Carbon Offsets: The U.S. Voluntary Market Is Growing, but Quality Assurance Poses Challenges for Market Participants
Published: 2008-08-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Carbon offsets--reductions of greenhouse gas emissions from an activity in one place to compensate for emissions elsewhere--are a way to address climate change by paying someone else to reduce emissions. To be credible, an offset must be additional--it must reduce emissions below the quantity emitted in a business-as-usual scenario--among other criteria. Assessing credibility is inherently challenging because it is difficult to make business-as-usual projections. Outside the U.S., offsets may be purchased on compliance markets to meet requirements to reduce emissions. In the U.S., there are no federal requirements and offsets may be purchased in the voluntary market. GAO was asked to examine (1) the scope of the U.S. voluntary carbon offset market, including the role of the federal government; (2) the extent to which mechanisms for ensuring the credibility of offsets are available and used and what, if any, related information is shared with consumers; and (3) trade-offs associated with increased oversight of the U.S. market and including offsets in climate change mitigation policies. This report is based on analysis of literature and data, interviews with stakeholders, and GAO's purchase of offsets.
section_title: What GAO Found
paragraphs: The scope of the U.S. voluntary carbon offset market is uncertain because of limited data, but available information indicates that the supply of offsets generated from projects based in the United States is growing rapidly. Data obtained from a firm that analyzes the carbon market show that the supply of offsets increased from about 6.2 million tons in 2004 to about 10.2 million tons in 2007. Over 600 organizations develop, market, or sell offsets in the United States, and the market involves a wide range of participants, prices, transaction types, and projects. The federal government plays a small role in the voluntary market by providing limited consumer protection and technical assistance, and no single regulatory body has oversight responsibilities. A variety of quality assurance mechanisms, including standards for verification and monitoring, are available and used to evaluate offsets, but data are not sufficient to determine the extent of their use. Information shared with consumers on credibility is also limited. Participants in the offset market face challenges ensuring the credibility of offsets, including problems determining additionality, and the existence of many quality assurance mechanisms. GAO, through its purchase of offsets, found that the information provided to consumers by retailers offered limited assurance of credibility. Increased federal oversight of the U.S. voluntary market could enhance the market's transparency and improve consumer protection, but may also reduce flexibility, increase administrative costs, and stifle innovation, according to certain stakeholders. Including offsets in regulatory programs to limit greenhouse gas emissions could also lower the cost of compliance, according to recent EPA analyses and economic literature. However, some stakeholders said that concerns about the credibility of offsets could compromise the environmental integrity of a compliance system.

section_title: Letter
paragraphs: Carbon offsets provide a way for individuals, businesses, and governments  to address concerns about the impact of their greenhouse gas emissions  on the earth’s climate by paying others to undertake activities that reduce,  avoid, or sequester greenhouse gases. A carbon offset can be defined as a  measurable reduction of greenhouse gas emissions from an activity or  project in one location that is used to compensate for emissions occurring  elsewhere. For example, a U.S. manufacturer might offset its emissions by  funding an external project that captures methane, a greenhouse gas  emitted from agricultural sources and landfills. The emissions reduced,  avoided, or sequestered by such projects are collectively termed carbon  offsets, though they may involve different greenhouse gases.
Carbon offsets are a potentially attractive option for those interested in  addressing concerns about climate change because they can offer a  potentially low-cost and convenient means of reducing, avoiding, or  sequestering greenhouse gas emissions relative to other options, such as  altering manufacturing processes or using less fossil fuel. 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 on  their own. Providing this assurance is inherently challenging because it  involves measuring the reductions achieved through an offset project  against a projected baseline of what would have occurred in its absence.  For example, if a facility that emitted 200 tons of carbon dioxide per year  implemented a project that reduced its emissions by 100 tons, it may have  created 100 tons of offsets. See figure 1 for a hypothetical depiction of an  offset project measured against a projected business-as-usual scenario.
The shaded area in the diagram represents carbon offsets generated from the project.
Emissions reductions from an offset project could occur immediately or gradually over time,  depending upon the project type.
Although definitions differ, our review of literature and discussions with  stakeholders identified four general criteria for credible offsets: They must  be additional, quantifiable, real, and permanent. A carbon offset project is  generally considered “additional” if it decreases emissions of greenhouse  gases below the quantity that would have been emitted in a projected  business-as-usual scenario. “Quantifiable” means the reductions can be  measured, and “real” means the reductions can be verified. “Permanent”  means the emissions reduced, avoided, or sequestered by a project will not  be released into the atmosphere in the future. In addition, it is important to  ensure that double-counting of a particular offset does not occur, where  multiple purchasers use the same offset. Participants in the offset market  may use a variety of quality assurance mechanisms to substantiate the  credibility of offsets. Market participants may also track the sale and  ownership of offsets by using one of several registries. The use of a  registry may help participants share details about offsets available for  purchase on the market.
Participants in the offset market include project developers, who identify  and perform actions that reduce, avoid, or sequester emissions; third party  verifiers, who ensure that projects adhere to relevant quality assurance  mechanisms; intermediaries, including aggregators, who buy offsets and  bundle them into larger quantities for resale; and retailers, who market  and sell offsets to consumers, including organizations and individuals.  Other participants include brokers and exchanges, which facilitate  transactions between buyers and sellers. Participants may play multiple  roles. For example, a single company may develop projects, purchase  offsets from other developers, and market offsets to consumers. Project  developers may also skip steps in the supply chain and sell directly to  consumers. Figure 2 illustrates a generalized carbon offsets supply chain.
Some carbon offsets are purchased by entities that are subject to legal  requirements to decrease their greenhouse gas emissions, such as the  European Union’s (EU) Emissions Trading Scheme. In such cases, the  market for offsets is referred to as a “compliance market.” In contrast, the  U.S. market is a “voluntary market,” and purchasers are not required to  limit their emissions or purchase offsets. However, the Congress is  considering several proposals for limiting greenhouse gas emissions that  would enable regulated entities to rely, in part, on offsets for compliance  in a fashion similar to the European Union’s program. Offsets also may  play a role in U.S. state and regional programs that are under development.
A brief description of certain international and domestic programs is  provided in appendix VI.
In the United States, market participants may purchase offsets through the  Chicago Climate Exchange (CCX) and on the retail market, which includes  transactions that occur outside of a formal exchange. CCX is a voluntary  greenhouse gas reduction and trading system through which members  make legally binding commitments to reduce their emissions. In addition  to these members, the CCX platform is also available to offset providers,  who may register tons on CCX that represent various greenhouse gas  reduction projects. CCX participants may trade offsets generated from  qualifying emissions reduction projects. According to CCX, to verify the  validity of offsets offered for sale on the exchange, and ensure that the  underlying offset projects conform to CCX rules, all tons registered for  sale have been verified by approved third party verification firms that are  specialized in particular fields. Further, in addition to other quality  assurance procedures, CCX market participants use a registry to help  track purchases and sales of offsets acquired or sold on the exchange. In  contrast to exchange trading, which occurs through platforms designed to  facilitate trades on a larger scale, retail sales typically involve transactions  directly between two parties. However, certain retailers buy offsets  through CCX and retire them on behalf of consumers. In addition, offsets  may be bought and sold across international borders and through Web  sites.
In this context, you asked us to (1) describe the scope of the U.S.  voluntary carbon offset market, including the role of the federal  government; (2) analyze the extent to which mechanisms for ensuring the  credibility of voluntary carbon offsets are available and used, and what, if  any, related information is shared with consumers; and (3) assess the  trade-offs associated with increasing the federal oversight of the U.S.  voluntary carbon offset market and incorporating offsets into broader  climate change mitigation policies.
In conducting our work, we reviewed available government and trade  literature related to carbon offset markets and conducted semistructured  interviews with nonprobability samples of stakeholders, including  providers, third party verifiers, and other knowledgeable stakeholders. To  respond to the first objective, we interviewed officials responsible for  offset-related programs at the departments of Agriculture (Forest Service),  Energy (Energy Information Administration), and Interior (U.S. Fish and  Wildlife Service), as well as the Commodity Futures Trading Commission  (CFTC), the Environmental Protection Agency (EPA), the Federal Trade  Commission (FTC), and the U.S. House of Representatives Office of the  Chief Administrative Officer (CAO). We also met with, among others,  representatives of the Council on Environmental Quality and officials  responsible for managing state and regional greenhouse gas mitigation  programs. To obtain detailed information about carbon offset projects in  the United States, we purchased and analyzed data from Point Carbon, a  provider of independent carbon market news, analysis, and consulting  services. We assessed the reliability of these data and determined that  they were sufficiently reliable for the purposes of this report. In addition,  to respond to the second objective, we purchased offsets from a  nonprobability sample of retail providers and analyzed the materials we  received in return as well as information provided on Web sites. To  respond to the third objective, we reviewed available economic literature  and information collected through stakeholder responses to  semistructured interview questions. A more detailed description of our  scope and methodology is presented in appendix I. We conducted our  work from July 2007 to August 2008.
subsections: section_title: The U.S. Voluntary Market Is Growing Rapidly with Limited Federal Oversight
paragraphs: Over 600 organizations develop, market, or sell offsets in the United  States, and the market involves a wide range of participants, prices,  transaction types, and projects. While the exact scope of the U.S.  voluntary market is uncertain because of a lack of complete data, available  information shows that the supply of offsets generated in the United States  has increased by about 66 percent over the last 3 years, from about 6.2  million tons in 2004 to about 10.2 million tons in 2007. The federal  government plays a small role in the U.S. market. While no single  regulatory body oversees the market, FTC and EPA, among others, have  undertaken some consumer protection and technical assistance efforts. In  addition, certain federal entities participate in the market as providers and  consumers. For example, the Forest Service works with a nonprofit  partner that solicits donations to support forestry projects.
subsections: section_title: The Market Includes a Range of Participants, Prices, and Transaction Types
paragraphs: A wide range of participants are involved in the U.S. voluntary market,  including providers of different types of offsets, developers of quality  assurance mechanisms, third party verifiers, and consumers who purchase  offsets from domestic or international providers. According to available  data, more than 600 entities are involved in the supply of offsets in the  United States, including companies, governments, colleges and  universities, and other organizations.
