The Evolving Role of Emission Offsets in Combating Climate Change

Reports and studies — Financial Advisory, Lazard Climate Center

September 13, 2022

A factory with gas pollution in the air


The Lazard Climate Center has issued a working paper entitled “The Evolving Role of Greenhouse Gas Emission Offsets in Combating Climate Change,” which explores the role of offsets in regulatory compliance, as an incentive for early climate action, and in implementing voluntary emission goals.

The voluntary offsets market has grown significantly in recent years and the Taskforce on Scaling Voluntary Carbon Markets has projected that the market could reach $50 billion in value by 2030. Yet, substantial limitations in the current voluntary offsets market persist, mainly revolving around price disparities (heterogeneity across regions and registries) and concerns around environmental integrity. Questions on offsets’ additionality, permanence, double-counting, and leakage also pose environmental, economic, and political challenges.

Based on the properties of offsets, the paper explores an array of financial and technological innovations that could enhance offsets’ environmental integrity and promote liquid offset markets. These include:

  • Commoditizing offsets by creating standardized contracts and futures that would allow the market to achieve convergence on pricing
  • The development of project insurance and related instruments that could mitigate the risk of decarbonization delivery and lack of permanence
  • Further technological advancements, like satellite imagery and blockchain, which could enhance abatement visibility and limit double-counting

Click here to download the paper. For more information, please contact Zachery Halem, Director of the Lazard Climate Center.

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