Carbon Offset Criteria:

1. Methodology
   Companies must scrutinize the methods employed in carbon offset projects. Whether it’s reforestation/Afforestation, Carbon removal, or methane capture, understanding the methodology is vital in determining the actual impact of the offset. Aligning your organization’s goal and scopes with high quality carbon offsets is critical. For instance, projects utilizing carbon capture and storage (CCS) technologies directly capture emissions from industrial processes and power plants, preventing them from entering the atmosphere. On the other hand, nature-based solutions such as afforestation and reforestation leverage the natural ability of ecosystems to sequester carbon. Understanding these methods helps companies gauge the actual impact of the offset and its contribution to emission reduction.
2. Technology vs Nature-Based Solutions (NBS)
   Evaluate the balance between technological solutions and nature-based solutions. Tech-based projects may include carbon capture technologies (avoided emissions), while nature-based projects involve activities like afforestation and reforestation (sequestration / removal). A strategic mix can provide a more comprehensive approach to carbon mitigation. Striking a balance between these two approaches ensures a comprehensive and sustainable carbon offset strategy.
3. Vintage
   The vintage of carbon offsets refers to the year in which the emission reductions occurred. Companies should consider the vintage to ensure that the offsets align with their current emission levels and goals. This consideration prevents the purchase of outdated offsets that may not contribute effectively to a company’s current sustainability targets. Other target frameworks allow for some flexibility with vintage and act as a good yardstick for procurement.
4. Countries/Location/Market Boundary
   Geographical considerations play a significant role in the effectiveness of carbon offset projects. Companies should assess whether the projects are in regions where emissions reductions are critical and whether they align with global climate goals. To avoid greenwashing, considering market boundaries ensures that the offsets adhere to international standards and contribute meaningfully to the global effort to combat climate change.
5. Price Range
   While cost is a factor, it should not be the sole consideration. Assess the price range of carbon offsets to ensure it aligns with your budget, but also consider the impact and quality of the projects associated with the offsets. the price of carbon offsets varies based on project type, location, and vintage. Cheaper offsets may not always guarantee the same level of emission reduction or removal. Companies should evaluate the cost-effectiveness of offsets by considering the quality and impact of the underlying projects. Some frameworks require third-party audit for verification of the projects.
6. Registry Preference
   Choosing carbon offsets registered with recognized carbon registries is crucial for transparency and credibility. Well-established registries, such as the Verified Carbon Standard (VCS) or the Gold Standard, ensure that emission reductions are accurately measured, reported, and verified. Companies should prioritize offsets that adhere to these standards to build trust in the offset’s environmental integrity. CORCs (Carbon Removal Credits) by Puro Earth registry is another wonderful example of high-quality credits.
7. Quantity
   Accurately assessing the quantity of carbon offsets required involves a detailed understanding of a company’s current emission levels (Scope 1 ,2 and 3 measurement) and reduction goals. This may require collaboration with experts in emissions accounting and carbon offsetting to calculate the precise number of offsets needed to achieve carbon neutrality.
8. Diversity of Projects
   Building a diverse portfolio of carbon offset projects minimizes risks associated with a single project type. Including Afforestation/reforestation, Human induced regeneration (HIR) and methane capture projects, among others, ensures resilience against potential fluctuations in the efficacy or viability of any one project. This diversification enhances the overall impact of a company’s carbon offset strategy.
9. Alignment with Standards (CCP/Oxford/CORSIA)
   Ensure that the chosen carbon offset projects align with reputable standards such as the Carbon Clean Solutions (CCP), Oxford Standard, or CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation). Compliance with these standards enhances the credibility and environmental integrity of the offset.

Purchasing carbon offsets is a strategic step toward mitigating the environmental impact of business operations. By delving into the technical intricacies of each criterion, companies can make informed and strategic decisions when purchasing carbon offsets. Technical expertise and a comprehensive understanding of these considerations will empower businesses to select offsets that not only align with their sustainability goals but also contribute meaningfully to the global fight against climate change.

Northmore Gordon has experience establishing a carbon offset criteria suitable for your business, Procurement of high-quality carbon credits and third-party verification.

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To achieve best practices, align the investment with sustainability goals and remove the risk of any claims of greenwashing, companies need to consider a number of criteria when purchasing.

These criteria include the technology generating the energy, the period (vintage) when it was generated, quantity required, location of generation, alignment with global programs or best practices, and risks associated with the registry (the authority issuing the certificates) or issuing country. The latest advance in RECs now includes timestamping the generation period to match load profiles.

