Climate Change Issues: Options for Addressing Challenges to Carbon Offset Quality
Published: 2011-02-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Carbon offsets are reductions in greenhouse gas emissions in one place to compensate for emissions elsewhere. Examples of offset projects include planting trees, developing renewable energy sources, or capturing emissions from landfills. Recent congressional proposals would have limited emissions from utilities, industries, or other "regulated entities," and allowed these entities to buy offsets. Research suggests that offsets can significantly lower the cost of a program to limit emissions because buying offsets may cost regulated entities less than making the reductions themselves. Some existing international and U.S. regional programs allow offsets to be used for compliance with emissions limits. A number of voluntary offset programs also exist, where buyers do not face legal requirements but may buy offsets for other reasons. Prior GAO work found that it can be difficult to ensure offset quality--that offsets achieve intended reductions. One quality criterion is that reductions must be "additional" to what would have occurred without the offset program. This report provides information on (1) key challenges in assessing the quality of different types of offsets and (2) options for addressing key challenges associated with offset quality if the U.S. adopted a program to limit emissions. GAO reviewed relevant literature and interviewed selected experts and such stakeholders as project developers, verifiers, and program officials. This report contains no recommendations.
section_title: What GAO Found
paragraphs: According to experts, stakeholders, and available information, key challenges in assessing the quality of offset projects include the following: (1) Additionality. According to many experts and stakeholders GAO interviewed, additionality is the primary challenge to offset quality. Assessing additionality is difficult because it involves determining what emissions would have been without the incentives provided by the offset program. Studies suggest that existing programs have awarded offsets that were not additional. (2) Measuring and managing soil and forestry offsets. For projects that store carbon in soils and forests, it is challenging to estimate the amount of carbon stored and to manage the risk that carbon may later be released by, for example, fires or changes in land management. Some studies have estimated that projects involving soils and forestry could constitute the majority of offsets under a U.S. program. (3) Verification. Experts and stakeholders said that verifying offsets in existing markets has presented several challenges. In particular, project developers and offset buyers may have few incentives to report information accurately or to investigate offset quality. According to experts, stakeholders, and available information, policymakers have several options to choose from in addressing challenges with offset quality. These approaches often involve fundamental trade-offs, such as increasing the cost of offsets. Nevertheless, some research indicates that including offsets in a program to limit emissions could provide substantial cost savings that would not be provided by a program without offsets. (1) Additionality. One way to assess additionality is project-by-project approval, a lengthy process that considers the individual circumstances of each project. Another approach is to group projects into categories and apply a standard to the entire group--for example, award offsets to all electricity generators with emissions below a certain level. While such standards may be less subjective and less costly to administer, they may also require a considerable up-front investment to collect data for various project types. (2) Measuring and managing soil and forestry offsets. To address these challenges a program could, for example, adjust the amount of offsets awarded based on measurement uncertainty, or establish a "buffer pool" of offsets to compensate for any re-released carbon. (3) Verification. To address this challenge, a program could, for example, hold verifiers liable for problems with offsets they have approved, contract with independent verifiers, and provide for rigorous oversight. Experts also identified options that could address multiple quality assurance challenges, such as limiting the quantity or type of offsets that can be used for compliance. However, limiting the supply of offsets could also raise their cost. Regardless of the program design, many experts said an offset program should clearly identify goals, align incentives with goals, promote transparency, and continuously evaluate progress.

section_title: Letter
paragraphs: In the past year, Congress has considered proposals to limit greenhouse  gas emissions from many sectors of the economy, including electric power  generation, transportation, and manufacturing. Most of these proposals  have focused on market-based mechanisms such as cap-and-trade, a  system the United States already uses to reduce air pollution that causes  acid rain. Under a cap-and-trade program, the government would place an  overall cap on emissions and issue tradable permits. Entities covered by  the program would have to surrender enough permits for all of their  emissions at the end of specified time periods. Such market-based  programs could forestall some of the potentially adverse effects of climate  change at less cost than other options to regulate emissions. However, a  program that reduces emissions could also increase the cost of activities  that generate emissions, such as the burning of fossil fuels. As a result,  cap-and-trade proposals have also included various provisions aimed at  limiting costs to businesses and consumers.
One potential cost containment mechanism for a cap-and-trade program is  the use of carbon offsets—activities that reduce emissions in one place in  order to compensate for emissions occurring elsewhere. Examples of  offset projects include (1) planting trees; (2) capturing greenhouse gases  from mines, landfills, and agricultural operations; (3) reducing tilling to  store, or “sequester,” more carbon in agricultural soil; (4) installing more  energy-efficient equipment; and (5) generating renewable energy from  hydroelectric, wind, or solar power. Such projects produce tradable  credits, or “offsets,” which can be purchased by regulated entities and  used to comply with emissions caps. In principle, allowing the use of  offsets would provide regulated entities with greater flexibility to make  emissions reductions at less cost. Regulated entities may find that it is  cheaper to reduce emissions by purchasing an offset than it is to reduce  their own emissions or to purchase permits from another regulated entity.  For example, it may cost less to pay a landfill owner or operator to capture  greenhouse gas emissions than to reduce emissions at a power plant.
U.S. legislation proposed in the past year would have created a cap-and- trade program that allowed regulated entities to use offsets to comply with  emissions caps, as does the European Union Emissions Trading System  (EU ETS) and other existing programs that limit greenhouse gas  emissions. Economic research indicates that including offsets in a cap- and-trade program could provide substantial cost savings. For example, in  an analysis of the American Clean Energy Security Act, Congressional  Budget Office (CBO) estimated that from 2012 through 2050, the annual  net cost of a program allowing offsets would be about 70 percent less than  a program without offsets. The extent of any savings is uncertain and  would depend on many factors, including the design of the regulatory and  offset programs. Such decisions could greatly influence an offset market  that, under some past legislative proposals, could become many times  greater than the largest existing offset market, which involves billions of  dollars worth of offset transactions each year.
However, we have previously reported that carbon offsets may also  compromise the environmental integrity of programs to limit emissions  and should therefore be carefully evaluated. Among other things, we  identified challenges that can affect the quality of carbon offsets. A quality  offset is one that achieves its intended reductions—in most programs, this  means that one offset credit equals one ton of reduced or avoided  emissions. While definitions vary, our review of the literature points to five  general criteria for assessing offset quality—an offset must be additional,  real, verifiable, permanent, and enforceable. An offset is additional if it  would not have occurred without the incentives provided by the offset  program. Real means that the quantified emissions reductions represent  actual net emissions reductions, and are not a product of incomplete or  inaccurate accounting; verifiable means the reductions associated with  the project can be accurately quantified, monitored, and verified;  permanent means the emissions stored by a project will not be released  into the atmosphere in the future, or that there are guarantees to ensure  that such releases are replaced; and enforceable ensures that offsets are  backed by tracking systems that define their ownership as well as  regulations and penalties for noncompliance.
