Carbon Accounting in the Cap & Trade and Carbon Tax Age


This posting was originally published by the WA CleanTech Alliance on November 12, 2015

Here in Washington, and in the rest of the world, there is a hot debate over putting a price on carbon. Beyond the merits and outcomes of a cap and trade system or a carbon tax, greenhouse gases must be measured and accounted for in order to assign a price to it. This process must be rigorous and verified.  Regardless of the emission source, the “currency” of carbon is measured in metric tonnes of carbon dioxide (CO2) equivalents (MtCO2e). This measurement accounts for the fact that some greenhouse gases (GHGs), like methane and nitrous oxide (yes, laughing gas that your dentist might administer) have a global warming potential significantly higher than CO2, itself.

Carbon offsets are an environmental trading mechanism that provides for GHG mitigation projects that would not exist without the addition of carbon finance. This test of “additionality” considers local, federal and other jurisdictional regulations, as well as project performance (activities that are beyond “business as usual”). Though currency is always counted in MtCO2e, the source of carbon credits can vary greatly. There are projects located here in Washington and throughout the world.

Around these GHG accounting systems, active carbon markets have developed. After some ups-and-downs since the 1990s, carbon markets have now matured. Carbon offsets registered at the major carbon registries can be trusted to represent real reductions. These high-valued carbon credits are known generically as verified emission reductions (VERs). Credits are serialized, with each carbon unit unique and traceable. Only VERs are considered to be valid in the compliance markets (CA Cap and Trade, EU ETS, RGGI, etc.), and, often, only certain types of VERs will be accepted by these governing bodies. The voluntary carbon markets are more open, as there are literally hundreds of different mechanisms for carbon offsetting, different protocols and locations where this work is being performed. Registries such as The Gold Standard Foundation (GSF) and the Verified Carbon Standard (VCS), with its partnership with the CCB standard (Climate Community and Biodiversity), offer assurance that not only do the projects reduce GHGs emissions, but also have a positive economic and social impact on their communities.

Carbon-offset projects can provide new educational opportunities, economic stimulus, better public health, creation of community co-ops, improved forests and watersheds, wetland preservation, power-grid enhancements, and improved waste management and agricultural practices. Even a U.S.-based landfill gas-destruction project can be configured to additionally generate renewable energy. Carbon-offset projects provide some of the best examples of sustainable development, all enabled by carbon finance.

Carbon offsetting is no substitute for doing sustainability work locally. Facilities need to continue to be more efficient, use less fossil fuels (including diesel and natural gas), and invest in solar and other renewables when it makes sense.  However, there remains an unavoidable carbon footprint. For example, when an airline is more efficient, it saves fuel, which in turn lowers operating costs. Even a modest one-to-two percent gain in efficiency represents a significant monetary savings. Yet, when 98 percent of an airline’s carbon footprint is from fuel consumption, a massive carbon footprint still remains. The same situation is true for the vast majority of industries actively working to reduce fossil-fuel consumption. Until zero emissions are achieved, it is possible to achieve carbon neutrality through the purchase of high-quality carbon offsets.

We must move our civilization off of fossil fuels before it is too late. Meanwhile, mitigating unavoidable emissions through the purchase of carbon offsets is a moral response to a daunting global emergency.