Carbon Offsetting

What is Carbon Offsetting?


In many circumstances it is not possible to reduce carbon emissions from all sources to zero. To achieve carbon neutrality or zero emissions, the remaining unavoidable emissions can be ‘offset’ by preventing or avoiding the same amount of emissions elsewhere in the economy.

Carbon offsetting is therefore investing in projects that reduce emissions or remove them from the atmosphere. Project types include: reforestation, investing in renewable energy, reducing emissions through energy efficiency, and/or more efficient agricultural processes. You can learn about the different types of projects here, and view a comprehensive list of Australian offset projects in our Carbon Project Registry.

Once you have invested money in a project, you receive carbon credits (which represent the emissions reductions created from the project) which can then be used to offset, or balance out the emissions released from your business activities.

Carbon Offset Projects

In Australia there are many different types of projects that can generate different types of carbon credits. To generate credits, project developers must adhere to strict guidelines and scientific methods that govern how a specific project will reduce emissions. In addition there are strict measurement and verification processes to assure emissions reductions are genuine.

The Australian Government’s National Carbon Offset Standard provides a list of offset units (or carbon credits) that are eligible for making carbon neutral claims against the Standard. These offset credits have met the integrity criteria of the Standard that ensure that genuine carbon reductions have occurred. You might want to consider using this list as a basis for making purchasing decision even if you are not seeking carbon neutrality.

When purchasing credits to go carbon neutral and/or meet certification requirements, organisations must engage a broker to ensure the right amount and type of credits are acquired. In many cases the broker will also be the carbon consultant assisting with the measurement, verification and reporting activities undertaken in the carbon neutrality or certification process. You can view a comprehensive list of brokers and carbon consultants in the Market Directory here.

 

Carbon Offsetting: The above diagram outlines both sides of the carbon neutrality equation. Broadly it shows the relationship between an organisation investing in carbon credits, and the project developer earning money from their sale.

Click below to learn more about types of credits, projects and co-benefits.

Types of Credits
Project Types
co-benefits

What is Carbon Offsetting?


In many circumstances it is not possible to reduce carbon emissions from all sources to zero. To achieve carbon neutrality or zero emissions, the remaining unavoidable emissions can be ‘offset’ by preventing or avoiding the same amount of emissions elsewhere in the economy.

Carbon offsetting is therefore investing in projects that reduce emissions or remove them from the atmosphere. Project types include: reforestation, investing in renewable energy, reducing emissions through energy efficiency, and/or more efficient agricultural processes. You can learn about the different types of projects here, and view a comprehensive list of Australian offset projects in our Carbon Project Registry.

Once you have invested money in a project, you receive carbon credits (which represent the emissions reductions created from the project) which can then be used to offset, or balance out the emissions released from your business activities.

Carbon Offsetting: The above diagram outlines both sides of the carbon neutrality equation. Broadly it shows the relationship between an organisation investing in carbon credits, and the project developer earning money from their sale.

Fact sheet: Carbon Neutrality & Offsetting
Australian Government National Carbon Offset Standard


Carbon Offset Projects

In Australia there are many different types of projects that can generate different types of carbon credits. To generate credits, project developers must adhere to strict guidelines and scientific methods that govern how a specific project will reduce emissions. In addition there are strict measurement and verification processes to assure emissions reductions are genuine.

The Australian Government’s National Carbon Offset Standard provides a list of offset units (or carbon credits) that are eligible for making carbon neutral claims against the Standard. These offset credits have met the integrity criteria of the Standard that ensure that genuine carbon reductions have occurred. You might want to consider using this list as a basis for making purchasing decision even if you are not seeking carbon neutrality.

When purchasing credits to go carbon neutral and/or meet certification requirements, organisations must engage a broker to ensure the right amount and type of credits are acquired. In many cases the broker will also be the carbon consultant assisting with the measurement, verification and reporting activities undertaken in the carbon neutrality or certification process. You can view a comprehensive list of brokers and carbon consultants in the Market Directory here.

Click below to learn more about types of credits, projects and co-benefits.

Types of Credits
Project Types
co-benefits

What is Carbon Offsetting?