Offset providers include project developers and intermediaries. We identified  210 offset providers of various types, including 87 U.S.-based providers.  Project developers implement individual projects and may sell offsets directly  to consumers or to intermediaries. Intermediaries are further subdivided into  retailers, aggregators, and brokers, among other categories. Retailers  generally sell smaller quantities of offsets to individuals or organizations.  Aggregators, also known as wholesalers, sell in bulk and often own a portfolio  of offsets. Brokers facilitate transactions between sellers and buyers.  Providers obtain the rights to the offsets they sell in a number of ways,  including developing their own projects or purchasing directly from project  developers, sometimes through brokers. Other providers purchase and retire  offsets through CCX on behalf of customers. Providers may also play multiple  roles in the offset market. For example, a single company may develop  projects, aggregate offsets from other projects or providers for resale, and sell  offsets directly to consumers. In addition, other entities, including investment  banks and other financial institutions, support the development of projects  through financing.
Quality assurance providers include those involved in activities such as  verification and monitoring of offset projects, and the development of quality  assurance mechanisms such as accounting standards for calculating offsets.  Project developers may use a third party verifier to confirm that offsets  generated by a project were accurately calculated. Once verified, the offset  might then be recorded by another independent party in a registry to track its  sale and ownership. Multiple registries operate in the United States to help  market participants track the ownership and retirement of offsets, although  not all offsets are listed on registries.
A wide variety of consumers buy offsets, including individuals, businesses,  nonprofits, governments, research institutions, universities, religious  congregations, utilities, and other organizations. Consumers’ motivations  for purchasing offsets may include corporate responsibility and public  relations, among others. Consumers may purchase offsets to compensate  for emissions that result from a variety of activities including flying,  driving, and purchasing consumer products.
Offsets sell on the market at a wide range of prices. In 2007, prices on the  global voluntary market ranged from $1.83 per ton to about $306 per ton,  with an average of about $6 per ton, according to one recent market  study. We purchased offsets from 33 retail providers, both domestic and  international, and prices ranged from about $5 per ton to about $31 per  ton. CCX prices were at their lowest in 2004, at $0.79 per ton, but recently  peaked at $7.40 per ton in June 2008.
There are also different types of carbon offset transactions, including  direct purchase and payment or donation in support of a service. The  difference between these transactions is whether the offsets are sold as a  commodity. In a direct purchase, consumers pay for the delivery of offsets  as a commoditized economic good. Direct purchases may allow the  consumer to evaluate the parameters of the offset project, including how  verification and monitoring methodologies were employed to create the  offset. When the transaction does not involve the exchange of a  commodity, consumers pay or donate money to a provider to support the  retirement of offsets or the development of new offset projects, but the  consumer does not own an asset after the transaction has been completed.  In this case, the payment or donation amounts to a promise by the  provider to supply the service of purchasing offsets or supporting offset  projects. Donations may be tax deductible, effectively reducing the cost of  the carbon offset.
Another key distinction involves the timing of an offset’s creation. In cases  where offsets are sold before they are produced, the quantity of offsets  generated from projects can be calculated using what is known as ex-ante  (or future value) accounting. On the other hand, when offsets are sold  after they are produced, the quantity of offsets can be calculated using ex- post accounting. Using future value accounting, consumers may purchase  an offset today, but it may take several years before the offset is  generated.
section_title: Project Developers Generate Offsets from a Wide Range of Activities
paragraphs: In addition to a range of participants, project developers generate offsets  from different types of projects by either reducing emissions at the source  or through sequestration. Emission reduction projects involve either fossil  fuel projects based on changes in energy production and use practices— such as energy efficiency, fuel switching, power plant upgrades, and  certain renewable energy projects—or greenhouse gas destruction  projects, including projects that capture and destroy methane from coal  mines, landfills, and agricultural operations. Sequestration projects  include biological sequestration projects that pull carbon dioxide out of  the air by, for example, planting trees or enhancing the management of  agricultural soils, and geological sequestration projects that capture and  store carbon dioxide in underground formations. See figure 3 for a  diagram of common types of carbon offset projects, and see appendix II  for descriptions of offset project types.
section_title: The Scope of the Market Is Uncertain, but Supply Is Growing Rapidly
paragraphs: The U.S. voluntary market is part of an expanding global market, with an  estimated 65 million tons sold in 2007, valued at approximately $337.3  million. Complete data on the volume of offsets traded in the United  States are not available, and the market’s transparency is limited. Efforts  to quantify and report on the voluntary carbon market have focused on the  global market and include limited information focused solely on the  United States. It is also difficult to separate out the U.S. portion of the  global market because U.S. market participants buy and sell across  domestic and international boundaries and transactions are private.  However, according to one study, an estimated 23 percent of the volume  sold in 2007 on the global market came from U.S. providers.
While the exact scope of the U.S. voluntary carbon offset market is  uncertain because of a lack of complete data, available information shows  that the supply of offsets based in the United States is growing rapidly. In  the last 3 years, the supply of offsets from projects based in the United  States increased approximately 66 percent, from about 6.2 million tons in  2004 to about 10.2 million tons in 2007. By comparison, EPA data show  that U.S. greenhouse gas emissions have averaged about 7 billion tons  annually since 2000. In addition, in 2007, at least 211 projects produced  offsets in the United States, as compared to 93 projects in 2004, an  increase of about 125 percent. See figure 4 for data on the U.S. supply of  offsets.
Of the total U.S. offset supply in 2007, about 85 percent was generated  from three categories of projects: methane, carbon capture and geological  storage (CCGS), and biological sequestration. About 49 percent of U.S.  supply was produced from projects that capture and destroy methane  from coal mines, agricultural operations, or landfills. An additional 19  percent was produced from CCGS projects that capture emissions from  industrial and energy-related emissions sources and then store these  emissions in geologic formations. Also, 17 percent was produced from  biological sequestration projects, including agricultural soil projects such  as no-till farming and forestry projects. Figure 5 illustrates U.S. offset  supply by project type in 2007.
One factor influencing the quantity of offsets generated from a particular  project is the type of greenhouse gas involved. This is because most  greenhouse gases, including methane, have greater heat-trapping ability  relative to carbon dioxide. Thus, the global warming potential of these  greenhouse gases influences the volume of offsets generated. For  example, reducing one ton of methane emissions has the same effect as  decreasing 25 tons of carbon dioxide. Accordingly, projects that decrease  gases with high global warming potential may be attractive from a  developer’s perspective.
Available data show that in 2007, 93 of the 211 projects that produced  offsets in the United States were methane projects. Of these, 5 coal mine  projects—2 percent of the total—accounted for 24 percent of the total  volume generated in 2007. On the other hand, 62 biological sequestration  projects (about 29 percent of the total) produced 17 percent of the supply.  This includes 52 forestry projects that produced about 7 percent of total  supply from U.S.-based projects. Table 1 presents U.S. project types by  number, volume, and percentage of total supply in 2007.
In the United States, projects are located in 40 states, but 34 percent of the  supply in 2007 was produced by 14 projects in Texas and Virginia. Projects  in these states include high-yielding projects such as coal mine methane  projects. While California had the greatest number of projects in 2007,  these 31 projects accounted for about 4 percent of the total supply. Figure  6 presents the volume and number of offset projects by state, and detailed  data are provided in appendix III.
section_title: The Federal Government Plays a Small Role in the Market
paragraphs: While no single regulatory body has oversight of the U.S. voluntary carbon  offset market as a whole, offset transactions are subject to applicable state  fraud and consumer protection laws, which are generally enforced by each  state’s attorney general. Certain federal entities provide some consumer  protection and technical assistance efforts and also participate in the  market as providers and consumers.
The mission of the Commodity Futures Trading Commission is to protect  market users and the public from fraud, manipulation, and abusive  practices related to the sale of commodity and financial futures and  options, and to foster open, competitive, and financially sound futures and  option markets. The CFTC exercises limited oversight over the Chicago  Climate Exchange due to its status as an Exempt Commercial Market  (ECM), a category established under the Commodity Futures  Modernization Act of 2000. Participants in such markets, in general terms,  must be large, sophisticated traders. Moreover, ECMs are allowed to trade  only exempt commodities. ECMs must abide by certain notification  requirements and affirm annually that they continue to operate under the  same parameters.
The 2008 Farm Bill increases the CFTC’s oversight of ECM contracts that  serve a significant price discovery function. The CFTC confirmed that  CCX is eligible to operate as an ECM, but at this time, CCX’s contracts  have not been determined by the CFTC to serve a significant price  discovery function. In cases where contracts serve a significant price  discovery function, ECMs must adhere to a number of core principles,  including monitoring of trading and the submission of certain data to the  CFTC. Generally, CCX operates with less oversight because participants in  the market are experienced. However, if the CFTC receives complaints, it  can take appropriate action.
Department of Agriculture, Forest Service  The mission of the Forest Service, an agency within the Department of  Agriculture (USDA), is to sustain the health, diversity, and productivity of  the nation’s forests and grasslands to meet the needs of present and future  generations. The Forest Service works with a congressionally chartered  nonprofit partner, the National Forest Foundation (NFF), to solicit  donations to the Carbon Capital Fund, which provides financial support  for carbon sequestration projects on lands managed by the Forest Service.  The Carbon Capital Fund donations are invested in Forest Service  reforestation projects to sequester carbon. According to the Forest  Service, donations to the Carbon Capital Fund will be used to replant  areas on national forests that have been damaged by wildfire and other  natural disturbances and to demonstrate the role of forest carbon  sequestration in addressing climate change. The Forest Service manages  the reforestation projects and also selects the project sites by using a  forest vegetation simulation model to estimate the amount of carbon that  will be sequestered by prospective projects. NFF operates the fund and  uses a private contractor to measure and verify offsets. The first  demonstration project was planned for the summer of 2008 on the Custer  National Forest in Montana and South Dakota, and projects tentatively  scheduled for the summer of 2009 will take place on the Plumas and San  Bernardino National Forests in California.
