A carbon offset is a reduction in the emission of a greenhouse gas. Reductions are accomplished by capturing greenhouse gases from the atmosphere or reducing the emissions from a source. An offset is meant to compensate for an emission happening somewhere else. A carbon offset is a tradable commodity. For example, carbon offset producers can sell offsets to companies wishing to reduce their carbon footprint.
Biogas projects qualify as carbon offsets because they reduce methane gas emissions. Carbon offsets can improve a project’s financial viability and create significant revenue streams for the project developer, but only if they can be sold in the marketplace. Currently, some states do not have effective or functioning carbon-offset markets and participation in other markets is complicated, with high transaction costs for a single player. Carbon offset aggregators pool carbon offsets from multiple projects, reducing the soft costs associated with selling in the marketplace. Aggregators can also serve as project developers, providing the capital needed to finance projects.
There are two mandatory carbon markets in the United States: the California Cap and Trade Program and the Regional Greenhouse Gas Initiative (RGGI) in the Northeast. The United States also has a voluntary carbon market where companies and people can sell and purchase offsets. Carbon offset standards and verifications differ widely across the voluntary market. There are dozens of offset certifiers that qualify under different schemes and have different standards for certification. Working with reputable certifiers helps ensure that offsets are verifiable and can be sold across voluntary and mandatory markets.
Aggregators have been successful in Brazil and North Dakota. Sadia, Brazil’s largest exporter of meat products, contracts with farmers to grow hogs but does not actually own the farms. Sadia formed a nonprofit organization to oversee, finance, operate, maintain, and sell carbon offset credits from its partner farms. Over the course of seven years, Sadia installed more than 1,100 anaerobic digesters at partner farms.
In North Dakota, the nonprofit North Dakota Farmers Union (NDFU) serves a different role. The NDFU created protocols that were “streamlined, easy to use, and unobtrusive to landowners.” For a small fee, it arranged for verification, registration and sale of carbon offset credits. Over the course of four years, the NDFU aggregated over 3,900 producers from all over the country who collectively earned more than $7.4 million in offset sales.
A combination of these aggregator models could be successful in other states. A private company could form a public-private partnership with the local stakeholder groups. The private company could leverage existing relationships with the farming community to promote the program; provide finance, oversight, and maintenance of the carbon credits; and sell the carbon credits to existing carbon markets. Stakeholder groups could streamline the process, educate participants, and provide verification services.