Offsetting with Corresponding Adjustments

How do different standards implement the new rules of the Paris Climate Agreement?

The changes from Kyoto to Paris rules are also relevant for the voluntary market. The rules adopted at COP26 in Glasgow provide clear guidance on how project operators and offset clients should ensure environmental integrity in offsetting and avoid double counting of emission reductions. The rules for Article 6 do not distinguish between voluntary market and compliance market projects.

However, Article 6 does not prohibit the use of certificates without Corresponding Adjustments (CA) for voluntary offsetting. The responsibility for ensuring that certificates without Corresponding Adjustments (CA) are not used for voluntary offsetting therefore lies with the standards in the voluntary market. However, the two best-known private standards in the voluntary market in Germany, Gold Standard and Verra (formerly VCS), are currently still dealing with the new framework conditions in different ways.

Verra does not recognise the need for Corresponding Adjustments for the voluntary offset market. Verra wants to leave it up to the buyers to decide whether they purchase certificates with or without corresponding adjustments and for which purposes they use them. The NGO Carbon Market Watch considers this approach insufficient to avoid double counting and to maintain environmental integrity.In their view, buyers are also unable to understand what exactly is behind the various labels (see also Carbon Market Watch (2020)).
Gold Standard currently sets the best-practice example in the voluntary market for realigning the voluntary market with the framework conditions of the Paris Climate Agreement.In future, the Gold Standard wants to distinguish between emission reductions for which corresponding adjustments have been carried out and which may be used for offsetting, and certificates that may not be used for offsetting because the reductions are used by the host country.

Project operators who want to operate offset projects must submit a Letter of Assurance and Authorisation (“LoAA”) from the host country for this purpose. But these regulations are not yet sufficient to really ensure that double counting does not occur, because a LoAA is initially only a declaration of intent by the project host country to prevent it. Whether the host country will reliably make the necessary adjustments in its inventory remains to be seen. Former CDM projects offer the most security for offset customers here, because they have already been recognised by the government as CO₂-reducing (so-called Letter of Approval, LoA) and are already subject to supervision by the community of states. It is expected that these projects can be quickly transferred to the new Article 6 mechanism after a rigorous independent review. Furthermore, existing emission reduction transfer agreements (ERPAs) between project operators and host countries can serve as collateral.

There are also strongly differing positions on Corresponding Adjustments among offset providers. atmosfair is clearly committed to Corresponding Adjustments in offsetting and has already reached the first bilateral agreements worldwide with 2 host countries for the issuing of corresponding adjustments to avoid double counting.

The atmosfair standard: How does atmosfair implement the new regulations of the Paris Climate Agreement?

As outlined in the previous section, the precautions to avoid double counting of climate protection standards in the voluntary offset market are not yet sufficient. atmosfair has therefore additionally developed its own requirements that projects must fulfil in order to be eligible for offsetting.

atmosfair requirements for climate protection projects and the resulting reduction units:

LoAA (Letter of Assurance and Authorisation): A LoAA including the assurance of CAs (Corresponding Adjustments) has been issued by the host country for the project/programme.
Transfer to Article 6.4: This is a registered CDM project/programme that has submitted an application for transfer to Article 6.4 to the UNFCCC.
GS Registry Authorisation noted: The project is listed in the Gold Standard Registry as an authorised project.
Article 6 readiness training: The host country administration has actively participated in training on Article 6 implementation.
Funding requirement: Only projects that have been newly initiated or that demonstrably require further funds for expansion after 2020 may be used for offsetting.
Transitional rule for old certificates: Only reduction units based on reductions achieved after 2020 and which meet all the above criteria may be used for offsetting. Transitionally, an exemption rule applies for the use of reduction units achieved in 2020 or earlier (vintage 2020 or older). These may be used for offsetting if they fulfil the above points.
All quality criteria such as permanence and additionality must be fullfilled.

