A company emitting greenhouse gases can contribute financially to initiatives that avoid or reduce CO2 emissions or other GHG emissions. These initiatives are called carbon offset projects.
The Carbon Credit market is still in its early stages and has been evolving rapidly since its creation. Hence, regulatory frameworks defining the way the price and the validity of carbon credits should be determined are still regularly changing. Thus, it can be difficult to identify reliable projects, that will have the impact claimed both on the short term and the long term along with a fair pricing. A company can better guarantee its positive impact by investing in the reduction of its own emissions rather than by financing offset projects.
Price
Multiple criteria are taken into account to determine the price of a ton of CO2, including :
The type of project. The cost of materials and equipments necessary to develop the project varies from one projects to another (protecting and restoring forests, developing and deploying renewable energy, etc.)
The geographic location of the project.
If the project has additional positive impacts besides its environmental impact (often social). For example, some projects provide jobs to people who wouldn't otherwise have easy access to employment.
These criteria aren’t rigorously quantifiable, which explains price variations from a project to another.
Criteria
A carbon offset project should meet five main criteria:
Measurability. Avoided and sequestered emissions must be regularly measured using the latest scientific data. Moreover, the methodology that is used must be explained and transparent.
Verifiability. Avoided and sequestered emissions must be validated by independent audits to ensure that they are effective.
Additionnality. Funding the project wouldn't have been possible without selling carbon credits. Additional CO2 has been sequestered or avoided (compared to a baseline scenario).
Permanence. Emissions must be avoided or sequestered on the long term.
Unicity. A carbon credit can only be sold to a single entity to avoid double-counting.
Labels
To ensure that the amount of carbon credits sold for one project aren’t overestimated and meet the above criteria, accredited organizations certify, amongst other criteria, that the computations and methodology used are valid and robust.
Certifiers are also subject to checks to guarantee the reliability of their labels, both socially and environmentally speaking.
It is advisable to opt for projects certified by reliable third parties (public entities, Ministry of Transition, etc.) that provide transparent details of their criteria and use recognized methodologies.