Explore this page to learn more about carbon markets and our protocol.

WHAT ARE CARBON MARKETS?

Carbon markets are formed when a government caps the amount of carbon emissions (pollution) permitted, and puts a price on said emissions, usually quantified by tons of carbon dioxide. Entities then buy and sell emissions, or emissions reductions, from the government and one another.

The market for carbon offsets has changed rapidly over the past decade and has left consumers vulnerable to unreliable claims of carbon reduction. The wildly variable quality of offsets on the market reflects the inherent uncertainty in offset projects, perverse economic incentives that motivate project implementers to inflate reductions, and lax or absent regulation. This uncertainty has resulted in a severe, but not unwarranted, crisis of faith in carbon offsets. This is why we procure carbon allowances, rather than offsets.

A carbon allowance is a legal document issued by a government agency permitting the bearer to emit one ton of carbon dioxide (or equivalent) into the atmosphere. The total number of allowances available (a.k.a. the Carbon Cap) is pre-determined and legally binding, meaning that retiring one allowance reduces the maximum pollution allowed by one ton of carbon dioxide.

Every power plant from Maine to New York is required to purchase one allowance from the state governments for every ton of CO2 they emit. The number of these allowances is capped. When you purchase our carbon allowances, we buy the same allowances these dirty power plants need to operate, reducing the number of available allowances and restricting their right to pollute.

A carbon offset is a certificate that equates to one ton of carbon dioxide (or equivalent) not emitted due to an investment in a carbon reduction project. Typical projects include re-forestation, prevention of deforestation, or methane capture. Carbon offsets can be difficult or impossible to verify or enforce.

WHAT DOES IT MEAN TO Hold A CARBON ALLOWANCE indefinitely?

Donations to CLA bind us to hold allowances in perpetuity on behalf of the respective donor. This action permanently removes the allowances (1 tCO2e) from the respective carbon market.

Since we are a nonprofit, we have no financial incentives to re-sell the allowances we purchase, no risk of going under and therefore having to sell our allowances, and we are not obligated to “cash in” our allowances to RGGI like power plants have to do when they pollute. Therefore, RGGI does not count our holdings as utilized allowances, so our participation will never contribute to justifying a raise in the auction caps based on demand.

Some state governments require regulated fossil fuel power plants (25MW and larger) to surrender one allowance for every ton of CO2e they emit. Allowances are sold by the states at quarterly auction. Each individual allowance is serial coded, and the number of allowances available for purchase at each auction is fixed and limited. Prices are set by auction. CLA participates in these auctions to purchase carbon allowances.

WHICH AUCTIONS DO YOU PARTICIPATE IN?

We participate in one primary market for our clients: The Regional Greenhouse Gas Initiative (RGGI).

We also engage with Compliance RECs for interested donors and continue to monitor developments under California’s cap and trade program. Developed as part of a suite of measures under AB 32 (Global Warming Solutions Act) to reduce emissions, California’s cap and trade program covers 450 businesses responsible for about 85% of the state’s total GHG emissions. CLA will be continuing to monitor market dynamics to ensure strong impact. The Carbon Lighthouse Association also provides Compliance RECs to interested donors. Please email us at info@carbonlighthouse.org to learn more.

WHAT IS THE REGIONAL GREENHOUSE GAS INITIATIVE (RGGI)?

The Regional Greenhouse Gas Initiative (RGGI) is the first mandatory market-based program in the United States to reduce greenhouse gas emissions. RGGI is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector. Learn more here.

HOW WILL I KNOW MY DONATION HAS A DIRECT IMPACT?

You can view our tracking page to see exactly which carbon allowances are assigned to whom, and see the tangible environmental impact of your donation.

HOW CAN I KNOW MY CARBON FOOTPRINT?

The average American emits 1 ton of CO2e per month, but if you want to calculate a more precise carbon footprint for your household, be sure to use our carbon calculator.

