Offset all-stars

While the U.S. carbon market is still in its infancy, analysts are projecting it will be worth $1 trillion by 2020 if federal policymakers adopt a national carbon emissions cap-and-trade program. Because the U.S. market is primarily voluntary, rather than a cap-and-trade system in which emission allowances can be traded, almost all carbon offsets in the U.S. market originate from project-based transactions.

Current market conditions create opportunities for energy-efficiency, renewable energy, forestry, methane recovery or other projects that decrease greenhouse gas (GHG) emissions and subsequently create offsets, which companies and individuals trying to achieve carbon neutrality gobble up. After two consecutive years of unprecedented growth, the market is expected to double again in 2008.

While representing a fraction of the investments operating in the global carbon market that is following the Kyoto Protocol, consumers spent more than $91 million on voluntary carbon offsets and renewable energy certificates (RECs), both of which are highly volatile in the currently unregulated U.S. carbon market, in 2006. Americans bought 68 percent of the offsets in the voluntary carbon market, which helped fund projects that mitigated 23.7 million tons of carbon emissions, according to “State of the Voluntary Carbon Markets 2007,” published by Ecosystem Marketplace.

Many organizations, from dairy cooperatives to paper mills to city governments, have funded projects that reduce GHG emissions through financing from offset providers such as Portland-based The Climate Trust and South Burlington,Vt.–based Native Energy. Others received assistance from firms such as New York–based EcoSecurities or Evolution Markets Inc. Nearly half the voluntary offsets sold in 2006 were transacted on the Chicago Climate Exchange, while others were sold directly to brokerage companies or corporations trying to curb their carbon footprint.

While each carbon offset company has its own unique strategy for evaluating [see “Understanding additionality"} and financing potential carbon offset projects, most are actively seeking projects that help meet a growing demand for emissions reductions. Numerous organizations, including the Federal Trade Commission, are tackling the debate over carbon offset verification in the voluntary market. While the controversy will likely continue for years to come, many businesses are finding innovative ways to leverage the voluntary market and set a foundation for a regulated market yet to come.

Peak performers
Many experts attribute the rapid growth of the green building industry over the last several years in large part to increased awareness about climate change and energy use. In addition to launching a shiny new version of its Leadership in Energy and Environmental Design (LEED) rating system [see “LEED grows up,” SI, June 2008], the U.S. Green Building Council (USGBC) is also working to develop a protocol for turning super energy-efficient buildings into carbon offset projects. The added financing, which would be based on the amount of carbon emissions the building would reduce, would provide the additional revenue developers need to implement cutting-edge energy efficiency measures.

The program would locate buyers interested in purchasing additional energy efficiency measures that go beyond a rigorous baseline, according to Scot Horst, president of Horst Inc., a sustainable materials consulting firm based in Kutztown, Penn., and chairman of the LEED steering committee. The rigorous baseline would likely be 40percent above the LEED energy baseline, ASHRAE 90.12007. In a 50,000-square-foot building, the measures would reduce the building’s CO2 emissions by an extra 600 tons each year, Horst says.