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    Carbon Offsetting: A Finance Mechanism for Energy Projects


    International Trade Forum - Issue 1/2010

    Options for offsetting carbon emissions from our lives are numerous. Is offsetting really working or is it only calming our eco-conscience? The Swiss non-profit organization myclimate explains how its offsetting projects work in practice.

    More and more companies and individuals offset their climate-relevant emissions (CO2 and others) through myclimate. The mechanism is simple: any energy consumption induced by economic and individual activities produces climate-relevant emissions which can be calculated. These emissions can be compensated by paying an amount of money (calculated according to the volume of emissions to be offset) into a carbon-offset project. If the project reduces the same amount of emissions that has been produced, the activity can be claimed as climate neutral.

    myclimate's carbon-offset projects, mainly located in developing countries, are run by experienced local partners - companies or organizations. Projects either replace fossil fuels with renewable energy or promote energy-efficient technologies.

    Additional costs can be covered through the offset mechanism. For example, when replacing a coal-fired power station, one option is to build the same type of power station. If a more expensive, climate-friendly, biomass-fuelled power station be built, additional costs can be covered by selling the emissions reductions. Additional costs are divided by the emissions reductions achieved. This is the price of one tonne of CO2 reduction.

    myclimate carbon-offset projects are also required to contribute to sustainable development. Environmental, economic and social sustainability is targeted. Positive effects include reduction of air and water pollution, improved quality of life, knowledge and technology transfer and job creation. The Gold Standard is currently the most stringent label measuring sustainability of carbon-offset projects.

    For example, a myclimate project in Peru aims to improve living conditions by introducing efficient stoves with chimneys, made with local materials.

    The Qori Q'oncha Programme is managed by Microsol, a social enterprise, and involves local organizations. Introducing efficient cookers with chimneys was the best alternative for both environmental and social development. Their use reduces demand for firewood, leading to a reduction of CO2 emissions, and also protects the forest and reduces time spent gathering firewood.

    The chimneys ensure thick smoke is expelled from the house, making women and children, in particular, less liable to respiratory illnesses. Local institutions and villagers are trained in the construction and use of the stoves and are taught about technology, health and the environment, guaranteeing the long-term success of the project.