RECs globally go by several different names:

• International RECs (IRECs)
• New Zealand (NZECs – Energy Certificates)
• Australia (LGCs – Large Generations Certificates, and in future Guarantee of Origin – GO)
• Tradable Instrument for Global Renewables (TIGR) a Registry for RECs

RECs Criteria:

1. Technology
   The technology employed in renewable energy projects significantly impacts the overall environmental benefits. Whether it’s solar, wind, hydro, or other clean energy sources, understanding the technology behind the generation process helps companies assess the long-term sustainability and effectiveness of the RECs they are purchasing. For example, Under RE100 Hydrogen is not recognized because hydrogen is not an energy resource. Rather, it is an energy carrier that is manufactured and has an underlying energy resource as an input. Hydrogen is therefore only renewable if the energy resource used in its manufacture is renewable, Hence it is critical to be aware of the technical criteria of the framework your business is committed to or adhering to GHG Protocol Corporate Standard is considered an excellent benchmark.
   
2. Vintage
   The vintage of RECs is a crucial factor, indicating the year in which the associated renewable energy was generated. Companies should consider aligning the vintage of RECs with their reporting year to ensure accurate representation of their commitment to renewable energy in specific timeframes. For instance, recent years have seen significant improvements in the efficiency of solar panels and wind turbines, leading to increased energy output. As technology advances, procuring recent vintages helps businesses make sure their procurement adheres to the latest regulatory changes and demonstrates commitment. For example, RE100 now only recognizes Starting January 1, 2024, RE100 members will need to secure renewable electricity or GOs specifically from power plants constructed or recommissioned within the last 15 years. However, there’s a provision: an exemption applies to 15% of a company’s overall electricity usage.
   
3. Quantity
   Assessing the quantity of RECs needed involves understanding a company’s energy consumption and sustainability goals. Careful calculations of your scopes will help determine the number of RECs required to offset a specific percentage of the company’s energy usage or achieve a certain level of renewable energy consumption. Tailoring to energy consumption patterns helps businesses match the right type of RECs. For example, a manufacturing facility with intensive production processes may have distinct energy needs compared to a technology company with extensive data centre operations running 24/7. In this case, the data centre may benefit from procuring new time-stamped RECs or ‘24/7 RECs’ as defined by RE100 Guidelines to match their constant usage.
   
4. Location
   The geographical location of renewable energy projects is significant in determining the impact of RECs. Supporting projects in regions with abundant renewable resources not only enhances the environmental impact but may also contribute to local economic development. Companies should consider aligning their RECs with regions that complement their sustainability objectives. Market boundaries are often defined by the framework you are adhering to or as a rule of thumb it is an advisable practice to procure RECs within the country where the emissions took place.
   
5. RE100 Alignment
   For companies committed to 100% renewable energy consumption (RE100), ensuring that purchased RECs align with this goal is paramount. RE100-aligned RECs contribute directly to a company’s renewable energy targets, demonstrating a clear commitment to transitioning away from conventional energy sources. Here RE100 Members have another option to procure green power directly from the supplier supported by retirement of EACs corresponding to it.
   
6. Registry Preference
   Selecting RECs from reputable registries adds credibility to a company’s commitment to renewable energy. Registries like the Green-e Energy Certification or the International REC Standard ensure that the purchased RECs meet stringent environmental and social standards, providing transparency and accountability in the renewable energy market. Some examples of registries are Evident(I-RECs) , TIGR , Certified energy New Zealand , Clean energy regulator , M-RETS etc.
   
7. Sovereign Risk
   Companies operating internationally should consider the sovereign risk associated with the countries where their chosen renewable energy projects are located. Assessing political stability, regulatory frameworks, and potential risks related to changes in government policies can mitigate potential challenges and uncertainties in the long-term viability of RECs. For example, Under recent changes in RE100 guidelines 8 countries have been excluded from the single-market boundary of Europe supporting the Guarantee of Origins RECs.
   
8. Major Operational Changes in the Past Year
   Companies should investigate whether there have been any significant operational changes in the renewable energy projects associated with the RECs over the past year. Changes in ownership, technology upgrades, or expansions can impact the overall effectiveness and reliability of the certificates. For example, Unbundled EACs cannot be used to decarbonize electricity from a non-renewable project. (e.g., a CHP system) under RE100 Framework when the project is owned by the company (therefore, the emissions from it are in scope 1), or when the project is on-site or when there is a direct line to the project (therefore, the electricity is not sourced from the grid).

As companies strive to integrate sustainability into their operations, the careful selection of Renewable Energy Certificates becomes imperative. This strategic approach not only enhances a company’s environmental credentials but also supports the global transition to a cleaner and more sustainable energy future. Although PPAs (Power Purchase Agreements) and VPPAs are feasible alternatives, most organizations prefer EACs due to their inherent flexibility and accessibility when navigating the intricate world of renewable energy procurement.

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