In many circumstances it is not possible to reduce carbon emissions from all sources to zero. To achieve carbon neutrality or zero emissions, the remaining unavoidable emissions can be ‘offset’ by preventing or avoiding the same amount of emissions elsewhere in the economy.

Carbon offsetting is therefore investing in projects that reduce emissions or remove them from the atmosphere. Project types include: reforestation, investing in renewable energy, reducing emissions through energy efficiency, and/or more efficient agricultural processes. You can learn about the different types of projects here, and view a comprehensive list of Australian offset projects in our Carbon Project Registry.

Once you have invested money in a project, you receive carbon credits (which represent the emissions reductions created from the project) which can then be used to offset, or balance out the emissions released from your business activities.

Fact sheet: Carbon Neutrality & Offsetting
Australian Government National Carbon Offset Standard


Carbon Offsetting: The above diagram outlines both sides of the carbon neutrality equation. Broadly it shows the relationship between an organisation investing in carbon credits, and the project developer earning money from their sale.

Click below to learn more about types of credits, projects and co-benefits.

Types of Credits
Project Types
co-benefits

Carbon Offset Projects

In Australia there are many different types of projects that can generate different types of carbon credits. To generate credits, project developers must adhere to strict guidelines and scientific methods that govern how a specific project will reduce emissions. In addition there are strict measurement and verification processes to assure emissions reductions are genuine.

The Australian Government’s National Carbon Offset Standard provides a list of offset units (or carbon credits) that are eligible for making carbon neutral claims against the Standard. These offset credits have met the integrity criteria of the Standard that ensure that genuine carbon reductions have occurred. You might want to consider using this list as a basis for making purchasing decision even if you are not seeking carbon neutrality.

When purchasing credits to go carbon neutral and/or meet certification requirements, organisations must engage a broker to ensure the right amount and type of credits are acquired. In many cases the broker will also be the carbon consultant assisting with the measurement, verification and reporting activities undertaken in the carbon neutrality or certification process. You can view a comprehensive list of brokers and carbon consultants in the Market Directory here.

What is Carbon Offsetting?


  • In many circumstances it is not possible to reduce carbon emissions from all sources to zero. To achieve carbon neutrality or zero emissions, the remaining unavoidable emissions can be ‘offset’ by preventing or avoiding the same amount of emissions elsewhere in the economy.

    Carbon offsetting is therefore investing in projects that reduce emissions or remove them from the atmosphere. Project types include: reforestation, investing in renewable energy, reducing emissions through energy efficiency, and/or more efficient agricultural processes. You can learn about the different types of projects here, and view a comprehensive list of Australian offset projects in our Carbon Project Registry.

  • Fact sheet: Carbon Neutrality & Offsetting
    Australian Government National Carbon Offset Standard

Once you have invested money in a project, you receive carbon credits (which represent the emissions reductions created from the project) which can then be used to offset, or balance out the emissions released from your business activities.

Carbon Offsetting: The above diagram outlines both sides of the carbon neutrality equation. Broadly it shows the relationship between an organisation investing in carbon credits, and the project developer earning money from their sale.

Click below to learn more about types of credits, projects and co-benefits.

Types of Credits
Project Types
co-benefits

Carbon Offset Projects

In Australia there are many different types of projects that can generate different types of carbon credits. To generate credits, project developers must adhere to strict guidelines and scientific methods that govern how a specific project will reduce emissions. In addition there are strict measurement and verification processes to assure emissions reductions are genuine.

The Australian Government’s National Carbon Offset Standard provides a list of offset units (or carbon credits) that are eligible for making carbon neutral claims against the Standard. These offset credits have met the integrity criteria of the Standard that ensure that genuine carbon reductions have occurred. You might want to consider using this list as a basis for making purchasing decision even if you are not seeking carbon neutrality.

When purchasing credits to go carbon neutral and/or meet certification requirements, organisations must engage a broker to ensure the right amount and type of credits are acquired. In many cases the broker will also be the carbon consultant assisting with the measurement, verification and reporting activities undertaken in the carbon neutrality or certification process. You can view a comprehensive list of brokers and carbon consultants in the Market Directory here.

What is Carbon Offsetting?


In many circumstances it is not possible to reduce carbon emissions from all sources to zero. To achieve carbon neutrality or zero emissions, the remaining unavoidable emissions can be ‘offset’ by preventing or avoiding the same amount of emissions elsewhere in the economy.

