Presentation: Leading Practices for Municipal Carbon Offset Policy, Gaby Kalapos, Clean Air Partnership

• PDF of Presentation
• Recording of Presentation

Why Bother with a Municipal Carbon Offset Policy?

Leading Practices Guide for Developing a Municipal Carbon Offset Policy

• Criteria for Selling Offsets: Establishing guidelines on when and how municipalities could sell GHG reductions, ensuring it does not compromise their ability to meet their own climate targets.
• Criteria for Purchasing Offsets: Ensuring that purchased offsets meet stringent verification and additionality requirements, prioritizing projects that actively remove carbon from the atmosphere.
• Leading Examples: A case study from the Cities of Toronto will illustrate how municipalities are structuring their offset policies to balance accountability towards their climate commitments and greenhouse gas reduction targets and securing the necessary resources to advance GHG reduction actions.
• Carbon cycle doesn't care where reductions are achieved
• Helps to secure the most cost effective GHG reductions
• Not our first rodeo - this has been used for air pollution and CFCs
• Critical goals to build a robust and transparent carbon market
• Cost effective reductions: ex in the acid rain program SO2 was reduced by 50% at a lower cost than anticipated showing the value of markets
• Critical to have a clear and declining cap - requires a well defined and gradual declining cap
• Need to ensure a robust monitoring and compliance process

What's the Difference Between Credits and Offsets?

• Credits are sometimes called carbon allowances - identify the mount of GHGs an entity is allowed to release. Those with excess reductions beyond their required reductions can sell their reductions to others to meet their regulatory requirements.
• Credits are used more in regulatory markets
• Offsets are trading between two entities, often as part of a voluntary market.
• Critical to understand that if the credit or offset is sold to another entity it is not available to the seller for their reductions (there are some exceptions to this that we will speak to)

What is Additionality and Why is it Important?

• In the carbon market, additionality refers to the principle used to assess whether a carbon reduction project results in genuine, additional greenhouse gas emission reductions or removals that would not have occurred without the project. For a project to be considered "additional," it must demonstrate that:
• The reductions would not have occurred without the revenue from carbon offsets. The emission reductions are beyond what would have taken place under a "business-as usual" scenario. The project should be financially or technically dependent on the sale of carbon credits to be additional rather than viable.
• The reductions exceed regulatory requirements or common practices: The project's actions must exceed legal mandates and standard practices within its sector or region.
• The reductions deliver real climate benefits: Additionality ensures that the offsets sold in the carbon market represent actual, verifiable emissions reductions that contribute to the overall climate goals, and ensures that there is no double counting of reductions.

How are Municipal GHG Reduction Targets Impacted When Offsets are Sold?

• If a municipality sells its carbon reductions via an offset to an entity within its municipal geography, the municipality cannot count those offsets through their corporate reduction targets BUT can allpy them to their community GHG reduction target.
• If a municipality sells their offsets to an entity outside the municipality's geography, those reductions can no longer be counted toward either corporate or community GHG reduction targets.
• Exception: ex. Clean Fuel Standard. Because the federal government is aggregating reductions and retiring them it appears that reductions under the Clean Fuel Standard can receive funding, but those reductions can be applied to municipal GHG reduction targets.

Carbon Market Transactional Costs

• Often can only secure GHG reduction at 50%, the other 50% often go to transactional costs.
• Reputational risks of double counting
• Carbon offsets are time allocated (often for one year time period)
• Annual reduction commitments need to be secured annually via an offset route.
• Business models: Commission (often 50%) or fee for service

Questions to Ask to See if Your Municipality May Need a Carbon Offset Policy?

• Does your municipality have a GHG reduction target?
• Has it identified it principles related to achievement of target (advancing all local opportunities as a priority to secure co-benefits)
• Has your municipality purchased offsets?
• Has your municipality sold offsets?
• Don't assume the answer is no, sometimes departments have sold reductions without coming to council.
• Waste is the department most likely to have possibly sold carbon offsets.
• https://www.cleanairpartnership.org/wp-content/uploads/2025/04/Carbon-credits-guide.pdf