Some legislative proposals to limit greenhouse gases, if enacted, would  have involved a number of federal agencies in the development of offset  quality standards and program oversight. The discussion draft of the 2010  American Power Act, for example, would have given the Environmental  Protection Agency (EPA) primary oversight over domestic offsets—except  for those pertaining to agriculture and forestry, for which the Department  of Agriculture would have had primary responsibility.
This report responds to your request for a review of offset quality issues.  This report provides information on (1) the key challenges in assessing the  quality of different types of offset projects, and (2) options for addressing  key challenges associated with offset quality if the United States adopted a  program to limit greenhouse gas emissions. To respond to these  objectives, we reviewed relevant literature and interviewed 13 experts— including economists, academic researchers, and experts in ecology and  law—selected based on their experience, recommendations from persons  knowledgeable in climate policy issues, and the relevance and extent of  their publications. We also assessed approaches used in seven offset  programs selected based on their representation in literature, and  interviewed 17 stakeholders—project developers, verifiers, and program  officials—from these programs. Information from our sample of experts  and stakeholders cannot be generalized to those we did not speak to.  Appendix I provides additional information about our scope and  methodology, and appendix II lists the experts and stakeholders we  interviewed.
We conducted our work from April 2010 to February 2011 in accordance  with all sections of GAO’s Quality Assurance Framework that are relevant  to our objectives. The framework requires that we plan and perform the  engagement to obtain sufficient and appropriate evidence to meet our  stated objectives and to discuss any limitations in our work. We believe  that the information and data obtained, and the analysis conducted,  provide a reasonable basis for any findings and conclusions in this  product.
subsections: section_title: Background
paragraphs: Carbon offsets can be used by entities that are subject to legal  requirements to limit their emissions, such as utilities or manufacturing  facilities. Offset programs designed for this purpose are called compliance  programs. One such program is the Clean Development Mechanism  (CDM), an offset program established by the Kyoto Protocol. The CDM  allows nations with binding emissions targets under the Kyoto Protocol— including those participating in the EU ETS—to purchase offsets from  projects in developing nations without binding targets. The CDM is the  world’s largest offset market, valued at $2.7 billion in 2009, and has  registered over 2,700 offset projects in 70 countries. Our prior work found  that the CDM provided developed nations with flexibility in meeting their  emissions targets but that the program’s effects on emissions were  uncertain, in part because the CDM’s screening process could not fully  ensure offset quality.
There are also “voluntary” carbon offset programs, where purchasers do  not face legal requirements to limit emissions but may buy offsets for  various reasons. For example, companies may purchase offsets to  demonstrate their environmental stewardship, while individuals may  purchase offsets to compensate for emissions resulting from their  personal travel or consumption of fossil fuels. Because the federal  government has not adopted binding limits on greenhouse gas emissions,  domestic purchases of carbon offsets generally fall within the voluntary  portion of the market. Voluntary programs in the United States include  private sector programs, such as the Climate Action Reserve (CAR) and  the Voluntary Carbon Standard (VCS), as well as Climate Leaders, an  industry-government partnership overseen by EPA. Voluntary offset  programs represent a relatively small share of the offset market—in 2009,  the total value of the voluntary offset market was approximately $338  million, around one-eighth of the CDM market. Our prior work on U.S.  voluntary markets suggests that many quality assurance mechanisms exist  but the extent of their use is uncertain. Table 1 lists the compliance and  voluntary programs we reviewed.
While the project review process can vary by program, it often involves the  following basic steps: (1) preparing application documents, (2)  establishing that the project meets eligibility criteria, (3) approving the  project and registering it in a database, (4) monitoring emissions  reductions over time, (5) verifying the amount of emissions reductions  produced over a certain time period, and (6) issuing offsets. Existing  programs generally have an administrative body to oversee offset projects  and ensure they meet established quality criteria. Other key participants  include project developers, who identify and perform actions that reduce,  avoid, or sequester emissions, and third-party verifiers, who ensure that  projects adhere to relevant quality assurance mechanisms. Figure 1  illustrates the CDM’s project cycle.
section_title: Key Offset Quality Challenges
paragraphs: Experts and stakeholders identified five key challenges to assessing the  quality of offsets in existing programs. First, many experts and  stakeholders agreed that the primary challenge is assessing whether the  offset project results in additional emissions reductions. Second,  emissions reductions from some types of offset projects, particularly soil  and forestry projects, can be difficult to measure. Third, carbon stored  through soil and forestry projects may not be permanent. Fourth, in some  cases it can be difficult to verify that offset projects complied with  program rules and that emissions reductions occurred as expected. Fifth,  the types of projects that are the most difficult to assess—forestry,  international, and certain agriculture projects—may make up the majority  of offsets in a future U.S. program, posing challenges for policymakers  designing an offset program.
subsections: section_title: Additionality Is the Primary Challenge
paragraphs: According to many of the experts and stakeholders we interviewed, the  primary challenge to assessing offset quality is determining whether offsets  generate “additional” emissions reductions—reductions that would not have  occurred without the incentives provided by the offset program. In theory,  offsets allow regulated entities to emit more while maintaining the  emissions levels set established by a cap-and-trade program or other  program to limit emissions. However, if the offsets represent emissions  reductions that would have occurred anyway, net emissions may exceed the  cap and compromise the environmental integrity of the program. We  previously identified additionality as a challenge to offsets in 2008 and  2009.
Although each program we examined took steps to ensure the  additionality of offsets, evidence suggests that non-additional offsets have  nonetheless been awarded under some existing programs. For example,  the CCX, a voluntary program, awarded offsets to farmers who had  practiced the credited activity for years. Several studies on the CDM also  suggest that a substantial number of non-additional projects have received  offsets, although some experts reported that the CDM has improved the  quality of its offsets significantly in recent years.
Experts and stakeholders cited a number of reasons why assessing  additionality can be challenging, including the following:    Difficulty of setting a baseline. Assessing additionality involves  comparing a project’s expected reductions against a projected baseline of  what would have occurred in the absence of the program. While this is not  a challenge unique to offset programs—many policy decisions involve  assessing alternative policies against a hypothetical baseline—it may  involve a number of assumptions that are uncertain. For example, some  programs approve offsets for forest management practices, such as  lengthening harvest cycles to allow forests to store carbon for longer  periods. An offset program could establish a baseline for these projects by  assessing historical data about how forest owners respond to changes in  timber prices and other economic variables. However, it may be difficult  to account for the variety of decisions a forest owner may make that affect  the amount of carbon stored—for example, not all forest owners may want  to maximize the amount of timber produced. Assumptions regarding this  and other factors that affect the amount of carbon stored can have a  significant impact on the number of offsets awarded, according to some  studies. For example, one study suggested that the number of offsets  awarded for a hypothetical forest management project could vary by an  order of magnitude, depending on the approach used to set baselines.