Carbon offsetting is therefore investing in projects that reduce emissions or remove them from the atmosphere. Project types include: reforestation, investing in renewable energy, reducing emissions through energy efficiency, and/or more efficient agricultural processes. You can learn about the different types of projects here, and view a comprehensive list of Australian offset projects in our Carbon Project Registry.

Once you have invested money in a project, you receive carbon credits (which represent the emissions reductions created from the project) which can then be used to offset, or balance out the emissions released from your business activities.

Carbon Offsetting: The above diagram outlines both sides of the carbon neutrality equation. Broadly it shows the relationship between an organisation investing in carbon credits, and the project developer earning money from their sale.


Fact sheet: Carbon Neutrality & Offsetting
Australian Government National Carbon Offset Standard

Carbon Offset Projects

In Australia there are many different types of projects that can generate different types of carbon credits. To generate credits, project developers must adhere to strict guidelines and scientific methods that govern how a specific project will reduce emissions. In addition there are strict measurement and verification processes to assure emissions reductions are genuine.

The Australian Government’s National Carbon Offset Standard provides a list of offset units (or carbon credits) that are eligible for making carbon neutral claims against the Standard. These offset credits have met the integrity criteria of the Standard that ensure that genuine carbon reductions have occurred. You might want to consider using this list as a basis for making purchasing decision even if you are not seeking carbon neutrality.

When purchasing credits to go carbon neutral and/or meet certification requirements, organisations must engage a broker to ensure the right amount and type of credits are acquired. In many cases the broker will also be the carbon consultant assisting with the measurement, verification and reporting activities undertaken in the carbon neutrality or certification process. You can view a comprehensive list of brokers and carbon consultants in the Market Directory here.

Click below to learn more about types of credits, projects and co-benefits.

Types of Credits
Project Types
co-benefits

Can I purchase offsets right now?


Although carbon neutrality and certification have many benefits for organisations, some individuals and businesses may opt instead to purchase offsets in order to take immediate action to negate certain aspects of their emissions profile. For example, some businesses might purchase credits to offset corporate travel whilst individuals might offset household or personal vehicle emissions.

Australia’s voluntary market is growing fast, and as such there are several organisations that you can immediately purchase offsets from public carbon offset retailers. Some of these organisations are featured below and full details of those online retailers operating in the market can be found in the Market Directory’s ‘Online Offset Retailers’ category.


Holding an Australian Financial Services Licence (AFSL)


In light of the information supplied throughout the Marketplace pertaining to the trading of carbon credits in Australia, it is important to review the below information about requirements for an Australian Financial Services Licence (AFSL). Make sure to check the whether the third party you engage must hold an AFSL to conduct its advisory or trading services.

Click on the box below to find out if an AFSL is relevant for you.

Updated Regulatory Guide RG236 released on 20th May 2015 details new carbon market licensing requirements:

In summary the fundamental requirements remain unchanged.

  • ACCUs and EIEUs are financial products.
  • Derivatives on regulated emission units and voluntary (non-regulated) emission units such as RECs, ESCs, VEEC’s, EUAs, NZUs, VCUs are also financial products.
  • Certain project aggregation arrangements could qualify as a Managed Investment Scheme. The units of such arrangements, depending on structure, could also be considered financial products.
  • Providing financial advice relating to, and dealing, making a market, operating a registered managed investment scheme, provide custody services in the above-mentioned products will require an Australian Financial Services Licence (AFSL). Please be aware that certain exemptions may exist.

A new development, as flagged in the initial consultation paper, is that Abatement Contracts are no longer considered a financial product. Abatement contracts are contracts between project proponents or aggregators and the Clean Energy Regulator (CER), to sell ACCU’s generated under the Carbon Farming Initiative (CFI) for the Emission Reductions Fund (ERF). At the moment, Abatement Contracts are awarded through an auction process. Any forward transaction component in these contracts, which would normally be classified as a derivative, are no longer defined as financial products.

Consequently, it is no longer a requirement to hold an AFSL to be able to provide advice and deal in ACCU’s in transactions with the CER in relation to the ERF.