According to Forest Service and NFF officials, they offer no guarantees  about the performance of Carbon Capital Fund projects. Donations to the  fund do not transfer rights or ownership of offsets. USDA officials said  that contributions to the fund are donations and do not create tradable  offsets. These officials also said that donations to the Carbon Capital Fund  would enable the Forest Service to plant trees, which would, in the long  term, lead to carbon reductions. NFF said that it would notify donors if the  forestry projects fail and that it plans to send documentation to donors,  including pictures, when projects are complete. As of January 2008, a total  of about $55,000 had been donated to the fund. Ten percent of the  donations was set aside for third party verification and monitoring,  according to NFF.
USDA also encourages the use of consistent forestry and agriculture offset  methodologies by working with market participants such as the Chicago  Climate Exchange and state and regional programs. For example, USDA’s  Natural Resources Conservation Service provided a $750,000 grant to the  Chicago Climate Exchange to promote the inclusion of agriculture  projects in the offset market by lowering costs and developing  methodologies for calculating reductions from no-till farming and  establishing a pool of project verifiers.
Department of Energy, Energy Information Administration  The mission of the Energy Information Administration (EIA) is to provide  policy-neutral data, forecasts, and analyses to promote sound policy  making, efficient markets, and public understanding regarding energy and  its interaction with the economy and the environment. EIA’s Voluntary  Reporting of Greenhouse Gases Program, established under section  1605(b) of the Energy Policy Act of 1992, provides a means for  organizations and individuals who have reduced their emissions to record  their accomplishments in a registry. In 2006 and 2007, EIA revised the  program to allow participants to report on offsets in certain  circumstances. The revised guidelines have not yet been implemented.
Department of the Interior, U.S. Fish and Wildlife Service  The mission of the U.S. Fish and Wildlife Service (FWS), a bureau within  the Department of the Interior, is to conserve, protect, and enhance fish,  wildlife, and plants and their habitats for the continuing benefit of the  American people. FWS partners with companies and nonprofits to develop  carbon sequestration projects on national wildlife refuges in the  southeastern United States. FWS enters into these partnerships to obtain  funds to restore and enhance native forest and wildlife habitat on national  wildlife refuges. FWS identifies refuge lands that are important for its  overall conservation goals and manages sequestration projects on these  lands, but does not play a role in the calculation, verification, or  monitoring of carbon offsets. Carbon sequestration projects must support  the purposes of each national wildlife refuge and be consistent with refuge  forest management plans. FWS negotiates additional funding  commitments with partners to meet long-term operations and  maintenance needs as well.
In return for funding carbon sequestration activities related to FWS  conservation goals, partners retain rights to any carbon credits that may  result from the restoration projects. The partners may in turn provide their  clients or donors with the opportunity to offset their carbon emissions by  contributing funds to these projects. Companies involved in partnership  agreements with FWS may restore or reforest refuges, or buy land  identified by FWS and then gift the land back to FWS and underwrite the  restoration of that land. Partners include energy companies and nonprofit  land trusts. According to FWS, these partnerships have led to the addition  of 40,000 acres of land to the refuge system and restored a total of 80,000  acres of wildlife habitat with more than 22 million trees. The Solicitor’s  Office of the Department of the Interior determined that FWS may accept  donations of this kind as long as it complies with the Department of the  Interior’s guidelines for accepting donations and applicable laws and  regulations.
The mission of the Environmental Protection Agency is to protect human  health and the environment. EPA Climate Leaders, a voluntary emissions  reduction program, provides technical assistance to companies on  calculating and tracking greenhouse gas emissions over time, calculating  emissions reductions from offsets, and incorporating offsets into emission  reduction strategies. In the Climate Leaders program, partner companies  commit to reduce their impact on the environment by completing a  greenhouse gas emissions inventory, setting reduction goals, and annually  reporting progress to EPA. EPA also provides guidance to partners on  calculating emissions reductions from offsets. For offsets to be credible,  according to EPA, they must meet four key accounting principles: the  offsets must be real, additional, permanent, and verifiable. Partners may  choose to develop their own offset projects or purchase offsets. Offset  projects must meet Climate Leaders requirements for use toward meeting  a greenhouse gas reduction goal, including the use of a performance  standard-based approach to quantifying emissions reductions. EPA has  developed accounting methodologies for certain offset project types,  including landfill gas, manure management, afforestation, transportation,  and boiler replacement projects. EPA is also developing protocols for  additional project types, such as coal bed methane.
The mission of the Federal Trade Commission is to protect consumers,  strengthen free and open markets, and promote informed consumer  choice. The Federal Trade Commission Act prohibits unfair or deceptive  trade practices, including deceptive advertising. Among other things, the  FTC enforces a wide variety of consumer protection laws and is evaluating  the treatment of carbon offsets in its Green Guides, a publication designed  to help advertisers avoid making false or misleading environmental  marketing claims. The FTC announced in November 2007 that it would  conduct a regulatory review of the Green Guides, which were last updated  in 1998 and do not currently address carbon offsets. According to the FTC,  carbon offset marketing claims may present a heightened potential for  deception because it is difficult, if not impossible, for consumers to verify  the accuracy of the seller’s claims. The FTC held a public workshop in  January 2008 about carbon offsets to obtain input on consumer protection  issues and to determine whether more direct guidance is needed. The  workshop examined the emerging market for greenhouse gas emission  reduction products and related advertising claims, among other issues.  The FTC is reviewing the public comments obtained through the  workshop but has not issued proposed changes to the guides and has not  decided whether to issue guidance specifically regarding offsets.
U.S. House of Representatives, Office of the Chief Administrative Officer  The Office of the Chief Administrative Officer provides operations  infrastructure and support services for the community of about 10,000  House Members, officers, and staff. The CAO purchased 30,000 metric tons  of offsets through the Chicago Climate Exchange as part of the Green the  Capitol Initiative, an effort to reduce the greenhouse gas emissions from  House operations. Among other measures, the Green the Capitol Initiative  outlines three strategies, including (1) purchasing electricity generated  from renewable sources; (2) meeting the House’s heating and cooling  needs by switching from using coal, oil, and natural gas at the Capitol  power plant to natural gas only; and (3) purchasing offsets to compensate  for any remaining carbon emissions. See appendix IV for more information  about the purchase of offsets by the CAO.
section_title: A Variety of Quality Assurance Mechanisms Are Available and Used, but Information on the Credibility of Offsets Is Limited
paragraphs: Multiple quality assurance mechanisms are available and used to ensure  the credibility of carbon offsets available for purchase on the U.S.  voluntary offset market, but a lack of centralized information makes it  difficult to estimate the extent of their use. Participants in the offset  market face several challenges to ensuring the credibility of offsets,  including problems determining additionality, and the availability and use  of many mechanisms for verification, and monitoring. Our purchase of  offsets found that the information supplied by a nonprobability sample of  retailers provides limited assurance of credibility.
subsections: section_title: Quality Assurance Mechanisms Are Available and Applied to Offset Projects, but the Extent of Their Use Is Uncertain
paragraphs: A wide range of quality assurance mechanisms, commonly described  collectively as “standards,” are available to ensure the credibility of carbon  offsets. Market participants and third parties apply these standards at  different stages of the carbon offset supply chain for a variety of purposes.  For example, accounting and reporting methods define how to measure  emissions reductions from specific types of projects. In addition,  verification and monitoring standards are used to confirm that offsets are  calculated correctly and that a project was indeed implemented, and to  monitor progress over time. End use product standards, applied later in  the supply chain, can be used to certify product marketing claims. Certain  mechanisms cover multiple aspects of quality assurance and specify the  use of registries to track the ownership and disposition of offsets, while  others focus on one aspect, such as ensuring that emissions reductions are  calculated correctly. Figure 7 illustrates how quality assurance  mechanisms relate to the various components of a simplified offset supply  chain, and appendix VII describes selected offset standards used in the  voluntary market.
Our review of the available literature and discussions with stakeholders  identified widely varying estimates of the extent to which market  participants use quality assurance mechanisms. Available information  suggests that many carbon offsets in the voluntary market were subject to  a quality assurance mechanism, but the fragmented nature of the market  and limited data preclude exact estimates of the use of such mechanisms.  One study estimated that more than 85 percent of the offsets purchased on  the retail market in 2007 were verified by third parties, but this estimate  did not include data on verification for many transactions. In contrast,  another study stated that the majority of voluntary offsets are currently  not certified against a third party standard. The available information  suggests that fewer providers use registries to track the ownership and  disposition of offsets than use third party verification or other quality  assurance mechanisms. For example, one study estimated that more than  50 percent of the offsets available on the retail market were not listed in a  registry, but this estimate did not include data for many transactions.  Because of incomplete and conflicting data on the use of quality assurance  mechanisms, including registries, we cannot accurately gauge the extent  of their use. In addition, these data limitations detract from the market’s  transparency.
section_title: Market Participants Face Challenges in Ensuring the Credibility of Offsets
paragraphs: Our interviews with stakeholders identified additionality and the presence  of many different verification and monitoring methods as the two greatest  challenges facing participants in the market. This is important because  stakeholders and the available literature identify additionality and  verification and monitoring as among the most important characteristics  for establishing the credibility of offsets. (See app. V for more  information about stakeholders’ ratings of characteristics of offset  credibility and market challenges.)
