By Stephan Wolters, adelphi, a Berlin-based think-tank

An increasing number of companies, organisations and governments are taking action which goes beyond what can be achieved using current UN and UNFCCC instruments. One such measure is the voluntary compensation of greenhouse gas emissions, usually based on offset projects in countries without international reduction commitments.

Domestic offset projects can foster innovation and deliver co-benefits

Domestic offset projects constitute a more recent, less explored approach in this regard. Within Europe, several initiatives are already developing domestic offset systems. However, while many companies and institutions would prefer to simply offset in their own region, there are significant obstacles to this, as a result of which domestic offsetting in Europe is still very limited. Kyoto Protocol commitments mean that almost no national projects are not at risk from double counting and double claiming. In Germany, for example, almost half of all buyers on the voluntary market would favour domestic projects – a demand that can currently not be met as a recent adelphi market analysis showed.

Domestic offset projects not only have the potential to achieve additional emissions reductions in sectors and by entities not addressed by EU ETS; they can also foster innovation, deliver co-benefits for the region and bring forward voluntary methods as blueprints for compliance markets. They can furthermore serve as an integral part of the compliance system as they constitute a cost-efficient, market-based, and demand-driven instrument. In Switzerland, for example, fossil fuel importers are obliged to offset fuel emissions through domestic projects. In Chile, domestic offsets are used to exempt companies from carbon taxes. Approaches and experiences e.g. regarding methodologies from the voluntary market can inform decisions and support efforts in the compliance market.

Five recommendations for stronger offset mechanisms

To discuss and address these challenges and opportunities, the Gold Standard Foundation and the German Federal Environment Agency (UBA) in June organised an expert workshop on domestic carbon initiatives in Europe, with support from adelphi. It featured a dialogue on domestic offset initiatives in Austria, Belgium, France, Germany, the Netherlands, Switzerland, and the United Kingdom.

Several key recommendations emerged from the conference:

1. Consider, learn from, and use voluntary offset experiences. The voluntary carbon market fulfils an important “sandbox” function, allowing stakeholders to explore innovative and potentially useful climate mitigation ideas. Lessons and the instrument itself should feed into both broader climate action efforts and into discussions on the post-2020 framework.
2. Provide a forum for dialogue and cooperation. Given the backdrop of heterogeneous initiatives with diverse scopes, stakeholders, interests, and perceptions of barriers, promoting cooperation can yield enormous benefits. Promising activities include disseminating and discussing ideas and experiences with further stakeholders, developing joint concepts and language, and suggesting joint approaches and understanding of regulatory issues such as double counting and the post-2020 climate policy framework. It could be very helpful to exchange methodologies, or for organisations to define their own standards, which could more clearly define commonly accepted methodologies.
3. Review, synthesise and update analyses of domestic initiatives in a coordinated, consistent manner. This will allow for overall improvements in the system’s transparency and credibility and, in turn, provide clear framing going forward.
4. From double counting to transparent accounting. There seems to be no easy solution on how to harmonise approaches and overcome all the challenges with respect to double counting. There is a plethora of differing experiences; however, a consensus is emerging that rather than searching for a panacea in vain, it will be more fruitful to focus on adopting a transparent approach, one that makes available clear information on emissions and the reductions made to counter them, encompassing their contexts, their sources, and how they are financed.
5. Provide adequate finance. All of these efforts – which can yield great benefits, to policy-makers in particular – require financing. Environmental ministries and agencies should hence support such work, ideally in an internationally coordinated manner and possibly with EU involvement.

It is paramount to explore how we can grasp the manifold opportunities provided by domestic offset projects, thus propelling even more ambitious climate action and supporting the transformation towards low-carbon economies in Europe.