The social value of offsets

Area of Science:

• Climate Science
• Environmental Economics
• Carbon Accounting

Background:

• Current methods for valuing carbon offsets are insufficient, particularly regarding temporary storage and associated risks.
• Uncertainty exists in quantifying the exact amount of carbon needed in temporary offsets to compensate for CO2 emissions.

Purpose of the Study:

• To define and calculate the Social Value of an Offset (SVO) as a fraction of the social cost of carbon.
• To establish a framework for assessing the equivalence of temporary carbon offsets to permanent carbon storage.
• To inform efficient net-zero policies and carbon market comparisons.

Main Methods:

• Developed a model defining SVO based on offset duration, non-additionality, and failure risks.
• Calculated the ratio of SVO to the social cost of carbon to determine equivalence factors.
• Generated a matrix of equivalence factors across various risk, permanence, and climate scenarios.

Main Results:

• One ton of carbon stored for 50 years is equivalent to 0.33-0.5 tons of permanently stored carbon.
• The SVO provides a policy-relevant metric for evaluating offset efficiency.
• A matrix of equivalence factors was generated for diverse scenarios.

Conclusions:

• The SVO framework offers a robust method for valuing temporary carbon offsets.
• This approach can simplify offset contracts, moving towards shorter, monitorable terms.
• The findings support improved carbon life cycle analysis and the valuation of carbon debts.