Strategies for Avoiding Lower-Quality Offset Credits

Conducting crediting project due diligence

Although you can improve your chances of acquiring high-quality offset credits by sticking to those that are reasonably priced, of recent vintage, and from project types that offer the least environmental integrity risks, the most robust approach is to investigate and evaluate the projects that generated the offset credits. Offset project due diligence can be performed by your organization, or with the help of outside consultants with the requisite expertise. It often helps, for example, to work with someone who has a detailed understanding of the sectors or project types from which you are acquiring offset credits.

The level of effort required for due diligence can vary, depending on a buyer’s resources and the type of project involved. In Annex 1 we indicate, for a range of different project types, where the greatest environmental quality risks are and where buyers should focus their due diligence. Buyers with less time and fewer resources may wish to restrict offset credit purchases to project types with the fewest risks (i.e., those in the “lower risk” category) or work with a trusted purchasing advisor. For buyers able to apply more time and effort, the following section provides a series of questions that should be explored in conducting due diligence related to each major offset quality criterion.

For each criterion, the questions are organized as follows:

  1. Questions that should be asked for any project.
  2. Additional questions that should be asked if the project type being considered exhibits higher risks or concerns related to the criterion being considered, as indicated in Annex 1.

Due diligence on offset projects will inevitably contain elements of subjectivity. Offset credit buyers should pay special attention to areas of greatest concern and make a determination about whether or not to buy credits based on their own comfort levels and risk tolerance, taking into account all elements of a project’s “quality.” Particular attention, however, should be focused on additionality and quantification questions.

Answers to these due diligence lines of inquiry can build confidence and resolve concerns relating to a project type’s inherent risk. Sources of information that may hold answers to these questions include:

  • The project, monitoring or verification reports, or the project’s protocol.
  • Direct outreach to project developers, stakeholders, project funders, brokers, or relevant regulatory entities may also prove a valuable source of information.
  • Visiting the project site is another method for gathering information that can be considered – if you are able to travel.

Gathering information to satisfy yourself of the project’s likely environmental integrity is subjective and projects differing contexts present unique challenges to building purchase confidence. These sources of information are not an exhaustive list but rather a good starting point to uncover answers to the following due diligence questions.

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