Our advice to companies:

The public’s view of offsetting, and of companies’ climate protection strategies and measures, is becoming increasingly stringent. To ensure that CO₂ offsetting is effective, we recommend applying the highest standards and quality criteria to offset providers, climate protection projects and emission reductions.

We have summarised these for you in our atmosfair standard (in German). We recommend that you check these criteria for the projects with which you offset and demand them from the project operators.

If this is not possible and not all criteria have been met, we advise you to only buy certificates from projects that at least meet the following requirements:

The project should be registered as a CDM project on the UNFCCC site and the issuances of mitigation certificates generated after 2020 should have the corresponding “provisional status” on the UNFCCC homepage (See e.g. our Nigeria project).
In the case of pure GS projects: In the Gold Standard Register, the project is mapped as an authorised project (i.e. LoAA deposited).
It should be a type of project that requires ongoing funding, e.g. a project that will be continuously scaled up, such as a household biogas project.

Of course, the quality criteria for projects (cf. section „The quality of projects matters“) should be met.

We advise against:

Certificates that are only registered under one standard in the voluntary market and are not subject to UNFCCC supervision (i.e. are not CDM projects),
Certificates generated by 31.12.2020 from projects that are not to be transferred to Art. 6.
Certificates from forest projects,
due to the unsecured permanence of emission reductions and reports on human rights violations
Projects from the atmosfair negative list (in German)

The way to Corresponding Adjustments/integre offsetting under Paris: Where does atmosfair stand?

Creating the conditions for CAs is a lengthy process – on the part of host countries and project developers. Host countries need to have an overview of projects implemented on their territory, and create the administrative structures to record emission reductions and compile emission inventories. Project operators must contact the host countries of their projects, and request CAs.

Transfer to Art. 6.4. foreseen:

All projects that atmosfair offers for offsetting after 2020 are registered under the CDM in addition to the GS. Thus, they are known to the host country and have a good starting position for the transfer to Article 6.4. atmosfair will apply for the transfer to Article 6.4 for all projects as soon as the process is technically possible.

Host country dialogue: atmosfair started the dialogue with the host countries of its projects early on and is leading the voluntary market with its commitment, as Silke Karcher, former Head of the Unit for EU Climate and Energy Policy, European Climate Initiative, Carbon Markets at the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) attests (see box). Together with the project partners in the respective host country, atmosfair has contacted the responsible government agencies, pointed out the danger of double counting of emission reductions and sought an exchange with the host country on how to avoid double counting through CA. In the meantime, atmosfair has reached the first agreement with Nepal on a CA in the voluntary market: Nepal has assured that it will not count the emission reductions achieved in atmosfair projects in Nepal towards its NDC. This means that atmosfair can continue to use the emission reductions achieved in Nepal for CO2 offsetting. Rwanda has also agreed to allow atmosfair to use certificates from its stove project there for offsetting and has issued a formal letter of agreement (LoAA) for the project.

The current status of each atmosfair project (status at Corresponding Adjustments, suitable for offsetting) is presented transparently on each individual page of the respective project.

Cooperation with Gold Standard:

atmosfair is in close exchange with Gold Standard on how the host country authorisation of projects is mapped in the Gold Standard Registry.

Together with Gold Standard, atmosfair has developed transition criteria that projects in the voluntary market must fulfil in order to be in line with the rules of the Paris Climate Agreement, especially to avoid double counting (Gold Standard Transition Criteria).

Educating other market participants:

In the voluntary carbon market, there is a gradual understanding that CAs are necessary to avoid double counting, but there is still disagreement and uncertainty on the part of providers and customers. atmosfair provides education on the necessity of CAs for integrity in offsetting and supports other market participants by providing information. For example, atmosfair is involved in the Alliance for Development and Climate, which was launched on the initiative of the German Federal Ministry for Economic Cooperation and Development (BMZ), by conducting workshops. atmosfair also supported the state of Baden-Württemberg in developing a guideline for CO₂ offsetting (in German).

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