What are carbon offset projects?
Carbon offset projects, or climate projects, verifiably reduce, avoid, or remove greenhouse gas emissions from the atmosphere. This is done, for example, through the generation of renewable energy, afforestation, the preservation and protection of forests, or the use of new technologies such as direct air capture.
To be certified as a carbon offset project, projects must be registered with international standards and meet clear criteria and requirements. Furthermore, certain methodologies must be adhered to, depending on the project technology. This is specified and administered by the relevant standard, for example the Gold Standard (GS) or the Verified Carbon Standard (VCS).
What requirements do certified carbon offset projects have to meet?
Carbon offset projects must fulfil four main criteria in addition to adhering to a certain methodology:
- Ecological and financial additionality: The criterion of additionality specifies that a carbon offset project must lead to lower emissions than would be the case without the project. In addition, project developers must prove that the project is dependent on further financing from the sale of Verified Emission Reductions (VERs) and could not be realised otherwise.
- Exclusion of double counting: It must be ensured that a VER is only issued once.
- Permanence: The criterion of permanence ensures that emission reductions occur over a longer period and not just in the short term. This is done to ensure a long-term positive benefit for the climate and to guarantee that VERs can be used in good faith to balance emissions.
- Regular independent audits: Carbon offset projects must be validated by recognised Validation and Verification Bodies (VVBs) and regularly assessed regarding all the above criteria. VVBs check compliance with the respective methodology and verify the actual amount of emissions saved ex post.
Why are carbon offset projects worthwhile?
Carbon offset projects not only contribute to reducing or avoiding greenhouse gas emissions, but also promote sustainable development worldwide. They contribute in different ways to the 17 Sustainable Development Goals (SDGs) of the United Nations.
As carbon offset projects verifiably reduce carbon emissions, they generally contribute to SDG 13 Climate action. The amount of VERs issued depends on the technology, duration, and scale – in short, the design – of the project. It is important that the amount of VERs issued is transparent and verified.
Depending on the project design, other SDGs can be supported in addition to SDG 13. For example, the wind energy project in De Aar, South Africa contributes to improving health (SDG 3) and the quality of education (SDG 4). Standards such as the Gold Standard or the Verified Carbon Standard require that carbon offset projects contribute to at least three of the 17 SDGs.
Thus, carbon offset projects are worthwhile because they demonstrably reduce emissions and promote sustainable development in the project country.
How are carbon offset projects financed?
The development of a carbon offset project is often associated with a high financial risk. The planned sale of VERs on the voluntary carbon market (VCM) reduces this risk for investors and facilitates project implementation in the first years.
Ongoing project activities are generally financed from the sale of VERs. Project developers must prove that they are dependent on this financing to realise the project (financial additionality). VERs thus serve to cover both initial and ongoing project costs, so accordingly, carbon offset projects are not financed by donations.
Are there carbon offset projects worldwide?
Carbon offset projects exist all over the world. ClimatePartner, for example, offers carbon offset projects on six different continents, however most of these projects are in developing countries. Certified carbon offset projects are often located in the Global South, as these countries are already severely affected by the consequences of climate change, but often lack the financial resources, know-how, and infrastructure to make the necessary investments in climate action without external support.
Industrialised countries, on the other hand, have historically been among the largest emitters of greenhouse gases and thus have a particularly high responsibility to mitigate climate change. Carbon offset projects help to harness the great potential for climate action investments in developing countries and to close the financing gap.
Examples of carbon offset projects: international and regional
Carbon offset projects come in a wide range of technologies, from afforestation and clean drinking water projects to microenergy credits for energy-efficient products. Project technologies can be split up into four categories:
- nature-based solutions, such as forest protection
- renewable energy
- social impact, such as improved cookstoves
- technical removals, such as Direct Air Capture
Most certified carbon offset projects are located in the Global South – to promote new technologies, advance sustainable development and protect valuable rainforests.
ClimatePartner also offers combined projects, bringing together funding for international carbon offset projects with additional support for regional nature conservation projects. Here, companies make a financial contribution to a certified carbon offset project, and for every tonne of CO2 saved by this funding, a nature conservation project, for example in Europe, is supported. Combined projects thus contribute to protecting parts of the world not covered by certified carbon offset projects.
You can find a selection of certified carbon offset projects as well as combined projects on our ClimateMap.
Interested in learning more about carbon offset projects? Visit the ClimatePartner Academy.