It is important to highlight that all other ACCU related financial services still require an AFSL. This would include providing financial advice on projects where the ACCU’s won’t be offered to the ERF, small transactions with third parties to compensate for a shortfall in an Abatement Contract, or to sell ACCUs generated by a project past the term of the Abatement Contract.

View the ASIC Regulatory Guide 236 >

Can I purchase offsets right now?


Although carbon neutrality and certification have many benefits for organisations, some individuals and businesses may opt instead to purchase offsets in order to take immediate action to negate certain aspects of their emissions profile. For example, some businesses might purchase credits to offset corporate travel whilst individuals might offset household or personal vehicle emissions.

Australia’s voluntary market is growing fast, and as such there are several organisations that you can immediately purchase offsets from public carbon offset retailers. Some of these organisations are featured below and full details of those online retailers operating in the market can be found in the Market Directory’s ‘Online Offset Retailers’ category.


Offsetting FAQ’s


Various governments around the world have developed regulated markets for pricing and trading carbon credits. Countries with carbon pricing initiatives either implemented or scheduled for implementation include:

  • China
  • Canada
  • USA
  • European Union

These schemes are usually designed to support targets or requirements for businesses in specific industry sectors to reduce greenhouse gas emissions.
In Australia, the compliance market is governed by the Emissions Reduction Fund Legislation and the Safeguard Mechanism. Heavy emitting entities in Australia are subject to the National Greenhouse and Energy Reporting Act (2007), which enforces a single national framework for reporting on greenhouse gas emissions, energy production and energy consumption.

They are governed by rules on a range of issues, such as monitoring and verification of emission reductions, and trading of carbon credits with other businesses in the scheme. Trading scheme rules also set out how emission reductions from outside the sectors covered under the scheme can qualify as ‘offsets’ in order to provide flexibility to businesses in meeting their emissions targets.

For a comprehensive update on global carbon pricing initiatives, please see the World Bank’s Carbon Pricing Watch 2017 report.

Outside of regulated compliance markets, businesses or individuals may voluntarily seek to reduce greenhouse gas emissions through offsetting, and this may involve:

  • Voluntary purchases of carbon credits recognised under a regulated market.
  • Voluntary purchases of carbon credits from emission reduction or sequestration projects outside the regulated market.

The voluntary nature of these purchases also allow for investment in a broader range of projects than are available through regulated markets and facilitates projects with co-benefits such as positive environmental, social and economic outcomes. These projects can also be selected to reflect the goals or values of the purchaser.

Offsets projects and the carbon credits they generate are verified under different international standards. These standards ensure the projects are implemented, run and managed properly and the credits they generate represent real and actual GHG emissions sequestered or avoided.
Understand your internal capacity to reduce emissions
Before investigating offsets, make sure to consider cost-effective avoidance and reduction opportunities internally. Offset purchases should occur as the final step of a comprehensive greenhouse gas management strategy, only after all possible internal emission reduction measures have been considered and implemented. This ensures that long term meaningful and permanent reductions can be made that do not need ongoing offset purchases.

Set an offsetting budget
Consider cost constraints (offset prices can range from less than $2 to more than $20 per tonne of carbon dioxide equivalents), preferences for a certain type of project (e.g. bio-sequestration versus renewable energy) or preferences for a particular project location (domestic versus international).

Know what you’re buying
When investigating offset products, carefully determine exactly what is being offered by evaluating each offset’s key characteristics. Request product disclosure documents for prospective offset projects that should provide a detailed overview of these important offset characteristics. These may help to decide which offsets to purchase. The National Carbon Offset Standard also sets integrity criteria for the offset units that can be used to make a carbon neutral claim. This is to ensure that offset units used represent genuine and credible emissions reductions.

Review your greenhouse gas management strategy
While on-site emission reductions may be the most effective greenhouse gas reduction strategy for some businesses, for others the most effective strategy may actually be one that is implemented by a business partner in your supply chain. These are likely to be outside of your direct control and consequently may require close cooperation to achieve desired outcomes, so it’s important to continually reflect on and review your internal strategy to make sure it is still the best way to manage your emissions.

Drive internal engagement
Don’t forget to communicate your actions to your staff, stakeholders and customers. Be transparent about which offsets you purchased, the standards to which they were accredited and the steps you took to purchase them.