Asymmetric information. To evaluate the additionality of a project,  program administrators must often rely on information provided by  applicants, and in some cases, this information may be difficult to  evaluate. One additionality test used by the CDM requires wind power  developers, for example, to establish that a project either is not financially  feasible without the revenues from offsets or is not the most economically  attractive option. This can involve a complex analysis including  assumptions about the internal rate of return for the project, the cost of  financing, the relative costs of fuels, and the lifetime of the project.  Research suggests that it can be difficult to verify these assumptions,  especially since applicants know more details about the project than  program administrators or verifiers, and may present data selectively to  support claims of additionality.
Multiple incentives. According to literature we reviewed, in some cases  there may be reasons to pursue an activity that are unrelated to the offset  program. For example, energy efficiency and renewable energy projects  may be profitable on their own, making it difficult to gauge how offset  revenue affects these projects’ financial viability. Similarly, conservation  tillage is an agricultural practice that can earn offsets because it stores  more carbon in soil than regular tillage, but farmers may also practice it  for other reasons, such as to help soils retain moisture. One study suggests  that conservation tillage increased by 3.5 percentage points between 1998  and 2004 as a share of total planted acres. If conservation tillage offsets  are accepted under a future offset program, it may be difficult to  determine what portion of future increases is attributable to the offset  program. In addition, some land use practices may be eligible for other  federal subsidies or policy incentives outside of the offset program,  potentially complicating additionality assessments.
Misaligned incentives. Some experts suggested that an offset program  may create disincentives for policies that reduce emissions. For example,  under an offset program that allows international projects, U.S. firms  might pay for energy efficiency upgrades to coal-fired power plants in  other nations. According to our previous work, this may create  disincentives for these nations to implement their own energy efficiency  standards or similar policies, since doing so would cut off the revenue  stream created by the offset program. For example, some wind and  hydroelectric power projects established in China were reviewed and  subsequently rejected by the CDM’s administrative board amid concerns  that China intentionally lowered its wind power subsidies so that these  projects would qualify for CDM funding. In addition, our review of the  literature suggests that in some cases an offset program may  unintentionally provide incentives for firms to maintain or increase  emissions so that they may later generate offsets by decreasing them. This  potential problem is illustrated by the CDM’s experience with industrial  gas projects involving the waste gas HFC-23, a byproduct of refrigerant  production. Because destroying HFC-23 can be worth several times the  value of the refrigerant, plants may have had an incentive to increase or  maintain production in order to earn offsets for destroying the resulting  emissions.
section_title: Measuring Emissions Can Be Challenging for Agricultural Soil, Forestry, and Other Types of Offset Projects
paragraphs: As we have previously reported, it can be difficult to accurately measure  emissions from some types of offset projects, particularly soil and forestry  projects. An offset program needs accurate measurements of emissions  to ensure that it awards an appropriate number of offsets. According to  our review of the literature, the most straightforward way to measure  emissions is through direct monitoring. For example, a project can run  methane collected from a landfill or coal mine through a meter to measure  the quantity collected and destroyed. Similarly, power plants can install  monitors to measure their carbon dioxide emissions. However, direct  monitoring is not feasible or cost-effective for all types of offset projects,  and does not capture the effect that some projects have on emissions  elsewhere. Types of offset projects with measurement challenges include  the following:    Land-use offsets. Land-use offset projects seek to absorb greenhouse  gases or reduce emissions by affecting various natural processes. For  example, trees absorb carbon dioxide from the atmosphere as they grow,  and soils store carbon. However, the precise amounts stored or emitted  due to an offset project may be uncertain because some of the underlying  natural processes are complex and not fully understood. The amount of  carbon absorbed by agricultural soils, for example, depends on the local  climate, soil type, vegetation, and past land management practices. While  precise methods for measuring carbon in soil samples are well established,  the level of carbon will vary across a parcel of land, and changes due to  the project may be small compared with the total level of carbon in the  soil. Accurate estimates can therefore require extensive sampling, which  may be prohibitively costly for some offset projects. Carbon storage  projects also require ongoing monitoring to assess whether the stored  carbon is re-released. According to literature we reviewed, estimates of  emissions from land-use offset projects can be more uncertain than those  of other projects. For example, the uncertainty of a meter that measures  methane captured from a landfill may be less than plus or minus 1 percent,  whereas uncertainties of the amount of carbon stored in agricultural soils  range from plus or minus 6 percent to plus or minus 100 percent.
Dispersed projects. Offset projects that include many small sources can  also be challenging to measure. For example, estimating emissions  reductions from a project that distributes energy-efficient light bulbs  would require assessing light bulb use among recipients and estimating the  associated energy savings. According to our review of literature, one  option is to collect information from a sample of recipients; however, this  can cost more and may involve sampling errors or other errors compared  with projects where emissions are directly monitored using a meter at a  single point.
Projects prone to leakage. The net effect of some types of offset projects  may be challenging to measure because of the potential for emissions to  increase elsewhere as a result of the project. This is known as leakage. For  example, avoiding wood harvest in one area may simply displace  harvesting and its emissions to another location. Some studies that  assessed different project types in different regions suggest that leakage  may be significant, although there is considerable uncertainty about the  extent of leakage and the factors that cause it. Estimates suggest that  between none or almost all of the emissions reductions from some types  of land-use offset projects could be negated by increased emissions  elsewhere. Other types of projects may also be at risk. For example,  energy-efficiency projects may save resources that are ultimately spent on  activities that increase energy use elsewhere.
Some experts suggested that measurement costs can affect the viability of  certain types of projects. The measurement stringency or degree of  accuracy required in a program can affect the costs of offset projects and  make some types of projects unviable. Some stakeholders reported that a  program will need to balance the benefits of accurate measurements with  the costs. Such a balance will shift over time as new techniques and  approaches are developed.
section_title: Carbon Stored in Soils and Forests May Not Be Permanent
paragraphs: As we have previously reported, projects that store, or “sequester,” carbon  carry the risk that the stored carbon will be re-released into the  atmosphere, known as a reversal. The risk of reversal is most commonly  associated with projects involving forestry and agricultural soil  sequestration. In these types of projects, reversals can occur as a result of  human activity, such as logging or changes in tilling practices, or from  natural events such as fires, storms, or insect infestations.
