Carbon Offset Registries: Key Challenges and Approaches
Has your business already invested in carbon offsets? In the fight against climate change, carbon offsets have become a tool for organizations and individual people to achieve their net-zero carbon emission goals. Basically, a single carbon offset represents a metric ton of removed or acquired carbon that other parties or agents can purchase and trade to reach their carbon reduction objectives (To learn more about carbon credit offsets and the broader carbon offset market and its valuation, take a look at this informative introductory article). Carbon offsets are issued by carbon offset registries, which we will introduce next and discuss in more detail throughout this article because registries play a crucial part in the legitimization, verification, and retirement of carbon offsets throughout their lifecycle in the carbon market.
What are carbon offset registries and what do they do?
As mentioned earlier, carbon offset registries are essentially entities that issue carbon offsets based on a multitude of unique certification standards, in addition to having responsibilities such as verifying the retirement of carbon offsets to prevent duplicate carbon reductions and tracing and tracking carbon offsets circulating in the market. The last function is particularly important because two organizations cannot claim the same carbon offset. If the same offset is claimed, the environmental impact is significantly less effective, which is detrimental to the overall fight against climate change.
Furthermore, In order to issue carbon credits, carbon offset registries also are required to create standardized protocols to support the registration of carbon reduction projects. The offset registry protocols are designed to track not only the offset, but also whoever owns the offset via a designated serial number, and showcase the data through a public ledger (more on how blockchain can further enable the ledger in a later section). As carbon offsets are purchased by organizations or individuals, these transactions are recorded on the registry’s ledger to ensure the retirement of the credit and prevent the risk of “double counting.”
How are carbon offset registries enforced and regulated
Carbon offset registries are enforced and regulated via unique registry enforcement systems. These systems ensure the accuracy and reliability of contracts that clearly designate the ownership of carbon offsets and terms of risk and responsibility if a carbon emission project fails to achieve its objective.
According to the Greenhouse Gas Management Institute’s Program Administration and Authority, registry enforcement systems are required to include these following guidelines:
- A public registry with identifiable data and information on carbon projects
- A designated serial number attached to every carbon offset credit produced by a carbon emission reduction project
- A protocol to verify the active or inactive status of a carbon offset
- A protocol to track the ownership of carbon offsets from origin to retirement
- Legally binding contract that show the ownership of a carbon offset
- Legally binding information that clearly identifies the risk bearer and their responsibility of an unsuccessful carbon project
The verification process of carbon offset registries
Carbon offset registries have specific protocols with carbon offset quality criteria that are able to verify a wide variety of carbon emission reduction projects. These accredited third-party registries conduct a thorough verification process for every carbon offset that is generated via the monitoring, tracking, and reporting of carbon offset projects and their data. Ultimately, this is to ensure carbon offset projects are running smoothly without any common issues like double counting.
Globally, the two most common types of registries are: 1) carbon offset accounting registries and 2) carbon emissions tracking registries. Carbon offset accounting registries focus on monitoring, tracking, and accounting for carbon offset transactions when they are purchased and sold, whereas carbon emissions tracking registries primarily recognize and analyze the source of carbon emission reductions, instead of carbon offsets in the market.
The next section will list out the most notable carbon offset registries and their carbon emission reduction verification standards for the voluntary carbon market.
Prominent voluntary carbon offset market registries
The American Carbon Registry (ACR) is a nonprofit organization created by Winrock International in 1996 as the world’s first private voluntary carbon registry. Any verifiers approved by the ACR must also be ANSI-certified.
The Climate Action Reserve is a climate action registry created by the state of California in 2001 to address climate change through voluntary accounting and reporting of carbon emissions. They have created carbon offset project standards of the highest quality, issued carbon offsets, and oversee the operations of independent third-party verification entities who must also be ANSI-certified.
The Gold Standard Impact Registry monitors and tracks not only carbon offsets, but also other environmental assets, in addition to any related environmental development impacts of Gold Standard-certified projects. Their verification is conducted by Designated Operational Entities (DOEs).
Verified Carbon Standard, also known as Verra, is the world’s most widely used voluntary carbon program with over 1,840 certified carbon emission reduction projects that have removed more than 1 billion tons of carbon emissions. Their unique carbon offsets that can be traded on the carbon market are called Verified Carbon Units (VCUs).
Utilizing blockchain to overcome the limitations of carbon offset registries
Traditionally speaking, carbon offset registries are subject to challenges and limitations, such as those caused by human errors in the accounting of carbon offsets (e.g. double counting), a lack of transparency and reliability in the monitoring, tracking, and reporting of credits, and heavy reliance on the cooperation and verifiability of third-party agents. Blockchain technology is poised to disrupt not only traditional carbon offset registries, but also the broader carbon emission reduction market.
Using blockchain, challenges like double counting can be addressed by having all cross-party transactions put on-chain on the immutable blockchain ledger to improve the reliability and transparency of transactions. This will not only increase trust among different parties, but also lower infrastructure and maintenance costs to make the carbon market more attractive for investors.
Furthermore, blockchain can help enforcement systems of registries improve the auditability of their contracts and also automate contracts via the implementation of smart contracts. Smart contracts can lower or completely remove third-party costs, save time, and also automatically execute any transaction based on its pre-written code.
Lastly, carbon emissions reduction data can be stored and verified on the blockchain. The immutability of blockchain will help ensure that the data is unchangeable, auditable, and securely available for all parties and stakeholders to view and reference when they need it.
Carbon offset registries are instrumental to monitoring, tracking, and verifying the carbon offsets being generated and traded in the voluntary carbon offset market. They are an essential aspect of carbon offset accounting that helps ensure carbon emission reduction projects are on the right track. Lastly, the future of traditional carbon offset registries may be progressing towards utilizing disruptive technologies for support, such as blockchain-enabled infrastructure and processes and technologically-engineered carbon removal, where a company uses technology to physically remove CO2 from the earth’s atmosphere and either store it away, recycle, or repurpose. To learn more about how blockchain can enable the carbon emission reduction market, you can read this article.