If the US will reach its Paris Climate Agreement goals and individual cities and corporations their greenhouse gas (GHG) reduction goals, entities will have a lot of emission reductions to do. One fortunate thing about reducing GHG emissions is its positive effect on Climate Change whether you reduce your own GHG emissions within the operations you control or any other GHG emissions around the world. GHGs is a global problem, with GHGs having no special impacts in any region, as far as any research shows. Therefore, reducing GHG emissions outside your operations or your property lines may be more economical than controlling them in house. Reducing another’s GHG emissions is known as “carbon offsets” (offsetting your own emissions by reducing them elsewhere). Reducing GHG emissions beyond what you are required to, resulting in bankable excess emissions, is known as “carbon credits”.

Carbon credits and offsets, including their trading, have been established for nearly two decades in Europe and other parts of the world. However, the concepts are not as well known in the US. With New York City about to implement aggressive GHG emission limits in 2024 and building owners scrambling to comply, the issue of carbon credits has come up. What if a building cannot reasonably reduce their GHG emissions to meet its limit (for example, it must provide residents heat, but does not have natural gas service and, thus, has no choice but to use higher-GHG emitting diesel oil instead)? Local Law 97 in NYC, while not in effect yet, is still evolving. It allows carbon offsets for a building to include in its compliance calculations, but only if it is renewable energy being built and offsetting GHG emissions in New York City proper. Offsetting GHG emissions outside of New York City, while an honorable act, is not recognized in Local Law 97.

Looking at the history of carbon credits and offsets, starting with the Kyoto Protocol in 2005, a framework was created for nations and companies to offset emissions by sponsoring projects far away, particularly encouraging these in developing nations. Such projects generate sellable Certified Emissions Reduction (CER) credits in metric tons of CO2e and can be used towards meeting a GHG Emissions reduction limit or sold for what the market will bear. Such flexibility encourages more such investments and projects. The Kyoto Protocol also established an international carbon credit trading program, allowing excess carbon credits to be monetized globally, further encouraging investment, managed by the World Bank, with credits verified for their validity and transactions (amounts and price) memorialized. This program also manages the sales of other credits, including Renewable Energy Certificates or RECs.

The Paris Agreement of 2015 went further, establishing GHG emission goals for both developing and developed nations. The Paris Agreement established two new programs for creating and trading carbon offsets and credits, with better defined rules on what is a qualifying project and the amount and value of the credits. While the Kyoto Protocol counted one ton of carbon emission offset as one ton of credit, the Paris Agreement changed that to show an overall increase in emission reductions, not the shifting of GHG emissions from one location to another.

The carbon market in Europe and Asia is healthy and thriving with businesses and nations evaluating ways to reduce GHG emissions the most technically- and cost-effectively, and such planning is a fundamental part of many major company’s operations. As portions of the US begin to adopt similar GHG emission reduction rules, the approach that has evolved in Europe may very well be utilized in the US.

CCES has the experts to help your firm determine its carbon “footprint”, your current and historic GHG emissions, and to recommend reliable ways to reduce your footprint, saving you significant cost. We can also investigate offset opportunities to further your flexibility. Contact us today at karell@CCESworld.com or at 914-584-6720.