Addressing the risk of reversal is important because a reversal can negate  the environmental benefit of the project. Carbon dioxide can remain in the  atmosphere for a long time—up to thousands of years, according to the  Intergovernmental Panel on Climate Change. In the context of an offset  program, this means that a project in which trees planted in one year but  destroyed 30 years later would convey a minimal environmental benefit  compared to a project that captured and permanently destroyed methane  emitted from a landfill.
section_title: Verifying Offset Projects Presents Challenges
paragraphs: According to our review of literature and interviews with experts,  verification is an important aspect of an offset program because  participants may have limited incentives to report information accurately  or to evaluate quality. Verification involves confirming that the project  complied with program rules and that estimates of emissions reductions  are reasonable. In most programs, a third-party auditor conducts the  verification, which can involve checking that emissions reduction  calculations are correct and site-visits to verify information with  independent measurements and observations. The verifier may also review  the assumptions underlying the assessment of additionality. According to  our review of literature, verification may be challenging because sellers of  carbon offsets may have little incentive to report information accurately to  program administrators, and buyers may have little incentive to investigate  the quality of offsets. Unlike buyers of other commodities, like oil or corn,  buyers of offsets may not care about the quality of the offsets they buy and  may be primarily interested in lowering their compliance costs by  purchasing lower-cost offsets. This is partly because under some designs,  buyers may not be liable for the quality of offsets they purchase after those  offsets have been issued by a program.
On the basis of our review of the literature and interviews with experts, we  identified several challenges to verifying offset projects, including the  following:    Projects in developing countries and those involving complex  measurement techniques can be difficult to verify. Some experts and  stakeholders suggested that offset projects in developing countries can be  difficult to verify because of varying legal frameworks, lack of available  documentation, or other reasons. For example, some verifiers reported  that it is sometimes difficult to verify whether project developers have  legal ownership of land used in a project. These challenges can vary  considerably depending on the country hosting the project. Some verifiers  noted that projects involving forestry and agricultural soils—in the United  States or in other nations—can be more challenging to verify, since they  often involve complex measurement methods. To verify emissions  reduction claims in such projects, a verifier must assess the  reasonableness of the model or estimation technique used, as well as the  data used in the model.
Incentives and conflicts of interest may complicate verification. Many  experts and some stakeholders reported that misaligned incentives and  conflicts of interest may affect the quality of verifications. In most cases,  third-party verifiers are selected and paid by project developers. This may  give verifiers an incentive to further the goals of the developer—earning  offsets at low cost—over the goal of ensuring the quality of offsets.
Specifying verification criteria can be difficult. Some stakeholders  suggested that the verification criteria used in some programs have been  unclear or subject to interpretation. This can make verifications difficult,  as verifiers must make subjective judgments as to the reasonableness of  assumptions and may interpret program guidelines differently than  program administrators intend. For example, according to CDM  documentation, about 7 percent of projects authorized by third-party  verifiers in 2009 were subsequently rejected by the board that ultimately  approves CDM projects. According to one study, this is partly because the  CDM rules for additionality were unclear or ambiguous, which led to  different interpretations between third-party verifiers and the CDM  board. In addition, the CDM’s guidelines do not establish a level of  confidence required in a verification, known as a materiality threshold.  Two verifiers we interviewed suggested that that without such a threshold,  verifiers may spend considerable effort investigating potential errors that  would have a negligible or no impact on emissions reduction estimates.
Competence and supply of verifiers may be inadequate. Some  stakeholders we interviewed suggested that there has been a limited  supply of qualified verifiers. Following spot checks of some verifiers, the  CDM suspended four verification firms from 2008 to 2010, in part because  of concerns over the skills and experience of staff. Two stakeholders said  that the shortage of verifiers is especially acute in developing countries or  for more technically demanding project types such as avoided  deforestation. The CDM has taken various steps to improve its  verification system, and these challenges may be alleviated in the future as  verifiers and program administrators gain experience with the verification  process.
These challenges have raised verification costs, according to our review of  literature and stakeholders we interviewed. One stakeholder said that  verification can be the single largest cost of developing an offset project.  According to information collected by the CDM, costs range from $13,000  to $54,000 to initially register a project and $7,900 to $32,000 to  periodically verify emissions reductions in that program. According to  two stakeholders involved in verifying CDM projects, these issues have  driven up verification costs in the CDM and contributed to a growing  backlog of projects. Verification costs could cause some otherwise high- quality offset projects not to be undertaken because they are not  financially viable.
section_title: The Most Plentiful Types of Projects May Also Be the Most Challenging to Assess
paragraphs: Experts and stakeholders generally agreed that for some types of offset  projects, quality is relatively easy to assess. In particular, many suggested  that projects that have one emissions source and involve the metered  destruction of greenhouse gases—such as methane flaring from landfills  and coal mines—generally produce high-quality offsets. These projects  take place at a single location; permit easy, reliable and continuous  monitoring of emissions; and are not at risk of re-releasing emissions.  However, offsets from such projects were forecast to be a small portion of  total offsets in recent legislative proposals. Further, EPA’s review of  recent draft legislation suggests that the potential emissions reductions  from these activities may be limited, and therefore may do little to reduce  the cost of a future U.S. program to limit emissions. For example, EPA’s  analysis of the American Clean Energy and Security Act estimated that  allowing landfill, coal mine, and natural gas system methane projects as  offsets would decrease the cost of emissions by only 2 percent relative to a  program without these projects.
According to our review of the literature, the types of projects that are  particularly challenging to assess—including forestry, international, and  some agricultural offsets—may account for the majority of offsets. In 2009,  CBO estimated that most offsets under proposed U.S. legislation would  result from forestry and agricultural practices, with most domestic offsets  coming from the forestry sector. CBO also estimated that international  offsets would comprise slightly over half of all offsets from 2012 to 2050.  Efforts to reduce deforestation in developing countries could be a  particularly significant source of offsets, given that up to 20 percent of  global greenhouse gas emissions results from tropical deforestation.  However, forestry offsets pose key challenges for measurement, leakage,  and permanence, and have therefore had a relatively limited role in  existing offset programs thus far.
section_title: Several Options Could Address Key Offset Quality Challenges, but Most Involve Trade-offs
paragraphs: According to our review of the literature and interviews with experts,  policymakers have several options to choose from in addressing  challenges with offset quality, but many of these options could increase  the cost of offsets and may involve other trade-offs. Nonetheless,  addressing these challenges may be valuable since offsets, in principle,  could substantially lower the cost of a program to limit greenhouse gases  relative to the cost of a program without offsets. The extent of these  savings will depend partly on the quality assurance mechanisms used to  address offset quality. On the basis of our review of relevant literature and  interviews with experts, we identified several options that address  challenges associated with additionality, measurement, permanence, or  verification. We also identified steps that could address multiple offset  quality challenges at the same time. Finally, we identified four overarching  principles that experts generally agreed could enhance offset quality.
