• Who We Are
    • The Climate Trust
    • Climate Trust Capital
    • Achievements
    • Leadership And Board Of Directors
  • What We Do
    • Action
    • Impact
    • Case Studies
  • Financials
  • Media
    • Blog
    • News & Press
The Climate Trust | Cars Can Help Us Understand Voluntary Carbon Prices

Cars Can Help Us Understand Voluntary Carbon Prices

Agriculture, Biogas, Forestry, Grasslands, Wetlands

Sheldon Zakreski, The Climate Trust
As published by TriplePundit – March 2, 2016

The price of carbon offsets can be quite perplexing. After all, a ton of carbon reduced is of benefit to the climate, regardless of where that reduction occurs or how it happens. If the benefit is the same, then why do carbon prices range from less than $1 to more than $15 per ton? There are some striking, and perhaps surprising, similarities between purchasing offsets and purchasing automobiles. In practice, most models will get you from point A to point B, but there is a question of quality in how you want to get there. The following is a “blue book” guide to the inventory that can be found in the carbon market and why it’s priced the way it is.

What’s in the sticker price?
The four major components that factor into setting the carbon price for an offset, are also the four things that car buyers look at: make, model, year, and origin.

Make
Credible offsets are certified using a third-party standard that guides how the project is designed and how its performance is measured. The standards most common in the U.S. are the American Carbon Registry, the Climate Action Reserve, and the Verified Carbon Standard.

Model
Just like automobile owners express clear preferences for trucks, sedans, or hybrids, different types of offsets resonate more strongly than others with particular buyers. One deciding factor may include the sector from which the emission reduction originates—examples include: forests, renewable energy, or farms.

Year
The vintage of a carbon offset matters, and offsets with that new car smell are often more attractive to buyers who place a premium on funding future offsets, rather than those that have already occurred. Logically, that means the older the age of an offset, the lower the price associated with it will be.

Origin
The “made in Detroit” factor also applies to offsets. A close proximity between the buyer and the project’s location can greatly increase a project’s desirability. Both individual and corporate buyers of offsets value projects that occur in their own backyard—streamlining the connection between their business operations and the emissions reductions.

The K-Cars
The “nice reliant automobile” of the offset market—cars that you can buy even if you don’t have a million dollars. K-Cars can be equated to landfill gas and industrial methane destruction offsets that are abundant in the marketplace, and have vintages that are several years old. Their existence dates back almost 10 years to when a strong economy and strong signals that a federal cap and trade system was on its way, led to a rush of landfill gas and energy projects. When both the economy and cap and trade legislation faltered, the result was a generation of large volume offsets flooding the market. The presence of so many of these offsets—dating back to before 2010—is why they can be purchased for less than $1 per reduction.

The Toyota Priuses
This car is all about the type of energy it uses, just like offsets from renewable energy projects. Because of their long-standing popularity, price points for clean energy, wind, and biogas projects range from $3 to $8 per reduction depending on vintage and location.

The Volkswagon Buses
This ride has a lot of charisma and usually evokes a journey to a beautiful natural setting. Additionally, unlike most cars, their value appreciates with age and is often tied to features that go well beyond its core function. Forestry offset projects carry many of the same traits as VW buses. Their value holds well as they age, and is determined not just by their ability to reduce emissions, but by the many co-benefits they offer—recreation, clean water, and biodiversity. A driving factor that can suppress forestry offset prices, is the large volume that such projects can generate. That is, very large projects can drive the unit price down substantially because there are often in excess of hundreds of thousands of offsets available for sale following verification. This is why forestry prices range from $5 to $10 per reduction depending on their scale and co-benefits.

The Tesla Model S
Produced, sold, and operated differently than most other cars, Tesla Model S stands out as exceptional in the marketplace. This is the type of car you don’t see every day. For the offset market, this is comparable to agricultural offset projects, or a unique project with exceptional social value, such as directly alleviating poverty. You won’t find these projects often, but when you do, they’ll range in price from $8-12 per reduction, as buyers are willing to pay top dollar for something that is distinctive and aligns with their values.

There are a variety of factors involved in making the decision about what type of carbon offset to purchase and for what price. With such a variance in cost, buyers may be tempted to go with the least expensive option, however, as demonstrated by the comparison with the automobile market, offsets on the lower end of the spectrum will not satisfy the needs of all buyers. Nonetheless, buyers will always consider price as one of the primary decision-making points. As the old adage goes, you get what you pay for—in cars and in offsets. If buyers are looking for the perfect fit of personality and performance in offsets, they may have to adjust their expectations.

Tags
Adaptation
Aggregation
American Carbon Registry
Biochar
Blue Carbon
C-AGG
California Air Resources Board
California Carbon Info
Cap and Invest
carbon offset standards
Carbon Pricing
Carbon-Pulse
Clean Power Plan
Climate Action Reserve
Climate Bonds
Conservation Finance Network
Corporate Social Responsibility
CORSIA
Culture
Dairy Digester
Ecosystem Marketplace
Edible Portland
Energy Central
Environmental Defense Fund
Environmental Justice
EPAF
Farm Power Northwest
GreenBiz
IPCC
Job Announcement
Leadership
Low Carbon Fuel Standard
Milestone
Oregon Carbon Dioxide Standard
Oregon Clean Fuels Program
Oregon Energy Facility Siting Council
Oregon Global Warming Commission
Pacific Coast Action Plan on Climate and Energy
Paris
Portland General Electric
REDD
Renewable Fuel Standard
Renewable Identification Numbers
Request For Proposal
RGGI
Rice
Risk Management
Scientific American
Social Cost of Carbon
Supply Chain
Sustainable Business Oregon
Triple Pundit
USDA Natural Resources Conservation Service
Verified Carbon Standard
Western Climate Initiative
Recent Comments
Leave a comment

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Cookie settingsACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT
Proud Member Partners in Diversity
  • DONATE
  • CAREERS
  • CONTACT

©2020 The Climate Trust. Crafted by ILLUSIO