According to most stakeholders and key studies, additionality is  fundamental to the credibility of offsets because only offsets that are  additional to business-as-usual activities result in new environmental  benefits. However, certain stakeholders said that additionality is not a  critical factor at this early stage in the development of carbon markets and  that the key goal should be to keep transaction costs and barriers to entry  low to create financial incentives for reducing emissions. Several  stakeholders said that there is no correct technique for determining  additionality because it requires comparison of expected reductions  against a projected business-as-usual emissions baseline (also referred to  as a counterfactual scenario). Determining additionality is inherently  uncertain because, it may not be possible to know what would have  happened in the future had the projects not been undertaken.
Stakeholders offered different definitions for additionality and preferred  different methods for determining whether projects are additional. For  example, some stakeholders said that additionality should be evaluated on  a case-by-case examination of the unique circumstances of each project,  while other stakeholders preferred evaluating projects against efficiency  standards for a technology or sector, known as a performance benchmark  approach. There are many other ways to determine whether projects are  additional, and many stakeholders said that applying a single test is too  simplistic because every project is different from others and operates  under different circumstances. See table 2 for descriptions of selected  additionality tests.
Stakeholders also identified the existence of many different verification  and monitoring methods as a key challenge to ensuring the credibility of  offsets. There are many standards for measuring, verifying, monitoring,  and tracking the distribution of carbon offsets but few standards, if any,  that cover the entire supply chain. The proliferation of standards has  caused confusion in the market, and the existence of multiple quality  assurance mechanisms with different requirements raises questions about  the quality of offsets available on the voluntary market, according to many  stakeholders.
The lack of standardization in the U.S. market may also make it difficult  for consumers to determine whether offsets are fully fungible— interchangeable and of comparable quality—a characteristic of an efficient  commodity market. The term “carbon offset” implies a uniform  commodity, but offsets may originate from a wide variety of project types  based on different quantification and quality assurance mechanisms.  Because offsets are not all the same, it may be difficult for consumers to  understand what they purchase. In addition, several stakeholders said that  a standardized offset registration process would foster transparency and  prevent double-counting. Because there is no single registry and because  of a lack of communication among existing registries, it is difficult for  consumers to determine the quality of the offsets they purchase.
Certain stakeholders said that a single standard would bring greater  credibility to the voluntary carbon offset market and result in projects that  meet more stringent protocols. However, some stakeholders said that they  did not expect that a single standard would emerge because of the wide  variety and complexity of offset projects. Further, several stakeholders  said that a single standard may not be desirable because it could stifle  innovation and limit access to the market. Certain stakeholders said that  the flexibility offered by multiple standards encourages the testing of new  methodologies and emissions reduction technologies.
While the concept of carbon offsets rests on the notion that a ton of  carbon reduced, avoided, or sequestered is the same regardless of the  activity that generated the offset, some stakeholders believe that certain  types of projects are more credible than others. Specifically, the  stakeholders identified methane capture and fuel-switching projects as the  most credible, and renewable energy certificates (REC) and agricultural  and rangeland soil carbon sequestration as less credible. Some  stakeholders also pointed out that projects that use future value  accounting practices to calculate offsets may be less credible. However,  certain stakeholders said that this does not mean such projects should be  categorically excluded from the offset market, only that they may require  more rigorous quality assurance. Approximately one-third of the  respondents said that credibility varies depending upon circumstances  specific to the project. See table 5 in appendix V for more details about  stakeholders’ rating of the credibility of different types of carbon offset  projects.
The stakeholders’ views on the credibility of different project types may  stem from the fact that methane and fuel-switching projects are relatively  simple to measure and verify, while RECs, forestry, and agricultural and  rangeland soil carbon projects face challenges related to additionality,  measurement, and permanence. According to several stakeholders, RECs  and carbon offsets are not comparable environmental commodities and  differ in their objectives, the actions they represent, and the standards by  which they are defined. RECs certify that a certain quantity of electricity  has been generated from a qualifying type of renewable generation  technology, whereas carbon offsets represent an amount of carbon  reduced in comparison with a projected business-as-usual emissions  baseline. RECs may be bought and sold to satisfy state-level requirements  to produce electricity from renewable sources—known as renewable  portfolio standards—and also in the voluntary carbon offset market. The  carbon benefits of RECs may be double-counted if sold in both markets,  according to some stakeholders. With respect to agricultural and  rangeland sequestration and forestry, certain stakeholders said it is  difficult to accurately measure emissions reductions from these types of  projects. In addition, forestry offset projects may not be permanent  because disturbances such as insect outbreaks and fire can return stored  carbon to the atmosphere.
Projects using future value accounting practices to calculate offsets may  also be less credible than those that do not, according to some  stakeholders. Ensuring the credibility of offsets purchased before they are  produced inherently involves a higher degree of uncertainty than  purchasing an offset that has already been generated. Some stakeholders  told us that future value accounting practices expose consumers to more  risk that the offsets will not materialize because it is more difficult to  verify and monitor such projects over time. Other stakeholders said that  future value accounting is an important way to fund certain types of offset  projects that might otherwise not be possible.
section_title: Information Provided to Consumers Offers Limited Assurance of Credibility
paragraphs: The information provided to consumers about offset projects and quality  assurance mechanisms offers limited assurance of credibility, according to  certain stakeholders and analysis of documents obtained through the  purchase of offsets. Several studies and stakeholders said that it is difficult  for consumers to make educated choices about offset purchases because  the information they need may not be provided by retail offset providers.
However, one stakeholder said that the strengths and weaknesses of  offsets could be determined with a reasonable amount of due diligence,  which is important to any buyer of a commodity in an emerging market.
To better understand the perspective of consumers, we purchased offsets  from 33 retail providers and found that the information provided about the  offsets varied considerably and offered limited assurance of credibility. We  retrospectively analyzed information provided to us by the retailers  directly as a result of the transaction as well as information provided on  their Web sites. We expected that the information provided by retailers as  a result of the transaction would yield detailed project-specific  information related to credibility, and our review of Web sites was  intended to supplement the information received directly from providers  as a result of transactions. We found that retailers provided limited  information about important characteristics for establishing the credibility  of offsets, including additionality, verification, and the use of a registry to  track offsets. We also found that few retailers identified specific projects  associated with our transactions, and that the information provided on  Web sites—in some cases general information about the retailers’ quality  assurance approaches—could not be linked to particular transactions. As  a result, we found it difficult, in many cases, to determine exactly what we  had purchased, and consumers in the offset market may face similar  challenges.
With respect to information provided directly as a result of a transaction, 3  of 33 retailers said that their offsets were additional but only 2 explained  how they defined additionality. The remaining 30 retailers did not provide  information on additionality. With regard to verification, less than one- third of retailers (9 of 33) specified that their offsets were verified by a  third party. The remaining 24 retailers did not provide information on  verification. In addition, 5 of 33 retailers specified that the offsets were  tracked in a registry and included the name of the registry, and 4 of these  provided associated tracking numbers. The remaining 28 retailers did not  provide information about the use of a registry. Further, as a direct result  of the transaction, less than half of the retailers (13 of 33) provided  information about whether the transaction resulted in the exchange of a  good or the provision of a service.
We also found that retailers provided limited information about the offset  projects associated with our transactions. Less than half (13 of 33)  provided information about the location of their projects, but the majority  of retailers (24 of 33) provided information on the type of project, and 9 of  these retailers identified multiple project types. In addition, 8 retailers  provided information related to the timing of the project, specifically,  when the project started or is scheduled to begin or when the offsets  would occur.
However, many provided more information on their Web sites that was not  directly related to our transactions. We found that almost all of the  retailers (30 of 33) provided some information related to verification on  their Web sites. This information varied considerably among the retailers,  with all 30 stating that the offsets were verified and 6 providing detailed  information such as verification reports. With regard to additionality, 22  retailers provided information on their Web sites, including some  explanation of how they define additionality. Finally, less than half of the  retailers (12 of 33) said that their offsets are tracked in a registry, including  10 retailers that identified a specific registry, and 2 that operate their own.
section_title: Both Increased Federal Oversight and the Use of Offsets in Climate Change Policies Involve Trade-offs between Cost and Credibility
paragraphs: Increased government oversight of the voluntary market could address  some concerns about the credibility of offsets by standardizing quality  assurance mechanisms and registries, and this could encourage new  projects and help protect consumers. However, more oversight could  reduce flexibility and increase the administrative burden for government  agencies and providers, which could raise costs and stifle innovation.  Using offsets in a mandatory emissions reduction program would involve  similar trade-offs. Offsets could lower the cost of compliance, encourage  investment and innovation in sectors not required to reduce emissions,  and provide time for regulated entities to change existing technologies.  However, if the offsets used for compliance are not credible, the  environmental integrity of a compliance system may be compromised.
subsections: section_title: More Oversight of the Voluntary Market Involves Trade-offs between Credibility and Cost
paragraphs: Increased oversight could address some concerns about the credibility of  offsets by standardizing the use of quality assurance mechanisms and  registries. Some stakeholders said that the voluntary offset market cannot  operate efficiently without standardized mechanisms for ensuring the  credibility of offsets. More government oversight could also help increase  the fungibility and commoditization of offsets and improve the market’s  transparency. Other benefits of oversight and standardization could  include encouraging the development of new projects, improving  consumer protection and awareness, and addressing concerns about  weaknesses of the voluntary market spilling over into a future compliance  market. Certain stakeholders said that enhanced oversight of the voluntary  carbon market would provide it with increased legitimacy that would help  to spur new offset projects and increase the size of the market.
On the other hand, increased oversight would likely increase the cost of  providing offsets in the voluntary market by introducing complex quality  assurance requirements, which reduce flexibility and increase transaction  costs. Oversight could also stifle innovation, according to some  stakeholders, by requiring complex procedures with greater administrative  costs, and by excluding some types of offset projects from the market. The  federal government could also incur costs associated with increased  oversight activities.
