Offsetting

Offset choice and procedure

The UN system has endeavored to ensure that its approach to offsetting meets the highest standards of reliability and overall credibility, and contributes as much as possible to environmental protection and sustainable development. By its October 2007 decision, the UN system Chief Executives Board for Coordination chose buying offsets from the Clean Development Mechanism (CDM) to meet its future climate-neutrality goals.

This decision was based on, among others, the UN Climate Neutral Strategy adopted by the UN system through the UN Environment Management Group. The Strategy specifies a set of criteria that the institutions of the UN system consider to be important for their offset choice, namely, additionality, verification and certification, transparency, conditions related to the time-frame and permanency of emissions reductions, sustainable development benefits from the projects, the need to be consistent with inter-governmentally accepted standards, and the importance of avoiding conflict of interests through the organization’s own projects.

From within the set of CDM projects, individual UN organizations have the flexibility to specify additional criteria that they would like projects to meet. The UN Climate Neutral Strategy identifies some such criteria, such as the promoting employment, providing additional social benefits, selecting certain types of projects for their good environmental performance, the minimizing negative secondary environmental impacts, and supporting a specific geographical region.

In purchasing offsets, the UN system organizations have followed the relevant administrative rules and regulations that apply to the procurement of goods and services in their respective organizations6. These cover issues such as the identification of potential vendors, solicitation documents, expression of interest documents, evaluation of bids, etc. In particular, it is essential to follow an open, unbiased and transparent process for identification of potential vendors. Expression of Interest documents have been posted in the usual media used by the UN for advertising upcoming procurement, on the CDM Bazaar, and by posting to relevant major email lists and other vehicles for reaching a broad audience.

This process allows for organizations to specify additional criteria that they may wish the Certified Emission Reduction units (CERs) to satisfy, such as those described above. In addition, the practice has been followed to purchase only CERs that have already been issued, to minimize risk to the UN organizations. Furthermore, practice has evolved to include the requirement that offset providers carry out the function of retiring CERs so that these do not enter the organization’s accounting as assets. The overall process to procure offsets is managed by the procurement department of the UN system organization in question.

The price paid for offsets varies according to the market and the price offered as a result of the tendering process. The UN rules for procurement require that the solicitation document indicate specifications that the offsets must satisfy. During the evaluation phase, criteria are defined in advance to decide whether these specifications are met. Price of offsets could be one of several criteria used. These criteria could include a pass/fail item, such as the requirement that offsets be generated by the CDM, or also a weighting system, if there are desirable but not essential attributes. The UN rules aim to ensure that the overall process is fair, objective and balanced.

Experience to date

In both the UN Climate Neutral Strategy and the statement adopted by the heads of the agencies, funds and programmes of the UN system, the UN approach stresses the importance of implementing ongoing measures to reduce greenhouse gas emissions on an ongoing basis as part of a plan with specific targets, whether or not any offsets are purchased. The UN Climate Neutral Strategy considers that offsetting greenhouse gas emissions should not be seen as a substitute for efforts to reduce emissions, and should only compensate for emissions that cannot be avoided.

Overall, the UN system organizations are still in the early stages of the offsetting process. Roughly one third of the reporting organizations have undertaken some type of activity related to offsetting. A number of organizations have indicated that they are still in the process of reviewing the financial implications and cost considerations. For most organizations, this is the first year that an inventory has been prepared; some organizations – particularly those with a significant number of field offices – have not yet got full coverage and are therefore lacking an accurate picture of the full greenhouse gas inventory. Others have reported that they have chosen to focus first on emissions reductions before offsetting.

Five UN system institutions have declared themselves climate-neutral or carbon-neutral7. Yet another organization8 offset part of its footprint in 2008 using a more restricted boundary, expanding to full coverage in 2009.

Another six organizations9 have made specific high profile events or meetings entirely or partially climate neutral. Two organizations have indicated that they are at the stage of having put forward proposals to include financial provision for offsetting in the 2010–11 biennium, one of which has been approved. When purchasing offsets, organizations have selected projects which have additional environment benefits, which belong to projects in a geographical location of special interest to that organization, are generated under a specific CDM-methodology (e.g. renewable energy, energy efficiency), or in some cases which have also satisfied the Gold Standard criteria.

There has also been variation in the means by which offsets have been funded, with both core funds and extra-budgetary resources being used. In some cases, particularly concerning the offsetting of specific events, funding has been provided through external sponsors, for example individual governments or private foundations. In these cases, the UN has not always conducted the procurement of offsets. A more systematic approach, pioneered by one UN organization and now being taken up or piloted by several others, has been to finance offsets at the point where the greenhouse gas emissions are being generated. In the case of travel, in several cases organizations are charging the offset costs to the travel budget line without increasing the overall allocation to the latter. This keeps the overall initiative cost-neutral, while reducing greenhouse gas emissions as compared to what they would otherwise have been. Furthermore, this has had the additional benefit of sensitizing staff to the climate impact of travel.

In the future, the organizations of the UN system will explore options for cooperating on offsetting initiatives, including putting in place mechanisms for joint purchase. Such approaches could generate economies of scale, both in terms of the transactions costs of conducting the process, skill sharing and in terms of lower offset price.

Offsetting could be combined with efforts to reduce or limit emissions. There have been some innovative suggestions that could be further developed. For example – as one organization has suggested – the possibility could be explored with airline companies of converting frequent flyer miles from official travel into contributions towards offsets. Another proposal for possible future consideration is to “cap-and-trade” emissions by allocating a certain amount of travel-related emissions to each division within the organization, and allowing divisions to trade between themselves.

Case study

Read about UNEP's experience of offsetting here.