Creating Carbon Offsets – It Starts With A Methodology

by David Priddy, VP of Business Development | February 24, 2021

With the continued push by businesses in recent years to establish more stringent sustainability goals with lower GHG thresholds, there’s been a corresponding rush by corporations, project developers, technology providers, and charitable foundations to implement emission reduction solutions to help meet this growing demand.  This has led to a plethora of innovative ideas and concepts from entities seeking to utilize carbon financing to bring their ideas to life.  As a leader in the carbon emission reduction and sequestration space, ClimeCo will frequently field requests on how to implement these ideas to generate and sell carbon offsets, which incentivizes continued investment in project activities that deliver emission reductions.  But after listening to entities pitch their ideas, the question that I most often hear is:  “Can we create carbon offsets?”  Well, the answer to that question can depend on many factors, but it all starts with an appropriate methodology.

Carbon Offset Methodologies

A carbon offset methodology is a framework document that defines the quantification and parameters that are required to generate carbon offsets throughout the life of a project. It establishes the project’s baseline, identifies qualifying practice changes to reduce carbon, and defines the monitoring requirements necessary to ensure that the reductions are real, quantifiable, verifiable, and additional to what would have happened in the absence of the project.

There are seemingly as many different offset methodologies available today as there are carbon reduction project ideas, but continuous innovation in this space keeps challenging that theory.  Voluntary registries, along with those carbon compliance programs that allow for the use of offsets, generally utilize their own protocols and methodologies.  In the North American voluntary market, we primarily work with three voluntary offset registries:  The Climate Action Reserve (CAR), American Carbon Registry (ACR), and Verra; these three registries offer more than 100 established methodologies.  Most of these existing methodologies can be classified into one of several primary categories, including industrial, agricultural, energy efficiency, waste, transportation, and renewable energy; however, the requirements for a particular methodology are usually written for a specific project activity, such that there is little room for interpretation or variance.  This often results in the need to modify an existing methodology or create a new one to support a proposed project’s activities if those activities do not precisely fit the parameters of an existing methodology.

Methodology Development

To ensure the integrity of carbon offsets, credible methodologies employ best practices based on the ISO 14064 standard, providing guidelines for quantifying, monitoring, reporting, and verifying GHG emissions and reductions.  These standards require that each project conducted under a methodology is calculated in a way that is relevant, complete, consistent, accurate, and transparent, and meets the aforementioned key crediting criteria (real, quantifiable, verifiable, and additional).  Therefore, the development of a new methodology requires a significant amount of input from the scientific community and various stakeholders, including industry groups, NGOs, and the legal and environmental justice communities.  The process can be lengthy and will typically include an individual proponent or group that authors the draft methodology, the formation of a stakeholder working group that provides technical and legal review, and a public comment period.  In our experience, it is quite common for a methodology development effort to take at least 12 months and cost hundreds of thousands of dollars in fees to complete. 

Lessons Learned

The ClimeCo team has been involved in developing several project methodologies, either as an author/co-author or by serving on a working group.  Our experience ranges from methodologies focused on industrial gases, such as the destruction of ozone-depleting substances (ODS) and the abatement of nitrous oxide (N₂O) from Nitric Acid and Adipic Acid production, to avoided methane emissions from organic waste composting and agricultural methane destruction.  We are also working with clients on the development of some new methodologies that hold significant promise.  Through all of this, we have learned that the process is best served by a collaborative and transparent effort between the project proponent and the registry that balances scientific integrity, conservativeness, and financial viability to ensure a robust, practical, and defensible methodology.

The Bottom Line

As companies continue to ratchet down on their GHG commitments, the voluntary carbon market is poised for significant growth.  Buyers in this market have become increasingly savvy; they are demanding more from the offset projects they support, including a sharper focus on those that align with their businesses and produce various co-benefits.  This opens opportunities for creative thinking and project innovation in areas that existing offset methodologies may not serve.  To maximize the potential for success, a project owner/proponent should align themselves with an experienced consultant like ClimeCo to guide them through this process.

About the Author

Dave Priddy is ClimeCo’s Vice President of Business Development.  He has more than 30 years of experience in the environmental management field and is responsible for the firm’s strategic market initiatives and the evaluation of new project opportunities.  David holds a B.S. in Engineering from the University of Louisiana, Lafayette.