subsections: section_title: Several Options Could Specifically Address Additionality, Measurement, and Other Key Challenges
paragraphs: On the basis of our review of relevant literature and interviews with  experts and stakeholders, we identified several options to address specific  challenges to offset quality. Many of these options involve trade-offs— most notably, more stringent quality assurance can increase the cost of  offsets. These options are not mutually exclusive, and some experts  suggested that a program will likely need to employ a combination of  options depending on the type of offsets allowed under the program.
subsections: section_title: Options for Addressing Additionality
paragraphs: There are several options to assess additionality, although many experts  we interviewed stated that it may be practically impossible to ensure that  all offsets are additional at the project level. Still, all of the programs we  examined included additionality as a criterion for offset approval, and all  took certain straightforward steps to increase the likelihood that issued  offsets are additional. For example, all of the programs we reviewed seek  to accept only those projects that achieve emissions reductions beyond  what is already required by law or regulation, and all require that projects  be initiated after a certain date (e.g., the start date of the program). The  assumption behind both of these requirements is that projects that cannot  meet them were likely motivated by something other than the incentives of  the offset program.
All the programs we examined also take one of two approaches to more  thoroughly assess the additionality of offsets—a standardized approach or  a project-by-project approach. With a standardized approach, a program  establishes a standard way of assessing additionality for each type of  offset project and uses it for all projects of that type. One way to do this is  for a program to review comparable projects and establish a performance  level or set of technologies that would be considered additional. For  example, a performance level for international electricity projects might  reflect the most efficient method of producing electricity that is in use in a  given region. Projects that exceed that performance level would then be  considered additional. Alternatively, a program could identify technologies  or practices that are generally additional. For example, after reviewing  current livestock manure waste management practices in the United  States, CAR decided that any project that installed a system to capture and  destroy methane gas from manure treatment or storage facilities could be  considered additional and defined a baseline methodology for all such  projects. Therefore, to demonstrate additionality under CAR, a project  developer simply has to show that an approved methane collection system  has been installed.
In contrast, with a project-by-project approach, additionality can be  assessed differently for each project—even projects of the same type—so  as to consider the unique circumstances of each project. For example,  CDM program documents show that livestock methane capture projects  generally have to (1) conduct either an investment analysis to show that  methane capture was not attractive without revenue from the sale of  offsets, or demonstrate that offsets allow the project to overcome some  prohibitive barriers; (2) demonstrate that methane capture is not already  common practice in that area; and (3) define an appropriate baseline from  which offsets would be awarded. Table 2 compares these two approaches.
The choice of approaches to address additionality involves three basic  trade-offs, according to on our review of relevant literature and interviews  with experts and stakeholders:  1.  Stringency versus cost.  Regardless of the approach that is used, a  more rigorous assessment of additionality can be more costly to  implement and exclude some projects that could have produced  additional offsets, according to some experts. Two experts we  interviewed estimated that relatively lenient offset standards could  mean that nearly half of issued offsets are not additional. On the other  hand, these experts estimated that stringent offset standards could  greatly reduce non-additional offsets but exclude a significant number  of potentially additional offsets from the program.  2.  Up-front costs versus lower overall administrative costs.  Some  experts and stakeholders suggested that a standardized approach may  reduce administrative costs overall but may also involve higher up- front investments than a project-by-project approach. For example, the  verification to register a project can cost a project developer between  $13,000 and $54,000 and can take over 250 days in the CDM’s project- specific process, while the same step involves minimal cost and  approximately 4 to 12 weeks under CAR’s standardized approach.  However, developing a standard can involve up-front costs for  collecting and evaluating information to assess business-as-usual  activities, and for soliciting and considering public comments on  proposed standards. Although a project-by-project approach may be  more expensive to operate over time, an expert suggested that it can  be established more quickly and at lower initial cost. This is because  the program administrator would not need to establish specific  standards for assessing additionality for each type of offset project,  although general offset criteria for all projects would still be needed.  3.  Flexibility versus objectivity.  While standardized approaches are  more objective to implement than project-by-project approaches, they  are less flexible, according to some experts and stakeholders. Some  stakeholders were concerned about subjective and inconsistent  decisions that have occurred in some programs that use a project-by- project approach, and these concerns would likely be reduced under a  standardized approach. However, once a standardized method is  established, it may allow little flexibility in assessing whether a given  offset project meets the standard. This lack of flexibility might mean  that some projects with the potential to generate additional offsets will  be excluded, and some non-additional projects will be included.
Recognizing these tradeoffs and that the suitability of a given approach  may depend on the type of offset project, many experts recommended a  hybrid approach that would use elements of both project-by-project and  standardized approaches, and that would be tailored to each offset project  type. For example, a standardized approach may work well for project  types where sufficient data on relevant industry practices are available,  while a project-by-project approach may be better suited to less common  project types.
section_title: Options for Addressing Measurement
paragraphs: According to literature we reviewed, one option to address the potential  for measurement error is to require project developers to incorporate  measurement uncertainty into their emissions reductions calculations,  reducing the number of offsets claimed to those that can be measured with  a specified degree of certainty. For example, CAR adjusts the number of  offsets that can be credited to a forestry project when measurement  uncertainty exceeds a certain threshold. Projects measured with high  uncertainty receive fewer offsets than comparable projects measured with  less certainty. Such deductions can be a significant amount of potential  offsets for some types of projects—up to 15 percent for some forestry  projects.
Additional options exist for addressing measurement challenges due to the  risk of emissions leakage, according to the literature we reviewed. At the  project level, some leakage may be addressed by expanding the area of  emissions monitoring—for example, for certain project types, VCS tracks  local “leakage belts” surrounding the project area. However, this option  does not address any emissions that shift beyond a localized region. An  alternative is to expand the scale of emissions monitoring to the national  or international level—for example, monitoring emissions in the forestry  sector or other sectors where leakage is likely to occur. In such a system,  adjustments could be made if the emissions in a given sector were higher  than expected, given estimated reductions from offsets. However, it may  be difficult to isolate the effect of leakage from other factors that affect  emissions. While some experts characterized leakage as a particularly  difficult challenge, literature we reviewed suggests that assessing the  potential for leakage may help policymakers adjust emissions  measurements appropriately. For example, leakage may often be driven by  the need to meet agricultural and timber demands. Assessing the  circumstances of the markets, regions, and countries targeted by an  emissions reduction program may help provide information on how much  leakage can be expected, enabling program administrators to adjust  policies as needed.
section_title: Options to Address Reversals
paragraphs: Addressing the risk of offset reversals—which occur when carbon stored  in trees or soil is subsequently re-released into the atmosphere—is critical  to achieving expected reductions under a program to limit emissions,  according to literature we reviewed. Developing a policy to address  reversals involves deciding how long a project must continue to store  carbon, and how to compensate for lost reductions in the event that stored  carbon is re-released into the atmosphere.
