Dear Project Developers, Please Bring Us More Carbon Offset Projects

Kathryn Thomsen, The Climate Trust
November 20, 2014

DEAR PROJECT DEVELOPERS: The Climate Trust is always on the lookout for carbon offset projects that can directly reduce or sequester greenhouse gas emissions, and can be verified against publicly-vetted, approved carbon offset standards. These carbon offsets must demonstrate beyond business-as-usual emission reductions. We strive to maximize emission reductions and invest our program funder’s dollars prudently. We’re hoping to find good offset projects in Oregon and throughout the entire United States.

The challenge we face is finding cost effective projects that can provide a reliable annual stream of greenhouse gas emission reductions into the future, while meeting eligibility requirements of the domestic carbon market standards. Do you have any advice on how we can help you find, develop, and bring us more carbon offset projects? – ON THE LOOKOUT FOR MORE PROJECTS

DEAR ON THE LOOKOUT: We have access to lots of good projects in the areas of renewable energy and energy efficiency, but we’re sometimes not sure what type of projects you are looking for. Can you help us understand so that we can bring you more of these?

DEAR PROJECT DEVELOPERS: At this time, The Climate Trust has a strong preference for domestic projects in the areas of forestry, agriculture, and biogas. We wish we could also invest in projects like solar, wind turbines, Electric Vehicle charging stations, or home energy efficiency to name just a few. While these project types are super important for climate mitigation, the main issues we face in applying these towards offset projects are: inability to demonstrate eligibility for domestic carbon offset crediting, or lack of clear ownership of the emission reduction.

The carbon offset market has evolved, and project types that were eligible 10 years ago may not be eligible today. For example, installation of wind turbines have reached a level of common practice in some states. These projects can be sold through Renewable Energy Certificates (RECs), or may be funded as a result of a state’s Renewable Portfolio Standard. This means, some renewable energy projects may no longer qualify as a carbon offset. While we really want to encourage more renewable energy and energy efficiency, some of these emission reduction activities funded through a state’s systems benefit charge (or local utility incentives) do not guarantee that their ownership (and fungibility) belongs to the end user.

DEAR ON THE LOOKOUT: We sometimes get a little confused because your decisions about what type of carbon offset project you will purchase seems arbitrary. Can you help us to understand how you evaluate a good versus not-so-good offset project?

DEAR PROJECT DEVELOPERS: Certainly. We actually use a set of criteria to determine which carbon offset projects to invest and acquire on the behalf of our funders. We evaluate projects using a step-by-step process starting with our acquisitions team, then review by our Programs Committee, and finally, approval by our Board of Directors. To help clarify how we evaluate carbon offset projects for acquisition, here are a few of the key criteria we look for:

• Projects must qualify to generate credits verified against domestic carbon offset standards, and protocols approved by the California Air Resource Board, Climate Action Reserve, American Carbon Registry, or the Verified Carbon Standard
• Projects should demonstrate ability to deliver a reliable and annual stream of offsets into the future at a minimum of 5,000 tons per year, or 50,000 tons over contract terms
• Project activities should not be required by local, state, or federal regulations, and should demonstrate these are a result of the carbon market mechanisms
• In addition to greenhouse gas emission reductions, the project should demonstrate environmental, social, and economic co-benefits

DEAR ON THE LOOKOUT: We really need a reliable source of capital funding to make these good projects happen, along with a future revenue stream into the future. What kind of investment and funding source can you guarantee for our project?

DEAR PROJECT DEVELOPERS: Carbon offset purchase pricing will vary based on a number of factors: the type of market activities (whether voluntary or compliance), risk, policy, the economy, and perceived value. To manage risk for The Climate Trust and its stakeholders, our carbon offset project investments must be tied directly to a demonstrated and reliable stream of carbon offsets into the future.

We are looking for good projects at all stages that we can help make a reality. Though we may like to pay for the full cost of carbon (including social), alas, to remain economically viable and sustainable, The Climate Trust can only invest an amount not to exceed the project’s current voluntary or compliance market price per ton of forecasted emission reductions.