Stakeholders held different opinions about whether the government  should play a larger role in the U.S. voluntary market. Several said that  organizations have already invested time, money, and expertise in  developing standards and that increased oversight should rely on and  build on these investments. Other stakeholders thought that standardized  quality assurance methods and registries would evolve naturally over time  as the result of market forces. Several stakeholders said that government  should focus on creating a mandatory greenhouse gas reduction program  instead of improving the voluntary market and that a future compliance  market will largely drive the standards for the voluntary market.
Certain stakeholders and available studies illustrated several policy  options for enhancing oversight of the market. One option would involve  requiring participants in the market to adopt standardized quality  assurance mechanisms and use a specific registry. A second option would  involve the federal government providing incentives or developing  voluntary programs to encourage participants to take certain actions.  Other options include prohibiting certain types of projects that are  considered less credible and applying discounts or imposing insurance  requirements on certain types of offsets with greater uncertainty or  potential for failure. As an example of government oversight in the  voluntary offset market, several stakeholders mentioned the United  Kingdom Department for Environment, Food and Rural Affairs (DEFRA)  framework for the Code of Best Practice for Carbon Offsetting. The code  is designed to increase consumer confidence in the integrity of carbon  offsets available for purchase in the United Kingdom. Offset products  meeting the requirements of the code will be assigned a certification mark  that providers may use for marketing purposes. The code initially covers  only Certified Emissions Reductions that are compliant with the Kyoto  Protocol, but voluntary emissions reductions could be included in the  code in the future.
section_title: Offsets Could Lower the Cost of Future Mitigation Policies but Increase Uncertainty about Achieving Emissions Reductions
paragraphs: Allowing offsets in a future compliance scheme could decrease the overall  compliance costs because it could provide regulated entities with a wider  variety of compliance options. In many cases, regulated entities may find it  economically advantageous to buy offsets instead of reducing emissions  themselves. Recent EPA analyses state that the cost of compliance with  mitigation policies under consideration by the Congress decreases  substantially as the use of offsets increases. Specifically, the agency’s  recent analysis of the Climate Security Act of 2008 (S. 2191) reported that  if the use of domestic and international offsets is unlimited, then  compliance costs fall by an estimated 71 percent compared to the bill as  written. Alternatively, the price increases by an estimated 93 percent  compared to the bill as written if no offsets are allowed. A 2007 EPA study  analyzing the economic impacts of the Climate Stewardship and  Innovation Act of 2007 (S. 280) found similar results. Other quantitative  studies by economists also show that the use of offsets will decrease the  cost of achieving emissions reductions. In general, the carbon price is  lower in quantitative models of a U.S. compliance system when domestic  and international offsets are widely available and their use is  unrestricted. Using offsets in a compliance scheme could also increase  the administrative costs of the scheme because of increased government  oversight of quality assurance mechanisms used to ensure the credibility  of offsets.
A lower carbon price due to the availability of offsets as a compliance tool  may have several effects, according to available economic literature. In the  short term, lower prices make compliance with a policy to reduce  emissions less expensive. Lower prices may also facilitate agreements to  limit emissions and enhance their environmental integrity by reducing the  incentive for regulated sources to either cheat on the agreement or shift  production to areas where carbon emissions are not regulated. Including  offsets in compliance schemes could also encourage investment and  innovation in unregulated sectors of the economy, possibly at the expense  of investment and innovation in regulated sectors. According to several  stakeholders and available economic literature, a market for offsets may  support climate-related innovation in sectors that supply offsets. For  example, unregulated facilities may devise new ways to limit greenhouse  gas emissions because they could sell offsets in the compliance market.
The availability of offsets in a compliance scheme could also provide time  for regulated facilities to develop new technologies and processes. Some  stakeholders said that access to offsets provides more flexibility in  meeting short-term requirements, leaving more time to implement long- term plans for internal emissions reductions and technology development.  Further, according to certain stakeholders, offsets may allow regulated  sources to continue using assets such as power plants until the end of  their useful lives, thereby reducing their premature retirement and the cost  of emissions reductions overall. In addition, multiple stakeholders said  that offsets may allow covered sources to avoid investing in long-lived  assets that achieve only marginal improvements, instead focusing on more  effective assets that take longer to develop.
On the other hand, allowing the use of offsets could compromise the  environmental integrity of a compliance system if nonadditional offsets  are used as compliance tools. Certain stakeholders said that because  offset programs increase the total quantity of compliance instruments  available to regulated sources, the integrity of the system can be  maintained only if offsets are additional. If a significant number of  nonadditional offsets enter the market, emissions may rise beyond levels  intended by the scheme, according to some stakeholders. Nonadditional  offsets could thus increase uncertainty about achieving emissions  reduction goals. This concern underscores the importance of using quality  assurance mechanisms to ensure the credibility of any offsets allowed into  a compliance scheme. In addition, these concerns could be minimized by  limiting the use of offsets or including policy options for enhancing  oversight of the market such as applying discounts or imposing insurance  requirements on offsets with greater uncertainty or potential for failure.
The available economic literature supports some of the environmental  integrity concerns raised by stakeholders. Economic analyses of offsets  acknowledge difficulties with their use, including baseline determination,  additionality, permanence, double-counting, and verification and  monitoring. If these criteria are more likely to be satisfied by internal  reductions from regulated sources than by offsets, the use of offsets may  result in greater emissions, according to these sources. Economists have  also identified “leakage” as a potential problem for offsets, especially  those created on a project-by-project basis. Leakage occurs when  economic activity is shifted as a result of emission control regulation.  Consequently, emissions abatement achieved in one location that is  subject to emission control regulation is diminished by increased  emissions in unregulated locations. For an offset project, leakage occurs  when economic activity is shifted from the site of the offset project to  another location or sector where emissions are not controlled. For  example, an offset project that restricts timber harvesting at a specific site  may boost logging at an alternative location, thus reducing the  effectiveness of the offset project. Forestry projects are thought to be  particularly vulnerable to these challenges, as are credits originating in  developing countries, even though these offsets have been identified as  sources of significant cost savings to compliance regimes in developed  countries.
Multiple stakeholders also said that including offsets in a compliance  scheme could slow investment in certain emissions reduction technologies  in regulated sectors and lessen the motivation of market participants to  reduce their own emissions. According to some stakeholders, if more cost- effective offsets are available as compliance tools, regulated sources may  delay making investments to reduce emissions internally, an outcome that  could ultimately slow the development of, and transition to, a less carbon- intensive economy. For example, a senior representative of the Council on  Environmental Quality said that there is a trade-off between short-term  focus on the marginal cost of reductions and long-term investment in  technology. This representative said that offsets may be a cheaper way to  reduce emissions today, but that investment in technology, not offsets,  builds emissions reductions into the economy for the long term. Other  stakeholders and the available economic literature raise similar concerns.  According to the literature, a market for offsets may support innovation in  sectors that supply offsets at the expense of investment in technology to  reduce emissions from regulated sources. Furthermore, certain  stakeholders said that it may be more difficult for regulators to mandate  the amount and timing of emissions reductions in specific economic  sectors if offsets are part of a compliance scheme.
Certain stakeholders suggested imposing limits on the use of offsets in a  compliance scheme to address some of these challenges, but stakeholders  held different opinions about the potential effectiveness of this approach.  Some said it may be necessary to place restrictions on the use of offsets in  order to achieve internal emissions reductions from regulated sources. If  all the effort to reduce emissions is in the form of offsets, then the  compliance system may not provide the price signals necessary for long- term investment in technology at domestic industrial facilities and power  plants, according to multiple stakeholders. They said that domestic  abatement is central to achieving the long-term goal of any emissions  reduction system. However, other stakeholders said that incorporating  offsets into a compliance scheme will enable greater overall climate  benefits to be achieved at a lower cost, as long as offsets are additional  and are not double-counted.
Existing international programs to limit greenhouse gas emissions that  allow the use of offsets for compliance may provide insights into trade-offs  between cost and credibility. For example, the European Union’s program  to limit greenhouse gas emissions enables regulated entities to use certain  types of offsets for compliance. GAO is reviewing the European Union’s  program, including the role of offsets, in a report that we will issue later in  2008.
section_title: Concluding Observations
paragraphs: The voluntary market for carbon offsets provides a potentially low-cost way  for purchasers of offsets to compensate for their emissions of greenhouse  gases by paying others to undertake activities that avoid, reduce, or sequester  greenhouse gas emissions. However, several factors contribute to challenges  in understanding the market. First, while most markets involve tangible goods  or services, the carbon market involves a product that represents the absence  of something—in this case, an offset equals the absence of one ton of carbon  dioxide emissions. Second, ensuring the credibility of carbon offsets poses  challenges because of the inherent uncertainty in measuring emissions  reductions or sequestration relative to a projected business-as-usual scenario.  Any measurement involving projections is inherently uncertain. These  challenges are compounded by the fact that project developers produce  offsets from a variety of activities—such as sequestration in agricultural soil,  and forestry projects, and methane capture—and do not use a single set of  commonly accepted quality assurance mechanisms. Third, many transactions  do not involve a central trading platform, exchange, or registry system. These  factors limit the market’s transparency and pose challenges for market  participants, especially consumers.
Additional oversight of the voluntary market could address some of these  challenges, but would also impose costs on government oversight bodies and  increase costs for market participants. Some options for increased oversight  include requiring the use of standard quality assurance mechanisms,  mandating the use of a common registry, establishing product disclosure  requirements that help consumers evaluate an offset’s quality, establishing  best practices, developing a government certification system, providing  incentives or developing voluntary programs to encourage participants to  take certain actions, and limiting the allowable types of activities that can  generate offsets. Consideration of these approaches involves trade-offs  among cost, quality assurance, and consumer protection. The Federal Trade  Commission’s efforts to update its Green Guides for environmental marketing  claims may also enhance the existing oversight framework, which consists  primarily of laws affecting contractual agreements and fraud.
