Carbon Offset Markets: A Viable Instrument?

Abstract

In this article, we explore the realm of carbon offset markets that have been set up to enable consumers to offset their share of carbon emissions. Though the market is a relatively new one, it has quickly spawned countless offset providers under both regulated and voluntary schemes. Our research points out that the market is widely unregulated and, furthermore, there is no common quality or certification structure for the offset providers. At this point in the evolution of the market, only a handful of offset provider ratings schemes exist; and even these schemes leave a vast void for consumers.

The article begins with a discussion on the state of the carbon markets including the mandate from the Kyoto Protocol. Next, the article will examine the concept of carbon offsets and provide examples of the market. Our purpose is to present the logic and the working of carbon markets, especially in the space of market instruments aimed at lowering of carbon emissions. Moreover, we ask how this market developed and where is it headed. The article will outline the standards environment for offset providers in order to illustrate the need for a single set of criteria among providers. It will then explore the differences among the providers and articulate the specific criteria upon which providers may be evaluated. Finally, we share the results of the data collection and highlight early findings. These finding allow us to compare providers effectively and efficiently on a common scale that services both providers as well as consumer stakeholders.