Under existing offset programs, carbon must be stored for a certain period  of time, although these “permanence” requirements vary significantly. In  the voluntary offset program CAR, for example, a forestry project must  store carbon for 100 years after offsets are issued or pay back the offset  credits. In contrast, CCX required a commitment of 15 years. Given that  carbon dioxide can remain in the atmosphere for anywhere between 30  years and several centuries, a longer time commitment may help improve  the likelihood that offset projects convey their intended environmental  benefit. On the other hand, some stakeholders suggested that extended  time commitments could reduce participation from landowners and  renters, who may be unwilling to commit to 100-year time frames. A CAR  official we interviewed noted, however, that CAR had received nearly 140  applications for forestry projects, each of which would be subject to the  100-year commitment.
The CDM takes a different approach by issuing temporary credits for  forestry activities, which can be used for compliance purposes only for a  certain amount of time. Once a credit expires, the owner must replace it.  New temporary credits can be used to replace the expiring credits if the  project owner is able to demonstrate that the carbon remains stored.  According to literature we reviewed, temporary crediting avoids the need  for ongoing monitoring to ensure permanence, and three experts  characterized it as the best option to address reversals. However, others  expressed skepticism that temporary credits would be attractive to buyers  in the context of a mandatory program to limit emissions. One expert, for  example, suggested that temporary credits would create ongoing  compliance liabilities that offset buyers would be unwilling to carry.  According to one study we reviewed, alternative forms of temporary  crediting could address these issues—for example, allowing the private  market, rather than the administrator of the program, to set contract  length to meet the different needs of market participants.
On the basis of our review of the literature and experts we interviewed, we  identified several other options which, together or independently, could  help ensure that carbon is stored for the specified time or otherwise  accounted for:    Hold seller or buyer liable. Policymakers could assign liability to either  project developers (sellers) or offset buyers. In the event of a reversal, the  liable party would either have to replace the offsets or face sanctions for  noncompliance. The advantage of holding the seller liable, according to  experts and literature we reviewed, is that the landowner has a greater  incentive to avoid reversals. Flexibility is another potential advantage to  this option, according to one expert—a landowner that wanted to use the  land for other purposes could simply replace the offsets. However,  literature we reviewed suggests the transfer of liability may have to be  established through a contract or other mechanism, since land ownership  can shift over time. Under the buyer liability option, the responsibility for  an offset reversal shifts along with the ownership of the offset. According  to some literature we reviewed, this option may give buyers a greater  incentive to pursue quality offsets, and liability may be easier to enforce.  However, one stakeholder we interviewed suggested that such an  approach would significantly dampen program participation because  potential offset buyers would be unwilling to take on this level of risk. An  unexpected forest fire, for example, could create a significant and  immediate financial liability for an offset owner.
Insurance. In the case of buyer or seller liability, private insurance  markets may help address the risk of offset reversals. For example, offset  owners could insure themselves through private insurance or bonds issued  by a bank, and if a reversal occurs, the insurer pays for the cost of  replacing the offsets. According to one expert, one advantage of this  option is that some private insurance companies may be better equipped  to assess risk than the federal government. However, another expert noted  that, because offsets are a relatively new commodity, there may not yet be  sufficient information to identify risks. This expert therefore  recommended against using this option until sufficient data exist to allow  a private market system to work at reasonable cost.
Programwide buffer pools. A program could establish a “buffer” pool by  setting aside a portion of all offsets from new projects to cover possible  future reversals. For example, the VCS requires land-use projects to  undergo a risk assessment for non-permanence, which encompasses risks  of natural disaster, technical failure, and political instability, among  others. On the basis of this assessment, a percentage of the credits is  withheld and put into a buffer pool for use in the event of reversal.  According to literature we reviewed, a programwide buffer pool can serve  as a type of insurance against unanticipated reversals. However,  determining the appropriate size of the buffer pool may be difficult,  according to some experts. A smaller buffer pool may not provide enough  protection against reversals, whereas a large buffer pool may require  applicants to withhold a larger share of their offsets, potentially  dampening participation in the program.
section_title: Options to Address Verification
paragraphs: There are three basic ways to verify offset projects. First, offset projects  can be verified by independent third-party organizations. Nearly all of the  programs we examined use this approach. Verifiers are generally chosen  and paid by project developers, presenting a potential conflict of interest.   Because of this, the programs we reviewed have various requirements  governing the relationship between the verifier and the developer. For  example, all require conflict of interest reviews, and some have additional  requirements governing the relationship between the verifier and the  developer. In RGGI, for example, verifiers may not have any other direct  or indirect financial relationship with project developers. Under some  programs, such as the CDM, third-party verifiers may also be liable for  failing to adequately verify that emissions reductions have occurred as a  result of the offset project. According to many stakeholders, these and  other requirements generally prevent potential conflicts of interest from  affecting the quality of third-party verifications, although two experts  suggested that such policies may not be sufficient.
Second, some experts suggested that a program could itself verify offset  projects, either directly or by contracting with third parties. This could  eliminate many potential conflicts of interest by eliminating the  relationship between project developer and verifier, although this is not  done in any of the programs we examined. Some stakeholders suggested  that having the program select verifiers could be problematic because it  could add a layer of bureaucracy and could reduce market competition,  among other reasons.
Third, one expert and one project developer suggested that project  developers could certify their own information if a program had strong  compliance and enforcement provisions to encourage developers to report  truthfully. For example, the government could conduct random spot  checks or audit a sample of projects. This would eliminate verifications,  but could increase the risk of fraud, abuse, and mistakes.
In addition to choosing who will verify offset projects, programs face  additional challenges related to verification. Experts and stakeholders  identified the following options to address these:    Oversight can help align incentives and improve verification. Some  experts and stakeholders stressed the need for rigorous oversight to  ensure verifications are effective and meet specified goals. This could take  the form of accreditation processes to select third-party verifiers and  ongoing monitoring of verifications including spot checks.
Clearly defined guidelines and expectations can facilitate verifications.