The options for enhanced oversight identified above may increase in  importance in the context of a compliance market associated with any  future policies that place binding limits on greenhouse gas emissions.  While allowing carbon offsets for compliance with mandated reductions in  emissions can decrease overall compliance costs for regulated entities,  challenges with the credibility of offsets could compromise the integrity of  a compliance scheme. In addition to the oversight options identified  above, the government could consider further steps to address  uncertainties with offsets such as limiting the extent of their use for  compliance, discounting a percentage of all offsets, and imposing  insurance requirements for offset providers and purchasers.
section_title: Matter for Congressional Consideration
paragraphs: GAO is not recommending executive actions. However, as the Congress  considers legislation intended to limit greenhouse gas emissions that allows the  use of carbon offsets for compliance, it may wish to incorporate provisions that  would direct the relevant federal agency (or agencies) to establish (1) clear  rules about the types of offset projects that regulated entities can use, as well as  standardized quality assurance mechanisms for these allowable project types;  (2) procedures to account and compensate for the inherent uncertainty  associated with offset projects, such as discounting or overall limits on the use  of offsets for compliance; (3) a standardized registry for tracking the creation  and ownership of offsets; and (4) procedures for amending the offset rules,  quality assurance mechanisms, and registry, as necessary, based on experience  and the availability of new information over time.
As agreed with your offices, unless you publicly announce the contents of this  report earlier, we plan no further distribution until 30 days from the report  date. At that time, we will send copies to others who are interested and make  copies available to others who request them. In addition, the report will be  available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-3841 or stephensonj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix VIII.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report examines (1) the scope of the U.S. voluntary carbon offset  market, including the role of the federal government; (2) the extent to  which mechanisms for ensuring the credibility of voluntary carbon offsets  are available and used, and what, if any, related information is shared with  consumers; and (3) the trade-offs associated with increasing the oversight  of the U.S. voluntary carbon offset market and incorporating offsets into  broader climate change mitigation policies.
In conducting our work, we reviewed available government and trade  literature related to carbon offset markets and conducted structured and  open-ended interview questions with nonprobability samples of 34  stakeholders, including 12 providers, 3 third party verifiers, 7 developers  of standards, and 12 other knowledgeable stakeholders. We selected  nonprobability samples of relevant stakeholders based on analysis of  existing market literature, referrals from other stakeholders, and other  criteria, such as participation in carbon offset trade conferences. In  general, we selected stakeholders that were frequently cited in available  studies of the offset market or participated in related conferences and  meetings, and preferentially selected stakeholders based in the United  States. We also conducted scoping interviews with several trade groups  and other knowledgeable stakeholders.
To describe the scope of the U.S. voluntary carbon offset market,  including the role of the federal government, we interviewed officials  responsible for offset-related programs at the Department of Agriculture  (Forest Service), the Department of Energy (Energy Information  Administration), the Department of the Interior (U.S. Fish and Wildlife  Service), and the Environmental Protection Agency, and officials at the  Federal Trade Commission and the Commodity Futures Trading  Commission. To obtain an official administration position on carbon  offsets, we met with the Council on Environmental Quality. We attended  public meetings and congressional briefings and attended several  conferences focused on the voluntary carbon offset market. We met with  officials responsible for managing state and regional greenhouse gas  mitigation programs, including California’s recently passed legislation to  regulate greenhouse gases (Assembly Bill 32), the Regional Greenhouse  Gas Initiative (RGGI), and the Western Climate Initiative. We met with  representatives of the Chicago Climate Exchange, the Chief Administrative  Officer of the House of Representatives, and other officials involved in the  purchase of carbon offsets for the House of Representatives. To obtain  perspectives on the role of the voluntary offset market in comparison and  as a complement to compliance markets, we interviewed officials at the  United Kingdom (UK) Department for Environment, Food and Rural  Affairs (DEFRA). We also met with the UK National Audit Office, and a  variety of other offset market participants and stakeholders in the UK. To  obtain specific information about the supply of offsets in the United  States, including the number and type of offset projects and the quantity of  offsets by state, we analyzed data purchased from Point Carbon, a  provider of independent news, analysis, and consulting services for  European and global power, gas, and carbon markets. Data presented in  this report on the supply of offsets refer specifically to offsets generated  from projects located in the United States. Point Carbon estimates that its  database accounts for approximately 80 percent of the offsets generated  from projects located in the United States based on its analysis of  domestic and global carbon markets. As such, our analysis may not have  included all projects that are operating in the United States; however, we  believe these data represent the best information available. To assess the  reliability of the Point Carbon data, we (1) performed electronic testing of  required data elements, (2) reviewed existing information about the data  and the system that produced them, and (3) interviewed Point Carbon staff  who are knowledgeable about the data. We determined that the data were  sufficiently reliable for the purposes of this report.
To analyze the extent to which mechanisms for ensuring the credibility of  voluntary carbon offsets are available and used, and what, if any, related  information is shared with consumers, we obtained about $100 worth of  offsets from each of a nonprobability sample of 33 retail providers for a  total expenditure of approximately $3,300. The information we obtained  from the nonprobability sample of purchases does not address how the  market may evolve over time or how consumers interpret the information  they receive from providers. To select the sample of retailers from whom  offsets would be obtained, we used available information to identify  providers that sold or accepted donations for offsets online. To select the  sample of retailers, we developed a list of providers based on primary  sources, including reports, studies, surveys, and lists from membership  organizations. We used information from providers’ Web sites to identify  whether providers sold or accepted donations for offsets online and  selected retailers that did and were identified in two or more primary  sources. We conducted online transactions because they cater directly to  individual consumers, a portion of the U.S. voluntary carbon offset market  that is not well characterized in available studies. We analyzed the  documentation directly related to each transaction, including (1)  transaction documents—information provided while conducting the  online transaction, (2) e-mail documents—any information received  through e-mail after conducting the transaction, and (3) mail documents— any information received through the mail after conducting the  transaction. We analyzed the documentation directly related to the  transaction, if provided, to determine whether it contained information  related to volume, price, project type and location, standards, registry,  verification, monitoring, additionality, timing, and ownership. We also  reviewed information presented on the retailer’s Web site to determine  whether information was provided about the retailers’ offsets related to  price, project type and location, standards, registry, verification,  monitoring, additionality, timing, and ownership.
To assess the trade-offs associated with increasing the oversight of the  U.S. voluntary carbon offset market and incorporating offsets into broader  climate change mitigation policies, we reviewed available economic  literature and information collected through stakeholder responses to  structured and open-ended interview questions. We conducted our work  from July 2007 to August 2008.
section_title: Appendix II: Description of Offset Project Types
paragraphs: Appendix II: Description of Offset Project  Types Projects that capture and combust or contain methane produced from agricultural  operations. This involves the installation of complete-mix or plug-flow digesters or lagoon  covers that collect aggregated waste from dairy, avian, and/or hog sources.
Projects that sequester carbon in soil through the adoption of conservation tillage and  activities such as planting grass or adopting certain tilling practices.
Projects that capture and sequester greenhouse gases using biological techniques such  as algae lagoons.
Projects that separate CO2 emissions from industrial and energy-related emissions  sources, transport the CO2 to a suitable storage site, and then isolate the CO2 by  injecting it into an underground geologic formation such as active and abandoned oil and  gas reservoirs, saline aquifers, or unminable coal seams.
Projects that capture and burn or contain methane emitted by coal mines.
Projects that reduce CO2 emissions by reducing on-site combustion of natural gas, oil, or  propane for end use by improving the energy efficiency of fuel usage and/or the energy  efficient delivery of energy services.
Projects that occur on land managed in accordance with sustainable forestry practices  and promote the restoration of native forests by using mainly native species and avoiding  the introduction of invasive nonnative species.
Projects that capture and burn or contain methane produced by landfills.
Projects that involve the adoption of certain sustainable grazing practices on rangeland  that include moderate livestock density and rotational and seasonal grazing techniques.
Projects that reduce emissions by generating energy from renewable sources including  but not limited to hydro, wind, and solar power.
RECs are tradable certificates that represent the environmental attributes that result from  one megawatt hour of electricity generated by a renewable source, such as wind power.
section_title: Appendix III: Volume and Number of Offset Projects by State in 2007
subsections: section_title: Multiple States
paragraphs: Twelve projects occur across multiple states. The data for these projects are included under the  category of multiple states and not included in the volume or number of projects for the individual  states involved in these projects.
section_title: Appendix IV: Description of the Purchase of Carbon Offsets by the Chief Administrative Officer of the House of Representatives
paragraphs: On March 1, 2007, the Speaker and Majority Leader of the U.S. House of  Representatives and Chairwoman of the Committee on House  Administration directed the House Chief Administrative Officer (CAO) to  develop a Green the Capitol Initiative to provide an environmentally  responsible and healthy working environment for House employees.  Among other measures, the CAO’s June 21, 2007, report recommended  that the House operate in a carbon neutral manner by the end of the 110th  Congress and identified three strategies to achieve this goal, including (1)  purchasing electricity generated from renewable sources; (2) meeting the  House’s heating and cooling needs by switching from using coal, oil, and  natural gas at the Capitol power plant to natural gas only; and (3)  purchasing offsets to compensate for any remaining carbon emissions.  According to the CAO, using strategies one and two, the House would  need to offset 24,000 short tons of carbon dioxide emissions to operate in  a carbon neutral manner.
