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.  

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