Carbon Offset Demystified

How are they made?
• Permits to pollute
– Issued by a regulating
body to place a cap on
emissions
– Emission reduction
performance impacts
supply
– Allocations usually
reduced year on year
– Permits have limited
use outside of the
compliance sphere
– E.g. EUA
• Emission reduction projects
– Derived from projects that lie
outside of the compliance
sphere
– Based on emission reductions
from projects, e.g. wind farms
or industrial efficiency
improvements
– Issued based on the reduced
emissions after a project versus
emissions prior to the project
– E.g. CER, ERU, VER