is genuinely necessary, we seek to encourage the most sustainable means available and follow a hierarchy of actions;
- record and raise awareness of emissions by ensuring travel data-sets are of the highest quality, practical, and consistent across Government. Government seek to continuously improve the standard of management information, and ensure Senior Management and our staff are made aware of their travel carbon footprints.
- where possible reduce those emissions. Government wants informed travellers making informed decisions. By educating travellers throughout the travel choice, booking and payment process Government is able to educate and influence staff decisions. Government advocates the most sustainable mode of transport for the business need - taking account of price, time and carbon emissions.
- mitigate remaining emissions through offsetting.
37. Is the Government reducing its other emissions?
In June 2006, the Prime Minister launched new targets and mandates for sustainable operations on the Government estate (SOGE), within and alongside the Sustainable Procurement Action Plan. These new, outcome-focused targets were agreed by all central Government Departments.
See: www.sustainable-development.gov.uk/government/estates/index.htm
These new targets replace those in the Framework for Sustainable Development on the Government Estate (originally published between 2002 and 2004).
The Sustainable Operations on the Government Estate (SOGE) Targets for building energy use are:
- To reverse the current upward trend in carbon emissions by April 2007.
- To reduce carbon emissions by 12.5% by 2010-11, relative to 1999/2000 levels.
- To reduce carbon emissions by 30% by 2020, relative to 1999/2000 levels.
And:
- To increase energy efficiency per m² by 15% by 2010, relative to 1999/2000 levels.
- To increase energy efficiency per m² by 30% by 2020, relative to 1999/2000 levels.
- To source at least 10% of electricity from renewables (31 March 2008.)
- To source at least 15% of electricity from Combined Heat and Power (2010).
And a commitment for
- Central Government’s office estate to be carbon neutral by 2012.
The Sustainable Operations on the Government Estate (SOGE) Target for Carbon Emissions from Vehicles is:
- To reduce carbon emissions from road vehicles used for Government administrative operations by 15% by 2010/11, relative to 2005/2006 levels.
38. What is the Government Carbon Offsetting Fund?
The Government’s carbon offsetting scheme (GCOF) will calculate the carbon dioxide emissions created by official air travel. We will then adjust this to give an indication of the total impact that air travel imposes on climate change and purchase credits from projects which prevent or remove an equivalent amount of emissions from the atmosphere. Total climate impact includes NOx, particulates and water vapour emissions and their specific effects at altitude, collectively know as radiative forcing (RF). The GCOF has voluntarily adopted an RF factor of x2, based on scientific reporting in 2005. The science of the additional impacts of aviation emissions is constantly developing.
As an example of calculating emissions for the GCOF, if a Government Department knows that the flights its staff have taken during the year have created 20,000 tonnes of carbon dioxide, it will estimate the climate change impact of these flights by multiplying this number by 2 and offset this total impact by buying 40,000 tonnes worth of carbon credits (CERs) from CDM projects. These will help develop renewable sources of energy, or more energy efficient technology.
To offset its emissions Government will purchase Certified Emission Reduction credits (CERs). These are emissions reductions from projects that are accredited by the UNFCCC Clean Development mechanism. Government’s preference is for CDM projects which are small-scale, involve renewable energy and/or energy efficiency and feature sustainable development benefits.
On 28 December 2006, we announced that EEA Fund Management Plc have been selected as our GCOF delivery partner. Through EEA, Government will set-up a facility to purchase the requisite number of credits and then unilaterally cancel them to ensure integrity and that these credits are not used to offset future emissions.
EEA will source 255,000 Certified Emission Reductions (CERs) by the end of April 2009, with an option for a further 50,000 to be delivered by that date. Depending on the final total of CERs required, the GCOF will spend around £3m on the purchase and cancellation of CERs.
Page last modified: 19 February 2008
Page published: 03 October, 2005