What Makes a High-Quality Carbon Offset?

How Carbon Crediting Programs Address Overestimation

Carbon crediting programs endeavor to ensure that avoided GHG emissions are not overestimated by requiring the use of detailed quantification methods specified within approved project type-specific protocols. In general, the quantification methods within a protocol include:

  • GHG accounting boundaries which define the GHG sources and sinks to be considered in quantifying a project’s baseline GHG emissions and the actual project GHG emissions.[1]
  • Baseline scenario determination and emission estimation methods that prescribe how a project’s baseline scenario is defined, including acceptable assumptions regarding baseline technologies and practices and provide instruction for quantifying the baseline emissions.
  • Quantifying actual project emissions methods that prescribe how emissions associated with the implemented activities are calculated. These methods ensure there is functional equivalence between the baseline scenario and project (i.e., that the same level of service or quantity of goods results from both scenarios).
  • Monitoring requirements that prescribe the data to be collected for quantifying the baseline emissions and the project emissions. These methods also specify how to conduct measurements, what kinds of estimates are acceptable, the calculation formulas that must be used, and how estimation uncertainties are assessed.[2]

Importantly, carbon crediting programs require verification by independent third-party verifiers who check that projects have properly applied prescribed quantification methods (see Box below). In most cases, carbon credits are only issued after GHGs have been avoided or removed, and been verified.

Finally, crediting programs also limit the crediting periods during which projects can be issued credits for avoiding GHG emissions. Crediting periods are typically from 7 to 10 years, which is often shorter than the operational lifetime of a project’s equipment. Programs generally allow crediting periods to be renewed (usually one or two times, depending on the project type), as long as a project remains eligible under its crediting program standard.

What do carbon credit project verifiers do?
Third-party verifiers have two main responsibilities in the context of the operations of a carbon crediting program. First, they perform project validation, which entails confirming that a proposed project meets a program’s eligibility criteria, including the determination of additionality. Second, verifiers conduct project verification, which entails confirming that project monitoring data was collected per a program’s requirements, as well as reviewing calculations to confirm that the project’s avoided GHG was estimated according to the approved protocol.[4] The verification process usually involves a site visit combined with auditing (or sampling) of monitoring data to confirm with “reasonable assurance” that the data are accurate.

Verifiers are generally paid by project developers, which creates an inherent conflict of interest. To address this conflict of interest, most carbon crediting programs review verification arrangements, require verifiers to legally certify that they are free from conflicts of interest (beyond the verification services contract), and limit the number of times that the same verifier can verify a single project or multiple projects for the same project developer. Programs also regularly audit the work of verifiers to assure their objectivity.

[1] Some of these sources and sinks may be treated as “leakage” effects and accounted for in supplemental calculations.

[2] Most quantification methods prescribe a combination of project-specific data collection, along with the use of conservative defaults or estimates where data collection is impractical.

[3] Renewal under some programs may also involve requirements to update the baseline scenario, and therefore reconsider additionality determination.

[4] Carbon crediting programs can differ in their approach to validation and verification. Some programs, like CAR, combine validation with the first verification of a project and do not make a formal distinction between the two functions. Others require validation and verification as separate steps (and some, like the CDM, require separate verifiers for each step to avoid conflicts of interest – since positive validation could lead to a more lucrative verification contract).