Unlike Fine Wines, Carbon Offsets Get Worse With Age

This article first appeared on the BNEF mobile app and the Bloomberg Terminal.

  • Older carbon offsets earn 24% discounts on average
  • Age of an offset can speak to the quality of a project

Companies hunting for carbon offsets at bargain prices should look at their age.

A carbon offset’s ‘vintage,’ or the year an emission reduction occurred or an offset was issued, can have a big impact on its quality, and therefore pricing. Offsets with an older vintage can earn discounts averaging 24% across various sectors and geographies. Offsets from forestry projects in Latin America issued prior to 2015 can be purchased for $2/ton less than those issued after 2015. Similar discounts can be seen with North American energy generation offsets.

For many companies purchasing carbon offsets, indirectly erasing their own harder-to-abate emissions, older vintage offsets can raise several red flags. They may indicate a project developer’s inability to sell credits to an offtaker, or that a project was built and issuing offsets without added revenue – both signs of a low-quality project. Companies like Microsoft, Salesforce and Barclays have purchased offsets that were issued more recently as a result.

Clients can find the full report “Voluntary Carbon Offsets: a Shortcutfor Heavy Emitters?” on the Terminal or on web.  

BNEF Shorts are research excerpts available only on the BNEF mobile app and the Bloomberg Terminal, highlighting key findings from our reports. If you would like to learn more about our services, please contact us.

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