The offset can be purchased or generated, and investment in carbon offset generation projects requires careful assessment. The carbon action plan of any company depends on many factors.
Purchasing carbon credits (Retailers and Wholesaler)
Carbon credits can be bought from a third-party retailer, or institutions can buy it either for profit or non-profit purposes. Price, projects, transparency and quality standards are some key aspects of carbon credits, which the buyer should be aware of. The current carbon market is a buyer beware market and investors should conduct thorough research to make a final decision.
Carbon offset credits can be purchased from third-party bulk supplier, specializing in providing a number of credits and the benefit of wholesale is the price is lower as compared to retail price, although, the price varies depending on the project type, transparency and standards.
Earning high quality offsets
The criteria to earn high-quality offsets are –
1. Transparency– Transparency is the main criteria to attain high quality offset. Transparency refers to the condition where all project details are provided to the investors. The need of the project should be clear and the details should include –
o The type of project
o Standards used
o Tests done
2. Get net reduction of emissions– The project should be able to provide real net reduction of emissions and an absolute net reduction of GHG emissions should be attained.
Some offset projects are based on the baseline emission concept, which has many risks. A baseline emission refers to the emission reduction calculated from the difference of emission in the baseline scenario and the emission generated from the project. The main issue with the baseline project is the hypothetical scenario, where there is no fail safe way. To get high quality in baseline project, the baseline should be explicit and should ensure benefits from offset projects.
How to invest in carbon offset projects?
If you wish to invest in carbon offset projects, instead of going to third-party, you can opt to invest in projects, which provide carbon credit generation opportunities. In exchange of money invested in buying the offsets, you can negotiate a project developer to get the ownership. This approach may initially involve a high transaction cost but as per the value of the projects, emission reduction capabilities and need of the institution, the buyer can opt to invest in offset projects.
There are many categories in offset projects, which vary depending on location of projects and method of carbon sequestration. The offset project can be located in any part of the world – Brazilian rainforests, sub-Saharan rainforests or Australia and the purchaser can either invest in forestry or agro-forestry for offset generation.
Some institutions offer investment opportunities in carbon sequestration projects and it allows these institutions to generate carbon offset for self use and sell the surplus offset. These institutions offer agro-forestry opportunities in different categories and the investors get land ownership for a specified term. Investors can earn carbon credits and sell the surplus generated in voluntary markets.