Offset Market Growing but Quality Assurance Lags: GAO

By ClimateBiz Staff
Published October 1, 2008

Carbon Offsets

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WASHINGTON, D.C. -- The voluntary carbon market grew about 66 percent between 2004 and 2007 but offset buyers find themselves with "limited assurance of credibility," according to Congress's investigative arm.

The U.S. Government Accountability Office found that, by and large, a lack of information surrounding carbon offsets leads to problems determining additionality and the existence of quality assurance mechanisms. More federal oversight could add transparency and boost consumer protection but may also introduce trade-offs, such as a chilling effect on innovation, higher costs and less flexibility.

The GAO pointed out that offsets are attractive because they provide a low-cost way of reducing or greenhouse gas emissions related to climate change.

"At the same time, consumers of offsets need assurance that buying an offset has the same effect on emissions as if they had decided to reduce emissions in their own," the GAO said in the report, "Carbon Offsets: The U.S. Voluntary Market Is Growing, but Quality Assurance Poses Challenges for Market Participants."

The GAO didn't suggest executive action, but said Congress may consider establishing standardized quality assurance mechanisms while it mulls allowing the use of offsets for compliance under future legislation. Offsets should be additional, quantifiable, real and permanent.

The GAO said allowing offsets under a regulatory regime could lower the cost of compliance but others said inclusion could threaten the integrity of a compliance system.

More than 600 organizations develop, market and sell offsets in the U.S. The supply has grown from 6.2 million tons in 2004 to 10.2 million tons in 2007. The supply is concentrated in Texas and Virginia, which accounted for about a third of offset projects. Nearly half of offsets were produced by methane gas related projects. Global prices per ton ranged from $1.83 to $306, with a volume-weighted average of $6 per ton.