Some experts and many stakeholders indicated that clear guidelines and  expectations are important for effective verification. More specific  guidance and more objective criteria can reduce the chance that verifiers  and program administrators will interpret information differently.
Standards and training can help improve the competence and supply of  verifiers. A program can help ensure that verifiers are competent by  establishing standards or a minimum set of qualifications. For example,  the CDM specifies that verifiers must have a certain level of verification  experience before they can serve as team leaders. Some stakeholders also  reported that training can be useful, although one suggested that the  private sector can develop necessary training if standards are clear  enough.
section_title: Other Options Could Address Multiple Challenges with Offset Quality
paragraphs: On the basis of our review of the literature and experts we interviewed, we  identified several other options that—used in combination or separately— may help address multiple challenges to offset quality at the same time.  Many of these options involve addressing the quality of the program on  aggregate, rather than attempting to ensure the quality of each offset at the  project level. This may be necessary because, according to a CBO study,  complete quality assurance of every project would be prohibitively costly,  particularly for forestry and other challenging types of offsets.
subsections: section_title: Limiting the Quantity of Offsets Allowed
paragraphs: According to our review of the literature, one way to mitigate the negative  impacts of non-additional offsets, leakage, and other quality problems is to  simply limit the use of offsets in a cap-and-trade program or other program  to limit emissions. With this option, the emissions reduction program  would ensure that only a fixed percentage of the emissions permits could  be affected by any problems with offset quality.
All existing emissions reduction programs we reviewed use this option. In  the EU ETS, regulated entities are able to use CDM credits for 12 percent  of their emissions cap, on average, through 2012. In contrast, a draft  Senate bill would have allowed a greater number of offsets into the  program—approximately 42 percent of the emissions cap during the first  year of the program. These percentages are based on the total emissions  cap, not the required emissions reduction. As a result, such limits could  mean that regulated entities could use offsets for all of their required  emissions reductions, assuming a sufficient supply of offsets was  available. RGGI’s approach, on the other hand, limits offsets to no more  than 50 percent of required reductions under the cap, which may avoid a  scenario where emissions reductions were wholly dependent on offsets.
Restricting the number of offsets allowed would likely increase the cost of  meeting the emissions cap in an emissions reduction program. On the  other hand, one expert suggested that while offsets may lower the cost of  compliance, such savings are irrelevant if offsets do not represent actual  emissions reductions.
section_title: Limiting the Types of Offsets Allowed
paragraphs: Policymakers could also choose to limit the types of projects eligible for  offsets, excluding the types most likely to pose quality problems. While  existing offset programs we reviewed allow a wide variety of project types,  they all also impose some limits on the type of projects they accept (see  table 3). In some cases, programs impose limits because of concerns over  the likely quality of offsets from certain types of projects. For example,  soil sequestration projects, including conservation tillage, are not  permitted in the CDM because of difficulties in accurately measuring the  amount of carbon that is ultimately absorbed into the soil.
Many experts and stakeholders suggested that project types should only  be eligible if they meet key quality criteria. Experts and stakeholders  generally agreed on the characteristics of projects that presented relatively  few quality assurance challenges:    Projects that represent a single, localized source of emissions are less  likely to necessitate resource-intensive sampling and complicated  measurement models than projects that cover large areas of land or those  with multiple emissions sources.
Projects with emissions that can be measured directly through a meter  allow for relatively easy monitoring and verification and are generally not  subject to leakage or reversals.
Projects that do not receive subsidies or generate revenue on their own  may be less challenging to assess for additionality, since the offset is often  the only financial incentive for these activities.
Projects implemented in the United States may be easier to verify than  international projects, given that verifiers may be less familiar with the  legal, political, and institutional infrastructures of other nations.
Rather than limiting an offset program to only these types of projects,  however, some experts cited reasons that the government should allow  some flexibility around offset types. First, the supply of offsets from easy- to-monitor, low-risk projects—such as projects to capture fugitive gases  from landfills or coal mines—may be limited. Second, some types of  offsets that present quality assurance challenges—such as those in the  forestry sector—also present large opportunities for emissions reductions.  Third, imposing higher limits on international projects relative to domestic  projects could exclude many legitimate reduction opportunities, according  to some experts.
Many experts and stakeholders recommended developing a list of  acceptable project types carefully over time. Some of them cautioned  against codifying a list of acceptable project types in legislation, instead  suggesting that the implementing agency choose acceptable project types  using guidance from scientific and financial experts. One expert  recommended that the agency initially focus on a set of project types that  are most likely to produce quality offsets using the experience of existing  programs and standards, and gradually build on that list as more  information is collected.
section_title: Discounting
paragraphs: According to our previous work, one way to compensate for offset quality  problems is to discount the value of offset credits. This could be done in  one of several ways, each of which has advantages and disadvantages,  according to literature and experts we interviewed:    Discount all offset projects.  Challenges in quantifying offsets range from  assessing additionality and setting emissions baselines to measuring and  verifying emissions reductions. While ideally an offset program would  have measures to address these issues, our previous work suggests that  even a rigorous approval process can still allow a substantial number of  offsets that do not meet quality criteria. An offset program could seek to  compensate for this by estimating the percentage of offsets that do not  meet quality standards in the program overall and then discounting all  offsets by that percentage. For example, five offset credits could be set as  equal to four emissions permits in a cap-and-trade program. The burden of  the discount would be borne by offset buyers, who would then need to  purchase more offset credits, or by offset suppliers, who would have to  perform more emissions-reducing activities. On one hand, some experts  characterized this as a relatively simple approach that may help limit the  adverse effects of non-additionality or other offset quality issues.  However, others suggested that determining the appropriate discount  would be difficult and somewhat arbitrary, and others expressed concern  that discounting would reduce the chance that additional projects would  be viable.
Discount certain project types. This option could be used to prioritize  certain types of projects over others, such as projects whose reductions  are relatively easy to measure or verify. These projects would receive  smaller discounts—or no discount—relative to higher-priority projects.  For example, some proposals suggest applying a greater discount to  forestry or international projects. However, some experts cautioned that  such an approach can impede economic efficiency by reducing the overall  supply of offsets or by making certain types of offsets more expensive.
Apply a discount before credits are issued. Under this option, used by  several existing programs, discounts are incorporated into a project’s  measurement methodologies before credits are issued, as a way to target  projects for which measurement error, leakage, or additionality is a high  risk. In general, experts and stakeholders supported this form of  discounting when it is possible, but some noted that leakage and  additionality can be especially hard to quantify and may be better  addressed through other quality assurance options.
section_title: Four Broad Principles Could Improve Quality in Any Offset Program
paragraphs: On the basis of interviews with experts and our review of literature, we  identified four broad principles that could help guide offset program  design under any approach to quality assurance:  Identify key goals and priorities for the program. Identifying key goals  and priorities can help guide the numerous decisions that will need to be  made in designing and administering the program. In many cases, policy  mechanisms designed to increase the quality of offsets may also increase  their cost. As a result, some experts suggested that policymakers should  define an acceptable level of uncertainty—or an acceptable level of cost— on which to base the choice of quality assurance measures. Establishing  these parameters may help policymakers determine whether specific types  of projects can be reliably verified within the acceptable ranges of  uncertainty, taking into account existing methods and technologies.
