Climate Action - Assisting business towards carbon neutrality

There is a limit to how much efficiency you can squeeze from your operations or how much renewable energy you can employ. The only choice for those that wish to compensate for their remaining emissions is to find them elsewhere in the form of some activity by another party that reduces emissions. This is commonly called a carbon offset or carbon credit. The term carbon neutral refers to the idea of neutralising emissions through carbon savings elsewhere.

Carbon offsets

Offsets are offered in two types of markets: regulated (also called mandatory or compliance), and voluntary. Regulated markets include the Kyoto Protocol and the associated Clean Development Mechanism, and the European Union's Emissions Trading Scheme that began in 2005. In the US, there is currently no federal mandate to reduce greenhouse gas emissions, although substantial effort continues at the state level, with California attempting to create the first regulated carbon market along with several other states. Some large companies are under mandatory programmes to offset their carbon emissions, including those European companies subject to the EU carbon trading scheme. More information can be obtained from the International Emissions Trading Association, an independent, nonprofit organisation dedicated to the establishment of effective systems for trading in greenhouse gas emissions by businesses.

To purchase offsets, individuals or businesses pay an offset company to implement and manage projects that avoid, reduce or absorb greenhouse gases. Climate change is a global problem, so carbon reductions will have the same impact no matter where they are implemented. Carbon credits are generated in a number of ways, including:

• Emission free energy generation including renewable energy.
• Reduction of the demand for energy including energy efficiency.
• Sequestration in the form of underground and forestry storage.
• Preservation.
• Chemical conversion.

The first two categories avoid emissions, and are generally considered a higher quality and less risky offset than sequestration offsets. Sequestration projects aim to absorb emissions that have already occurred. They are the most controversial as there are currently no commercial underground sequestration projects and it is unlikely any will be built for a decade. Forestry offsets are considered risky due to uncertainty of calculating absorbed carbon and the threat of drought or disease that can literally kill a project.
Preservations offsets pay to protect areas that absorb carbon, such as tropical rainforests. The rationale is that by preserving the carbon sink, carbon can be taken from the atmosphere, or not released from activities that reduce the area, such as logging.

According to one report, the highest quality offsets are generated from the flaring of methane from landfills. This is due to the fact that methane has a global warming potential 24 times greater than carbon dioxide over 100 years and 61 times greater in the first 25 years. Greengas International is one company that generates carbon credits by converting waste gas to energy through joint partnerships with mines, landfills and biogas producers. Worldwide benefits of such projects include 125 megawatts (MW) of power, saving four million tonnes of CO₂.

Although sometimes criticised, voluntary markets have the capability to create a much larger change by pushing regulated markets to cleaner outcomes, becoming the tipping point that creates rapid and permanent emission reductions and even a new energy economy based on sustainable energy. Aside from the feel good factor, this is a substantial and concrete reason to participate.

Many companies are finding a marketing value in offsetting some or all of their emissions from a variety of sources directly or indirectly related to their business activities. Others recognise that participating in voluntary carbon markets is excellent preparation for future life under a mandatory cap and trade scheme. Computer maker, Dell, for example, has recently entered into an agreement with a carbon offset company to offset carbon from shipping computer equipment. Some large travel agencies have even started giving their clients the option to purchase offsets for their travel. Non-governmental organisations (NGOs) and corporations have also started to offset their employees' emissions from travelling.

Currently, there are more than 35 companies and organisations active in the voluntary offset markets targeting a range of customers. Eleven companies address the effects of air travel specifically. There are also more than 600 providers of green power. The average price for carbon offsets is US$15/tonne, but costs range from US$5-50 tonne.
Because it is not regulated, the voluntary carbon market is almost anything someone wants it to be. The current market is a case of buyer beware. However, some emerging standards are helping companies choose quality offsets, including Green-e and the CDM Gold Standard.

Emissions trading

Whether voluntary or mandatory, emissions trading is an increasingly popular approach to emissions reduction. It is a market based mechanism that aims to achieve environmental objectives at least cost. A central authority, usually a government agency, sets a limit or cap on the amount of greenhouse gases that can be emitted. Companies or other groups that emit CO₂ are given credits or allowances that represent the right to emit a specific amount. The total amount of credits cannot exceed the cap, limiting total emissions to that level. Companies that pollute beyond their allowances must buy credits from those who pollute less than their allowances. This transfer is referred to as a trade.

The Chicago Climate Exchange, for example, is North America's only, and the world's first global marketplace for integrating voluntary legally binding emissions reductions with emissions trading and offsets for all six greenhouse gases.

The European Union Emission Trading Scheme (EU ETS) is the largest multinational, greenhouse gas emissions trading scheme in the world where large emitters of carbon dioxide within the EU must monitor and annually report their CO₂ emissions. They are obliged every year to surrender (give back) an amount of emission allowances to the government that is equivalent to their CO₂ emissions in that year.