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Carbon Offsets: The U.S. Voluntary Market Is Growing, but Quality Assurance Poses Challenges for Market Participants

GAO-08-1048 Published: Aug 29, 2008. Publicly Released: Sep 26, 2008.
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Carbon offsets--reductions of greenhouse gas emissions from an activity in one place to compensate for emissions elsewhere--are a way to address climate change by paying someone else to reduce emissions. To be credible, an offset must be additional--it must reduce emissions below the quantity emitted in a business-as-usual scenario--among other criteria. Assessing credibility is inherently challenging because it is difficult to make business-as-usual projections. Outside the U.S., offsets may be purchased on compliance markets to meet requirements to reduce emissions. In the U.S., there are no federal requirements and offsets may be purchased in the voluntary market. GAO was asked to examine (1) the scope of the U.S. voluntary carbon offset market, including the role of the federal government; (2) the extent to which mechanisms for ensuring the credibility of offsets are available and used and what, if any, related information is shared with consumers; and (3) trade-offs associated with increased oversight of the U.S. market and including offsets in climate change mitigation policies. This report is based on analysis of literature and data, interviews with stakeholders, and GAO's purchase of offsets.


Matter for Congressional Consideration

Matter Status Comments
As the Congress considers legislation intended to limit greenhouse gas emissions that allows the use of carbon offsets for compliance, it may wish to incorporate provisions that would direct the relevant federal agency (or agencies) to establish (1) clear rules about the types of offset projects that regulated entities can use, as well as standardized quality assurance mechanisms for these allowable project types; (2) procedures to account and compensate for the inherent uncertainty associated with offset projects, such as discounting or overall limits on the use of offsets for compliance; (3) a standardized registry for tracking the creation and ownership of offsets; and (4) procedures for amending the offset rules, quality assurance mechanisms, and registry, as necessary, based on experience and the availability of new information over time.
Closed – Implemented
The American Clean Energy and Security Act of 2009 (H.R. 2454 for the 111th Congress)passed by the House of Representatives--but not the Senate--incorporated carbon offset provisions. Specifically, Part D of Section 1 incorporates provisions about eligible offset project types, quality assurance mechanisms, procedures to account for offset uncertainty (such as insurance mechanisms), methods for tracking offset creation and ownership, and procedures for making changes as necessary.

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