What Is: Carbon Offsetting with a Renewable Energy Project
This article is a brief description of carbon offsetting through projects related to renewable energy, also sometimes called the ‘greening of power’. It is for someone intending to offset their carbon footprint, providing the basics for how these projects achieve carbon offsetting, what carbon accreditation auditors look at when evaluating them, and issues commonly associated with them.
For preparatory reading, and links to other articles in this Carbon Offsetting series:
- Carbon Offsetting & Net Zero Emissions
- Renewable Energy Carbon Offsetting Projects
- Project examples:
Carbon Offsetting & Net Zero Emissions
Since the global warming phenomenon was first confirmed in the 1990s, the need to scale back greenhouse gas emissions has been known.
Greenhouse gases have increased at an unprecedented rate in planetary history, driven by mankind’s burning of fossil fuels within a relatively short period of time. The increased heat trapped by the added greenhouse gases have begun to change the balance of climate systems, some of which lead to the release of even more greenhouse gases (e.g. forest fires, permafrost melts).
In 2015, the Paris Agreement saw the nations of the world agree that global warming needs to be kept below 2 degrees above pre-industrial global temperatures (aiming for no more than 1.5 degrees to avert the worst effects of climate change to vulnerable nations).
Net zero carbon emissions is not about that.
You may notice a growing number of companies pledging to be ‘net zero’ or have ‘net neutral’ carbon emissions. Invariably this will involve changing the way their businesses operate so that they emit less carbon. And, if there are any carbon emissions left over, they have to be offset.
However, without needing to be particularly good in math, you would realise that even if all businesses are net neutral from now on, we would still not be in carbon balance. The greenhouse gases already in the atmosphere now will continue to heat the earth, and climate change that is already underway will release other greenhouse gases from natural reserves.
So this is why I say upfront that going net zero is not about solving climate change. Additional things have to be done over and above that. Going net zero is about not making the problem worse, so that it isn’t harder and harder to solve.
Carbon offsetting verification standards
Carbon projects rely on carbon accounting to qualify as carbon offsetting. (Jargon cheat sheet article link is at the top). Like financial accounting, you need audits to make sure the carbon accounting is honest. Unlike financial accounting, which has been around for longer, carbon accounting is still being tweaked, since is it still a relatively new discipline. That this is still going on, does not mean that carbon accounting isn’t trustworthy, or that it isn’t essential.
Carbon projects may be fully dedicated to a company intending to meet net neutral targets (e.g. Qantas’ reforestation project), or generate credits which can be bought by individuals, like you and I. The latter are usually managed by carbon offsetting service providers, such as Terrapass.
We can rely on audits carried out by the service providers to be assured that projects are managed to standards submitted to the United Nations Framework Convention on Climate Change (UNFCCC). Examples include the Gold Standard, and the Verified Carbon Standard.
Renewable Energy Carbon Offsetting Projects
OK, with the context out of the way, now on to the project type. This article will cover renewable energy projects which qualify for carbon credit funding.
What are renewable energy projects?
When people talk about energy projects these days, it’s specifically about energy that powers machinery. We don’t mean, for example, the feed that goes to power work animals. We mean, the energy that switches on lights, moves motorised transport, powers internet servers.
Renewable energy projects are projects that provide energy not from fossil sources like coal and hydrocarbons, but from renewable sources like the sun, wind, or dams. They are called renewable because these forms of energy are either infinitely renewable (for example, the wind), or will be replenished in short cycles (like wood pellets).
Time frame relative to human cycles is the key here. If we run out of fossil fuels, for example, we’ll have to wait a billion years to get it again. So clearly, we’re using it faster than we can get it back. (Incidentally, this means that, even if global warming was not happening as a result of fossil fuels, eventually we would need to shift to renewable energy anyway.)
On the other hand, the sun will technically expire at some point. But, since it’s an event that will only come in billions of years, we can say that the sun is also a renewable source.
How does renewable power combat climate change?
About half of the world’s carbon emissions are due to the use of fossil fuels for generating electricity and warmth. If renewables replace fossil fuels for these two things, we would halve the rate of CO2 emissions. Although this would not avoid climate change, it would slow it down and perhaps avoid the worst effects.
How many kinds of renewable energy projects are there?
When we think about fossil fuels, there’s only a limited range for what that is. You’re either talking about coal, or some kind of hydrocarbon, whether oil or gas. That’s because these come from one type of thing: plants and animals in dinosaur times that got fossilised the right way to become fossil fuels.
Renewable energy, however, is very diverse. Apart from the sun, wind and waves, you can also generate energy from burning agricultural waste, from hydrogen, and even from farming algae to make non-fossil hydrocarbons.
The ways that you use the energy are also different. With fossil fuels, there’s just one way you use it: burning it. But you can use renewable energy directly from its motion (an example is sailing), you can convert that motion or light into electricity, you can store that energy in chemical batteries or gravity batteries – you get the idea.
So it’s not about finding “the” renewable energy solution to replace fossil fuels. It’s about finding the mix of energy solutions that fulfil our different energy needs. It’s going to be different for a landlocked mountain country vs an island nation vs a large continental state.
Which ones are also carbon offsetting projects?
Renewables are the energy paradigm that the world needs to transition to, in order to stop burning fossil fuels. However, not all renewable energy projects also qualify for carbon offsetting.
A carbon offsetting project gets to earn carbon credits. It can then sell the carbon credits to people who wish to offset their carbon emissions so that they can be carbon neutral. Therefore, the renewable energy project has to show it would somehow eliminate carbon emissions. For example, would a coal plant be shut down after a solar field project is completed?
Secondly, the project has to show that it wouldn’t have happened anyway even without the carbon credit funding (i.e. ‘additionality’). Otherwise, we would be double-counting.
Thirdly, certain voluntary certification bodies may require more stringent interpretation on the above. For example, Gold Standard have effectively stopped issuing carbon credits for renewable energy projects in developed countries. Verra have stopped issuing credits for all grid-connected projects.
Essentially they assume that the momentum of the market means that additionality is now unlikely (projects probably no longer need the assistance of carbon financing); they chose to prioritise countries that need the most help.
Clean Development Mechanism (CDM) methodologies for renewable energy
For renewable energy projects, determining the above can get quite complicated. This is because power grids are often centralised, making it unclear whether and how much project will displace fossil fuel energy.
In addition, projects that needed the carbon credit funding five years ago, may not need it if it were built today. Many solar projects, for example, no longer need – and therefore no longer qualify for – carbon credit funding. In most places, solar is now cheaper than conventional electricity generation.
Credible carbon offsetting certifiers generally refer to methodologies submitted to the UNFCCC. There are several for renewable energy projects alone, to cover how to meet the two big rules for the different power supply scenarios.
For those interested in listening in on how carbon offsetting issuers discuss methodology updates, here’s an example Verra video. As you can imagine, it’s a bit dry. But, just like financial accounting, you need people who will go into this level of detail in order to deliver credibility and trust. Ideals begin with intentions, but are delivered by standards and rules.
An important part of the Paris Agreement is recognition that countries must have the freedom to choose the combination of methods for how they meet their climate ambitions, because each nation has vastly differing circumstances. A solution that doesn’t make sense to one country – however large and influential – may be perfect for another. Is your country pursuing renewable energy, and what kinds? Comment below!
I would like to acknowledge Gold Standard and Verra for providing information and resources that facilitated the writing of portions of this article.