The CAO recommended purchasing carbon offsets through the Chicago  Climate Exchange (CCX), a voluntary greenhouse gas reduction and  trading system through which members make commitments to decrease  their emissions. If CCX members reduce emissions beyond their reduction  goals, they may sell the extra reductions to other members of the  exchange. In addition to emitting members, the CCX platform is also  available to offset providers, who may register tons on CCX that represent  greenhouse gas mitigation projects. To meet their commitments, CCX  members may trade emissions reductions or offsets known as Carbon  Financial Instruments (CFI). According to CCX, to verify the validity of  offsets offered for sale on the exchange, and ensure that the underlying  offset projects conform to CCX rules, all tons registered for sale on the  CCX platform from offset projects must have been verified by CCX- approved outside verifier firms that are specialized in particular fields. The  outside verification firms are to ensure that the projects are in accordance  with CCX eligibility rules and methodologies, verify that projects have  been implemented, conduct on-site inspections, and send verification  reports to CCX. CCX staff and, in certain cases, the CCX Offsets  Committee, review the verification reports and request corrective actions,  if necessary. After completion of any corrective actions, CCX sends the  verification reports to the Financial Industry Regulatory Authority  (FINRA) for a final review to ensure project verification documentation is  complete. Uniquely serialized Carbon Financial Instruments based on  these offsets are then issued to the project owner’s CCX registry account,  and may then be sold in the CCX market. The market participants’ registry  accounts help the market participant track purchases and sales of offsets  acquired or sold on the exchange that can be used to identify specific  information about the offset projects, including verification documents.  According to CCX, all participants have the option of buying CFIs  anonymously and all transaction prices must be reported so that CCX can  post prices on its trading platform.
The House Appropriations Committee, in its June 19, 2007, report on the  2008 Legislative Branch Appropriations Bill, stated: “The Committee  believes it is important to offset greenhouse gases generated by the House.  In that regard, the Committee requests the Chief Administrative Officer  purchase Carbon Financial Instruments to offset carbon produced by all  House operations. These offsets should be fully transparent, verified,  American, project-based offset credits.” The CAO requested and received  approval from the Committee on House Administration on August 29,  2007, to purchase offsets and submit an application to CCX with the  necessary fee. According to CAO officials, CCX was the best option for the  House because it is well established relative to the rest of the industry, has  clear verification and monitoring standards, and allows for the anonymous  purchase of offsets. The CAO requested that CCX conduct a blind auction  because the CAO did not want to decide or know which projects were  selected. According to the CAO, this approach was adopted to eliminate  any opportunity for House funds to be used to benefit one geographical  region or congressional district over another. For example, the CAO  decided not to purchase offsets on the retail market from domestic  nonprofit groups because a decision to select specific vendors or offset  projects in one location instead of another could be construed as a  political act. On October 23, 2007, CCX made a public announcement to  potential sell-side market participants that it would hold the reverse  auction on behalf of the House of Representatives and stipulated that the  projects sought had to be verified and approved CCX projects undertaken  in the United States. The auction closed on November 1, resulting in the  purchase of 30,000 metric tons for a total of $90,550 including transaction  fees. Results of the auction were announced at a public ceremony on  November 5, 2007.
The CAO bought offsets before implementing the emissions reduction  strategies specified in the Green the Capitol Initiative. Based on  calculations performed for the Green the Capitol Initiative report by the  Department of Energy and the Lawrence Berkeley National Laboratory,  the carbon footprint of the House is approximately 91,000 short tons.  According to the CAO, until the Architect of the Capitol’s metering  program is complete, in March 2009, House emissions data are based on  historical estimates. To reach the goal of carbon neutrality, the Green the  Capitol Initiative called for two emissions reduction strategies and the  purchase of carbon offsets to compensate for whatever emissions  remained. Purchasing electricity generated from renewable sources would  decrease emissions to 34,000 short tons. Switching from burning coal, oil,  and natural gas at the Capitol power plant to burning only natural gas  would further decrease emissions to 24,000 short tons. The third strategy  to reach the goal of carbon neutrality was to purchase offsets for the  remaining carbon emissions—24,000 short tons. However, the first two  strategies had not been completed when the CAO purchased offsets  through CCX in November 2007. Concerning the first two strategies, the  Architect of the Capitol purchased renewable energy in June 2008, and the  CAO, in written comments, told us that the Architect of the Capitol had  purchased natural gas to account for the House’s portion of energy used at  the Capitol Power Plant. According to the CAO, there was no benefit to  waiting to purchase offsets.
The CAO used data from 2006 that GAO developed as part of a broader  characterization of greenhouse gas emissions from legislative branch  agencies and later analyzed by Lawrence Berkeley National Laboratory to  identify the amount of offsets the CAO would purchase to reach its goal of  carbon neutrality by the end of 2008. The CAO stated that it does not have  current emissions data and that the Architect of the Capitol does not have  meters that enable it to directly monitor its energy use or emissions in real  time. According to the CAO, emissions data projected from a 2006 baseline  provide a reasonable estimate of current emissions.
In November 2007, the CAO purchased 30,000 metric tons of offsets  through CCX, which is more than the 24,000 short tons identified in the  Green the Capitol Initiative report and a memorandum approving the  CAO’s Chicago Climate Exchange application, which was signed by the  Committee on House Administration in August 2007. The CAO purchased  approximately 9,075 short tons (about 8,231 metric tons), more than  identified in the Green the Capitol Initiative, an amount valued at about  $24,447 based on the weighted average purchase price of $2.97 per metric  ton paid by the CAO. According to the House CAO and CCX, the purchase  of additional tons was an administrative error that resulted from the  difference between short and metric tons and reference to the draft report  rather than the final report. An April 2007 draft of the Green the Capitol  Initiative report identified the need to purchase 34,000 tons, but the June  2007 final report identified the need to purchase 24,000 short tons. On  March 27, 2008, the CAO requested that CCX retire 24,000 of the 30,000  metric tons. Currently, 6,000 metric tons remain in the CAO’s registry  account, which, according to the CAO, may be used to offset additional  emissions generated by the operation of the House. The CAO said that the  initial purchase of carbon offsets was an approximation and plans to  reconcile the purchase in fiscal year 2009.
Because it retired 24,000 metric tons instead of short tons, the CAO retired  about 2,460 short tons (about 2,231 metric tons) more than identified in  the Green the Capitol Initiative report. These extra tons are valued at  about $6,626 based on the CAO’s purchase price. According to the CAO,  the retirement of extra tons may address uncertainties in the emissions  calculations used to determine the amount of offsets to purchase.
Following the auction, the CAO received information from CCX about the  number and types of projects underlying its purchase. No other  information was provided by CCX or requested by the CAO. The offsets  purchased by the CAO came from a variety of project types, including  agricultural methane, agricultural soil sequestration, coal mine methane,  landfill methane, and renewable energy. The CCX auction notice required  that offsets submitted to the auction originate from U.S.-based projects,  and CCX officials said that they screened the registry accounts of auction  participants to confirm that the sellers’ offsets were from U.S.-based  projects. Registry accounts maintained by CCX for market participants  track the type of information necessary to satisfy the criteria directed by  the appropriations committee report. Thus, the CAO could verify that the  offsets met the criteria, if necessary. The CAO can also request that CCX  provide additional quality assurance documentation, including detailed  verification reports.
section_title: Appendix V: Summary of Stakeholder Responses to Interview Questions
section_title: Appendix VI: Summaries of Selected International, Regional, and State Programs
subsections: section_title: California Global Warming Solutions Act (Assembly Bill 32)
paragraphs: On September 27, 2006, the California Global Warming Solutions Act was signed into  law. The act requires the California Air Resources Board (ARB) to establish a program to  reduce the state’s emissions to 1990 levels by 2020. On June 26, 2008, ARB released a  draft scoping plan for public comment that contains the strategies California will use to  reduce emissions of greenhouse gases. The draft includes a discussion of the potential  role of offsets in implementing AB 32. Specific commitments on the role of offsets in AB  32 will be available in a revised scoping plan that ARB will publish in early October 2008  for comment. This version of the plan will be presented to the Air Resources Board in  November 2008 for possible adoption by the board. AB 32 requires the board to adopt a  scoping plan by January 1, 2009. Regulations based on the final scoping plan must be  adopted by January 1, 2011, and are to become effective on January 1, 2012. More  information about implementation of the California Global Warming Solutions Act is  available at http://www.arb.ca.gov/cc/cc.htm.
The governors of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Ohio, South  Dakota, and Wisconsin, and the premiers of the Canadian provinces of Manitoba and  Ontario participate or observe in the Midwestern Greenhouse Gas Reduction Accord, an  agreement to establish greenhouse gas reduction targets and time frames, and to  develop market-based mechanisms to reach these targets. The accord was established  in November 2007. An offsets subgroup is expected to make recommendations about  the role of offsets in a regional emissions reduction program by September 2008,  according the subgroup’s work plan. More information about the Midwestern  Greenhouse Gas Reduction Accord is available at http://www.midwesternaccord.org/.
Regional Greenhouse Gas Initiative (RGGI)
The Regional Greenhouse Gas Initiative is a cooperative effort by Northeast and Mid- Atlantic states to design a regional cap-and-trade program initially covering carbon  dioxide emissions from power plants in the region. Connecticut, Delaware, Maine,  Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and  Vermont are participating in the RGGI effort. The District of Columbia, Pennsylvania,  Ontario, Quebec, the Eastern Canadian Provinces, and New Brunswick are observers in  the process. On August 15, 2006, the participating states issued a model rule that details  the proposed RGGI program. Offset projects included in the program are initially limited  to five types of projects, including landfill methane capture and sequestration, because  these types occur within the borders of the RGGI states, among other factors. The  model rule specifies offset project requirements including criteria for additionality,  quantification and verification of emissions reductions, independent verification, and  accreditation standards for independent verifiers. Each source required to reduce  emissions would generally be able to use offsets to comply with up to 3.3 percent of its  obligation in a single compliance period. If the compliance price hits certain levels, the  use of offsets may increase to 5 or 10 percent of required reductions. The first 3-year  compliance period will begin January 1, 2009. More information about RGGI is available  at http://www.rggi.org/index.htm.