Align incentives with goals. The design of the offset program creates  incentives that may or may not serve program goals. Assessing the  incentives created by various program designs can inform design decisions  and may help improve outcomes. For example, evaluating whether the  incentives offered by the offset program overlap with other incentive  programs could help policymakers determine if program adjustments— such as offset discounts or limits on project types—are needed.
Promote transparency. A program might cover projects from a wide range  of economic sectors and countries. Clear and transparent processes and  publicly available information can enable concerned third parties to be  involved in project oversight, potentially improving the quality of offsets.  In addition, maintaining transparency in the development of procedures  and standards can help build trust in the program and reduce uncertainty  for investors.
Incorporate evaluation and continuous improvement into the program.  Carbon markets are relatively new and less mature than other commodity  markets, and program administrators will therefore need to be able to  respond to an evolving marketplace. This may include adapting to  unforeseen consequences of program policies as well as incorporating  new technologies and innovations that emerge over time. Experts and  literature thus recommended that a program develop a process for  ongoing evaluation and assessment of program policies and outcomes. For  example, a program could establish an ongoing process to update the  methods used to establish baselines so that they accurately reflect current  conditions and technologies. According to one expert, a program could  also evaluate the effectiveness of its additionality procedures by assessing  whether projects that had been screened out by program policies were  ultimately implemented.
As agreed with your office, 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 the appropriate  congressional committees and other interested parties. In addition, the  report will be available at no charge on GAO’s 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 trimbled@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Individuals making key contributions to this report are  listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: This report examines (1) the key challenges in assessing the quality of  different types of offset projects, and (2) options for addressing key  challenges associated with offset quality if the United States adopted a  program to limit greenhouse gas emissions. To address these objectives,  we reviewed existing information, assessed approaches in seven offset  programs, and conducted semistructured interviews with knowledgeable  persons in two broad groups: experts (researchers, economists, and  academic experts involved with designing or assessing offset programs)  and stakeholders (individuals that directly participate in or administer  offset programs).
Specifically, we assessed approaches that seven offset programs use to  address offset quality. We selected programs based on their representation  in relevant literature and assessed two compliance programs—the Clean  Development Mechanism (CDM) and the Regional Greenhouse Gas  Initiative (RGGI)—and five voluntary programs—Climate Action Reserve  (CAR), Chicago Climate Exchange (CCX), Climate Leaders, Gold  Standard, and Voluntary Carbon Standard (VCS). We identified and  interviewed 19 stakeholders from these programs to better understand  quality issues from multiple perspectives. Stakeholders we interviewed  included (1) program officials, (2) verifiers, and (3) offset project  developers. To select a sample of verifiers, we identified seven verification  firms that worked with at least three of the seven offset programs and  interviewed representatives from each. To select a sample of project  developers, we selected the three U.S.-based and three internationally  based offset developers that had the most projects registered with the  three largest offset programs in each market. Appendix II lists the  stakeholders we interviewed and their affiliations.
We also selected a nonprobability sample of 13 experts—a group that  included economists, academic researchers, and specialists in ecology and  law—based on their knowledge and experience in relevant areas,  recommendations from knowledgeable persons including agency officials  and other interviewees, and the relevance and extent of their publications.  To ensure coverage and range of perspectives, we selected experts who  had information about key offset types, like the agriculture and forestry  sectors; came from scientific, technical, or economic backgrounds, and  provided perspectives from both developing offset standards and  assessing the quality of offsets. We verified our list of experts with other  experts that have served on previous GAO panels focused on market- based mechanisms to address climate change to ensure that we had  sufficient expertise. Appendix II lists the experts we interviewed, which  included agency and international officials and researchers. We conducted  a content analysis to assess experts’ responses and grouped the top  responses into overall themes. Not all of the experts provided their views  on all issues, and we do not report the entire range of expert responses in  this report. Findings from our nonprobability sample of experts and  stakeholders cannot be generalized to those we did not speak to. The  views expressed by experts do not necessarily represent the views of  GAO. To characterize expert and stakeholder views, we identified specific  meanings for the modifiers we use to quantify views, as follows:  “Many” represents 6 to 10 experts, and 7 to 15 stakeholders,  “Some” represents 3 to 5 experts, and 3 to 6 stakeholders.
To understand the scope of current and possible U.S. government work in  carbon offsets quality assurance, we interviewed officials responsible for  offset-related work at agencies identified as having important roles in  either existing programs or current legislation. These agencies were  Energy Information Administration, Environmental Protection Agency,  Department of Agriculture, and United States Agency for International  Development. To understand issues related to quality assurance in the  Clean Development Mechanism (CDM), we met with officials of the United  Nations Framework Convention on Climate Change (UNFCCC), which  administers the CDM. We also met with officials of the German Federal  Environmental Ministry to learn about quality issues in the context of the  implementation of the CDM on the national level. GAO provided a  summary of the contents of this report to UNFCCC and EPA officials prior  to its issuance.
We conducted our work from April 2010 to February 2011 in accordance  with all sections of GAO’s Quality Assurance Framework that are relevant  to our objectives. The framework requires that we plan and perform the  engagement to obtain sufficient and appropriate evidence to meet our  stated objectives and to discuss any limitations in our work. We believe  that the information and data obtained, and the analysis conducted,  provide a reasonable basis for any findings and conclusions in this  product.
section_title: Appendix II: List of Experts and Stakeholders
subsections: section_title: Experts
section_title: Stakeholders
paragraphs: We interviewed officials from the following organizations:  American National Standards Institute (ANSI)
Clean Development Mechanism (UNFCCC Secretariat and German  Federal Environment Ministry)
Climate Leaders (EPA)
Voluntary Carbon Standard  World Bank, Carbon Finance Unit  Det Norske Veritas (DNV)
Environmental Services, Inc.
ERM Certification and Verification Services  First Environment, Inc.
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Michael Hix (Assistant Director),  Quindi Franco, Cindy Gilbert, Cody Goebel, Tim Guinane, Richard  Johnson, Erik Kjeldgaard, Jessica Lemke, Susan Offutt, and Ben Shouse  made key contributions to this report.