The definition of Scope 1-3 emissions is based on the guidelines of the Environmental Protection Agency:

·       Scope 1: direct emissions, e.g. on-site fossil fuel combustion from boilers and furnaces, fleet fuel consumption, etc.

·       Scope 2: indirect emissions, e.g. emissions that result from the generation of electricity, steam from a local steam grid, etc.

·       Scope 3: related emissions, e.g. from employee travel and commuting, contracted solid waste disposal, wastewater treatment, and transmission and distribution (T&D) losses associated with purchased electricity, etc.

Carbon neutrality is based on achieving net zero emissions. Many different protocols help companies achieve carbon neutrality and have different ways of quantifying this outcome.

By purchasing and retiring allowances from only regional or national cap and trade programs, reductions are folded into economy-wide goals. Therefore, with CAP certification (below), the correct claim for companies or organizations to make is they are helping to reduce overall emissions within domestic cap and trade programs. A donation is referred to as a National Climate Contribution (NCC) and certifies a voluntary donation toward reaching and surpassing domestic GHG mitigation goals. This is the direct impact of donations from individuals and businesses.

When these entities purchase the equal number of allowances as tCO2e that they are emitting in a year, they can claim carbon neutrality, as defined under the CAP Certification, as they have accounted for their emissions not eliminated through energy efficiency or other reductions.

In the long term, CLA expects that due to the Paris Agreement claims of carbon neutrality based on carbon offsets – e.g. offsets from the voluntary markets rather than through RGGI – will be difficult if not impossible to guarantee as compliant. As a leading offset standard notes in recent analysis, “Post-2020, as a significant share of offset projects will be in countries and sectors subject to a target under the Paris Agreement, it will become increasingly difficult to source double counting ‘risk-free’ credits to fulfill carbon neutrality or compliance commitments.” The use of RGGI allowances currently protects against this risk, which is a large reason they are utilized under the CAP Certification, and CAP will continue to monitor the market environment to ensure the Protocol is updated as details of the Paris Agreement continues to unfold.

The Carbon Allowance Protocol (CAP) provides guidance for individuals and companies looking to account for their emissions through removing carbon allowances from government-regulated carbon markets. This protocol aims to provide a transparent guide for donors looking to understand, track, and communicate their impact.

The CAP can be applied to individual events/activities in addition to comprehensive accounting of an individual’s or company’s annual emissions.

Step 1: Quantification

Donors calculate their emissions. This process is flexible based on donor needs:

a.      Donor has already calculated their carbon footprint: See Step 2.

b.     Donor is looking to quickly calculate their emissions: Estimate emissions through online carbon calculator.

c.      Donor is looking to better understand their detailed emissions: Work with a nonprofit or other third-party for individualized carbon footprint calculation or perform study in-house.

Step 2: Donation and Certification

Based on the calculated number of emissions (tCO2e) submit a donation to purchase the equivalent carbon allowances. This transaction can be completed online or through a purchase order.

A donation for the purchase of one allowance from a government auction is equivalent to the prevention of 1 tCO2e. Each entity managing the allowance program will clearly set out which party is taking on the price risk from potential variations in auction price, so donors are assured that each donation for 1 tCO2e leads to the purchase of one allowance. This donation is referred to as a National Climate Contribution (NCC) and certifies a voluntary donation toward reducing overall emissions within a domestic cap and trade programs.

Currently RGGI allowances are the only type accepted under this protocol. However, compliance RECs can be included in the allowance mix upon consultation with the nonprofit. New markets for addition under the protocol are periodically reviewed.

Step 3: Reporting and Communication

The entity managing the allowance program participates in the subsequent quarterly auction, placing a bid for the donor’s specified number of allowances or provides allowances purchased in a recent auction. Allowances are delivered to the RGGI CO2 Allowance Tracking System (COATS) general purpose account within seven business days. Each allowance and its unique serial number will be posted publicly (e.g. on a website) and attributed to the respective donor.

The donor will receive a CAP Certificate noting the number of allowances and serial numbers purchased in their name along with the logo in several formats for use in promotional materials.