On February 19, 2008, the United Kingdom (UK) Department for Environment, Food and Rural  Affairs announced the framework for the Code of Best Practice for Carbon Offsetting to provide  UK consumers with guidance on carbon offsets. The code is designed to increase consumers’  understanding of offsetting and its role in addressing climate change, increase consumer  confidence in the integrity and value for money of the offset products available to them, and to  provide signals to the UK offset sector on the quality and verification standards to which they  should aspire. Offset products meeting the specifications of the code will be assigned with a  certification mark, which providers may use on their Web sites and other materials. The code is  voluntary and offset providers can choose whether to seek accreditation for all, or some, of their  offsetting products. The code initially covers only Certified Emissions Reductions (CER), that  are compliant with the Kyoto Protocol, because there is currently no definition or fully  established common standard for voluntary offsets. DEFRA has asked the voluntary offset  industry to jointly develop a standard that could be included in the code in the future. For more  information about the DEFRA Code of Best Practice for Carbon Offsetting see  http://www.defra.gov.uk/environment/climatechange/uk/carbonoffset/index.htm.
The Western Climate Initiative was launched in February 2007 by the governors of  Arizona, California, New Mexico, Oregon, and Washington to develop regional strategies  to address climate change. Partners in the Initiative also include Montana, Utah, and the  Canadian provinces of British Columbia, Ontario, Quebec, and Manitoba. Other U.S. and  Mexican states have joined as observers. The WCI regional greenhouse gas emission  reduction goal is an aggregate reduction of 15 percent below 2005 levels by 2020. On  May 16, 2008, the WCI released recommendations about how to structure the region’s  cap-and-trade emissions reduction program, including a series of recommendations  about how to incorporate offsets into such a program. A more detailed version of the  draft offset recommendations was released in July 2008, and WCI is striving to reach a  final agreement on overall program design in August 2008. More information about the  WCI draft design recommendations on offsets is available at  http://www.westernclimateinitiative.org/.
section_title: Appendix VII: Selected Carbon Offset Standards
paragraphs: Appendix VII: Selected Carbon Offset  Standards The California Registry serves as a voluntary greenhouse gas (GHG) registry to protect  and promote early actions to reduce GHG emissions. The California Registry develops  reporting standards and tools for organizations to measure, monitor, third party verify, and  reduce their GHG emissions consistently across industry sectors and geographical  borders. For more information about the California Registry, see  http://www.climateregistry.org/.
The CarbonNeutral Protocol, a proprietary standard developed by The CarbonNeutral  Company, describes the requirements for achieving “CarbonNeutral” status and the  controls employed by The CarbonNeutral Company to ensure the correct use of  CarbonNeutral logos. The protocol sets out the quality requirements for projects and  schemes that produce offset credits that may be applied to make activities or entities  CarbonNeutral under this program. For more information about the Carbon Neutral  Protocol, see http://www.carbonneutral.com/pages/cnprotocol.asp.
CCX is a voluntary greenhouse gas reduction and trading system through which  members make commitments to decrease their emissions. CCX participants may trade  offsets generated from qualifying emissions reduction projects. CCX employs a central  registry for recording emissions as well as holdings and transfers of its serialized  emission units–Carbon Financial Instruments (CFI). The registry is linked with the CCX  electronic trading platform. For more information about CCX, see  http://www.chicagoclimatex.com/index.jsf.
The Clean Development Mechanism (CDM) is part of the Kyoto Protocol to the United  Nations Framework Convention on Climate Change (UNFCCC). CDM enables  industrialized countries to achieve emissions reductions by paying developing countries  for certified emission reduction credits. CDM projects must qualify through a registration  and issuance process. The mechanism is overseen by the CDM Executive Board,  answerable ultimately to the countries that have ratified the Kyoto Protocol. For more  information about CDM, see http://cdm.unfccc.int/index.html.
The Climate, Community, and Biodiversity Alliance (CCBA) is a partnership among  companies, nongovernmental organizations, and research institutes seeking to promote  integrated solutions to land management around the world. CCB standards are project  design standards for evaluating land-based carbon mitigation projects in the early stages  of development. For more information about the CCB standards, see http://www.climate- standards.org/.
Climate Leaders is an EPA industry-government partnership that works with companies to  develop climate change strategies. EPA Climate Leaders, a voluntary emissions  reduction program, provides technical assistance to companies on how to calculate and  track greenhouse gas emissions over time, calculate emissions reductions from offsets,  and incorporate offsets into emission reduction strategies. EPA has developed accounting  methodologies for certain offset project types including landfill gas, manure management,  afforestation, transportation, and boiler replacement projects. Project protocols are being  developed for additional project types, including coal-bed methane, methane end use  from landfill and manure management projects, and forest management. For more  information about Climate Leaders offset methodologies, see  http://www.epa.gov/climateleaders/resources/optional-module.html.
The Climate Neutral Network is an alliance of companies and organizations committed to  developing products, services, and enterprises that have a net-zero impact on global  warming. The Climate Neutral Network certifies companies whose products, services,  and/or enterprises have a net-zero impact on global warming. The Climate Neutral  Network is closing as a nonprofit and transferring its certification program to another  nonprofit. For more information about the Climate Neutral Network, see  http://climateneutralnetwork.org/.
The Gold Standard offers a quality label to voluntary offset projects for renewable energy  and energy efficiency projects with sustainable development benefits for the local  community. Gold Standard projects are tested for environmental quality by third parties  and the Gold Standard carbon credit label is granted after third party validation and  verification of the offset project. For more information about the Gold Standard VER, see  http://www.cdmgoldstandard.org/index.php.
On February 19, 2008, the United Kingdom Department for Environment, Food and Rural  Affairs (DEFRA) announced the framework for the Code of Best Practice for Carbon  Offsetting to provide consumers with guidance on carbon offsets. Offset products meeting  the requirements of the code will be assigned a certification mark that providers may use  on their Web sites and other materials. The code is voluntary, and offset providers can  choose whether to seek accreditation for all, or some, of their offsetting products. For  more information about the DEFRA Code of Best Practice for Carbon Offsetting see  http://www.defra.gov.uk/environment/climatechange/uk/carbonoffset/index.htm.
Green-e Climate is a certification program for carbon offsets sold to consumers on the  retail market. Green-e Climate sets consumer protection and environmental integrity  standards and employs a three-step verification and certification service that ensures  supply equals sales, offsets are independently certified, and consumer disclosures are  accurate and follow program guidelines. For more information about Green-e Climate,  see http://www.green-e.org/getcert_ghg.shtml.
Greenhouse Friendly is an Australian government initiative aimed at providing businesses  and consumers with the opportunity to sell and purchase greenhouse neutral products  and services. For more information about Greenhouse Friendly, see  http://www.greenhouse.gov.au/greenhousefriendly/index.html.
ISO 14064 is a three-part international standard that provides guidance on developing  organization-level emissions inventories; quantifying, monitoring, and reporting  greenhouse gas emissions reductions at the project level; and validating and verifying  greenhouse gas emissions reduction projects. More information about ISO 14064  standards is available at http://www.iso.org/iso/home.htm.
Plan Vivo is a system for managing the supply of verifiable emission reductions from rural  communities in a way that promotes sustainable livelihoods. Companies, individuals, or  institutions wishing to offset greenhouse gas emissions can purchase voluntary emission  reductions via a project trust fund in the form of Plan Vivo Certificates. Projects use the  Plan Vivo management system to register and monitor carbon sequestration activities  implemented by farmers. For more information about Plan Vivo, see  http://www.planvivo.org/.
Social Carbon has the objective of guaranteeing that the projects developed for the  reduction of greenhouse gas emissions significantly contribute to sustainable  development, incorporating transparent methods of access and measurement of the  benefits that are returned to the parties involved and to the environment. The aim of the  Social Carbon methodology is to provide offsets that also provide clear social and  environmental benefits in the areas where projects operate. For more information about  the Social Carbon methodology, see http://www.socialcarbon.com/   The VER+ Standard provides a global standard for voluntary greenhouse gas emission  reduction projects. The criteria of the VER+ Standard are streamlined with those of CDM,  including the requirements of project additionality and corresponding tests that prove the  project is not a business-as-usual scenario. For more information about the VER+  standard, see https://www.netinform.de/KE/Beratung/Service_Ver.aspx.
The Voluntary Carbon Standard (VCS) was initiated by The Climate Group, the  International Emissions Trading Association, and the World Economic Forum in late 2005  to standardize and provide transparency and credibility to the voluntary offset market,  among other objectives. To recognize credible work that has gone into developing  greenhouse gas programs around the world, the VCS Program has a process for  recognizing programs that meet VCS criteria. For more information about the VCS, see  http://www.v-c-s.org/index.html.
The International Carbon Investors and Services (INCIS) Voluntary Offset Standard  (VOS) can be used as a minimum standard when purchasing verified emission reduction  credits on behalf of organizations or individuals offsetting their greenhouse gas  emissions. The Voluntary Offset Standard is intended to support the development of  emerging carbon markets around the world, and support international policy convergence  with a view to long-term carbon market integration. For more information about the VOS,  see http://www.carboninvestors.org/documents.
The Greenhouse Gas Protocol, a partnership between the World Resources Institute and  the World Business Council for Sustainable Development, provides an accounting  framework for greenhouse gas standards, programs, and inventories around the world.  For more information about the Greenhouse Gas Protocol, see  http://www.ghgprotocol.org/.
This table summarizes and introduces the variety of standards available in the voluntary offset  market. It is not an exhaustive list of standards, nor is it intended to provide precise descriptions.
We do not summarize or compare the criteria of these standards because they exist for different  purposes and apply to different portions of the carbon offset supply chain. For more specific  information, please see standard documentation available at the referenced Web sites, if available.
section_title: Appendix VIII: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Michael Hix, Assistant Director;  Janice Ceperich; Nancy Crothers; Cindy Gilbert; Richard Johnson; Ben  Shouse; Ardith A. Spence; and Joseph Thompson made major  contributions to this report. Richard Burkard, Terrell G. Dorn, Steve Gaty,  Jim McDermott, Andy O’Connell, Dan Packa, Kate Robertson, Ray  Rodriguez, Jena Sinkfield, and Sara Vermillion also made important  contributions.