Creating Carbon Offsets for Voluntary Markets

August 31, 2021

Download infographic

Creating Carbon Offsets for Voluntary Markets 

Carbon trading and offsets are part of a sustainable and responsible future. They can serve as dependable investments for your business operations, and they offer a host of societal and environmental benefits – including reducing greenhouse gases (GHGs) and carbon dioxide equivalents (CO2e). But how are all of those offsets created?  

The Life Cycle of Carbon Offsets 

Carbon credits are created and sold within the voluntary trading market, allowing organizations to finance positive change via projects that reduce carbon emissions. Here’s how it works: 

The Project Idea Note – “I have an idea”

It all starts when an organization creates a “project idea note.” The idea note is a concept design that aims to prevent emissions, remove emissions, or otherwise protect an environmental asset that can store or remove carbon. The project idea note covers the project’s methodology, feasibility, impact and risk assessment, and potential stakeholder engagement. If this framework meets basic requirements for a carbon offset project, it proceeds to the next step. 

Designing the Project – “Here’s what my idea looks like”

In the Design phase, the project developer outlines greenhouse gas (GHG) emission parameters. In other words, they start by setting the bar for baseline emissions. Then, they figure out the best way to “temperature check” GHG emissions as the project rolls along. Since this is still a concept, they must next estimate the quantity and reduction of those emissions and then describe how to quantify and monitor the project’s value – environmental or otherwise. It is critical to prove “additionality” – that’s the necessary piece. Additionality unequivocally states that the project is responsible for GHG reductions that would not have taken place without the project. 

Validating the Project Design – “Let’s check that idea.”

Next, the project developer shows their work. To validate a design, an independent third-party audits and reviews the plans. The inspection ensures accurate adherence to the methodology. Suppose the third-party offers a seal of approval. In that case, the project’s integrity is confirmed, and, pending other approvals (geographic regulation, for instance), project activities can begin – like tree planting or clean fuel replacements. The third-party auditor is also tasked with helping prove additionality, as mentioned above. 

Verification of the Project – “Is this working?”

Once the project has been implemented and monitored, another independent third-party verification takes place. Isn’t it nice, all these agencies working so well together? The project results are assessed, and the overall GHG mitigation is checked. Ideally, the results align with the initial plan so that the carbon credit process can continue. 

Issuing Carbon Credits – “Let’s create some value from that idea”

If the GHG results are accurate, the project is now able to provide offsets for the registry. These carbon credits (one tonne of CO2e per credit) are verified and can be regularly issued under a recognized standard until the project reaches the end of its life. The credits are then recorded in a public registry. It’s there to keep score. 

Listing and Purchase of Carbon Credits 

Public carbon trading registries are hubs that enable the transfer, ownership, and usage of carbon credits. Registries ensure proper credentials and the accurate tracking of offsets via unique serial numbers that identify specific credits individually.  

Once a company, NGO, or other entity purchases that credit, it is transferred to the buyer’s account. This process prevents double purchases and maintains consumer confidence. Once the credit is purchased, it is permanently retired, and the associated serial number cannot be used again. This process ensures a credit cannot be claimed and then re-sold. It’s the offset version of “no takesies backsies.” 

Additional Benefits of Carbon Offsets and Projects 

Beyond the carbon benefits, offsets and projects have other “co-benefits” to local and regional communities. These range from investments in biodiversity, pollution reduction, and cultural heritage support to more tangible effects, including new technological innovations, higher employment rates, and cleaner energy production for the future. The divine link between these co-benefits: a stronger local and global community. 

For organizations that purchase the credits, there are more benefits. They get to foster goodwill with consumers, positively contribute to their ESG goals, and strengthen relationships with companies that expect more sustainable suppliers.   

At Radicle, we can help you navigate the complexities of purchasing credits. 

If you have questions about the creation, commerce, and use of carbon credits, we’re here to provide answers. Reach out and let us know how. We’re here to bring you into the world of carbon trading.