Many offset projects deliver a range of positive outcomes or ‘co-benefits’ in addition to emission reductions. By purchasing carbon credits from verified projects, organisations support the delivery of co-benefits associated with the project.

Co-benefits are increasingly being seen as commercially valuable aspects of offsetting; as they provide multiple benefits to the communities in which the projects operate, credits from these projects are often valued at a higher price. Additionally selecting projects with certain co-benefits are a way of aligning the offsetting process with an organisation’s culture and values. Additionally companies can derive further value through increased community engagement, stronger internal engagement and cohesion around the offsetting narrative, and improved reputational benefits. Broadly, co-benefits fall into three categories:

  • Environmental
  • Social
  • Economic
Learn more about Co-Benefits
There are several key characteristics that businesses should consider when selecting carbon credits, these include: additionality, permanence, leakage, double counting, timing of emissions reductions, monitoring & verification and co-benefits.

Additionality is a key concept in evaluating whether or not an offset project leads to real and measurable greenhouse gas reductions. To be regarded as a valid offset, a project must be proven to be ‘additional’ to what would have occurred anyway. For example, a routine upgrade of equipment or changes in response to a regulatory requirement cannot be regarded as additional.

Translating the concept of additionality into practice requires establishing ‘tests’ of additionality. Typically these tests address the following types of additionality:

Financial Additionality

The project needs to go beyond business as usual (BAU) commercial practice. A standard test for this is if the project is financially viable without the offset funding.

Regulatory Additionality
The project needs to go beyond existing legal requirements.

Environmental Additionality
The emission reductions cannot be counted toward another emission reduction scheme or commitment.

Some emission reductions may not be secure or may involve a range of risks. For example, this can occur with forestry projects where risks from fire or pest infestation are high, or where carbon credits are sold in advance. Offset providers should offer some form of guarantee that purchased credits will be maintained, or customers will be compensated if the project doesn’t deliver the expected emissions reductions.
Changes in emissions that take place beyond the boundary of the project but are attributable to the project activity are called emissions ‘leakage’. New and/or additional emissions occurring off-site need to be quantified and taken into account in assessing the emissions reductions achieved.

For example, if a forestry project limits logging in one area, the possibility that deforestation will occur elsewhere should be considered. Offset providers should also consider emissions from project operations (eg. electricity use, transportation of materials, etc.) that could increase emissions relative to the project baseline.

Leakage should be explicitly addressed in calculation of the net emissions reductions achieved by a project.

Double counting can happen when two or more businesses claim the same emissions reduction. This can happen if an offset is sold to two or more entities, or when an entity upstream of the project unknowingly claims the reduction as its own (eg. an electricity generator). The establishment of protocols, and the use of an offsets registry can ensure offsets are adequately accounted for.

The offsets registry in Australia is the Australian National Registry for Emissions Units (ANREU) which is administered by the Clean Energy Regulator (CER).

The CER issues Australian Carbon Credit Units (ACCUs) for greenhouse gas abatement activities undertaken as part of the Australian Government’s Emissions Reduction Fund.

Some offset providers generate and sell credits from their projects on an annual basis while others forecast credits over the life of their projects and sell them up-front.

For some projects this is necessary to get project funding, but counting on emissions reductions to occur over the lifetime of a project presents several risks. Regulatory requirements could make some offset projects obsolete in the future. For example, implementing energy efficiency technologies that may be mandated by government in the future would no longer satisfy ‘additionality’ requirements (see above).

Proper monitoring and verification, and legally-recognised commitments from the offset provider to secure replacement credits if the project doesn’t deliver anticipated emissions reductions can help to mitigate these risks.

Purchasers of offsets may wish to ensure that the emissions impact of their operations are neutralised by offsets in ‘real time’.

To ensure that the emissions reductions claimed by the project have actually taken place, the emissions should be monitored, reported and verified (often referred to as MRV), in line with a recognised standard. You can learn more about certification standards and accreditation used in Australia here.

The verifier should evaluate the project based on an explicit set of criteria that minimise the risk of false emission reduction claims. This should include the ongoing monitoring of the project to ensure that claimed outcomes have eventuated. Use of a third-party verifier is recommended to ensure the integrity of the carbon credits.