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Investing in Carbon Offsets

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In recent years, the world of real estate has focused on sustainability, and rightfully so. According to the U.S. Green Building Council, buildings account for 40% of primary energy use in the United States, as well as 39% of its carbon dioxide emissions. These numbers have played a part in the industry’s drive toward green building. Owners are no longer content with traditional energy use and the negative impact that it has. Building owners have identified tangible returns to going green, including increased marketability, decreased operating costs, and the halo effect. These returns create an opportunity for carbon offset investments.

Investing in Carbon Offsets

A carbon offset is a credit or certificate that represents the reduction of one ton of carbon dioxide emissions. These offsets are created by projects that reduce carbon dioxide and have the reduction verified by a qualified third party. These carbon reduction projects then sell their offsets to individuals and companies that wish to mitigate their environmental impact. In most cases, participation in the carbon offset market is voluntary. These offsets are most commonly purchased to earn LEED points for a building or to get media recognition for a company’s green efforts. According to Jason Brown, Senior Marketing Manager at 3Degrees, an environmental commodities firm specializing in renewable energy certificates (RECs) and carbon offsets, “Building owners should consider purchasing carbon offsets if they want to mitigate the climate impact of the greenhouse gases emitted from their energy use -- specifically emissions resulting from purchased steam or from natural gas, propane, or fuel oil combusted on site. By purchasing carbon offsets in proportion to their building’s (non-purchased electricity-related) carbon emissions, building owners can balance out the climate impact of their energy use.” It is worth noting that both 3Degrees and the U.S. Green Building Council recommend the use of renewable energy certificates (RECs) to mitigate the environmental impact of electricity use.

Purchasing carbon offsets, much like renewable energy certificates (RECs) and solar renewable energy certificates (SRECs), may seem too complicated, forcing the green building industry’s decision-makers to look in another direction. Many individuals or businesses may have difficulty finding out how and from whom to buy them. Fortunately, 3Degrees provides us with the following step-by-step list of how those decision-makers can invest in carbon offsets:

“Building owners should consider purchasing carbon offsets if they want to mitigate the climate impact of the greenhouse gases emitted from their energy use." Jason Brown, Senior Marketing Manager at 3Degrees

  1. Make sure to lower your building’s carbon emissions as low as financially possible through on-site green building practices first.
    • This will reduce the amount of carbon emissions that need to be offset, which will ultimately reduce cost of purchasing the necessary carbon offsets.
  2. Find a carbon-balancing services firm that sells third-party verified carbon offsets. You can find a list of such firms at the Green-e Climate website.
    • Green-e Climate is a certification program for the sale of carbon offsets sold in the voluntary market.
    • Green-e Climate certification ensures that no double-selling of greenhouse gas emission reductions occurs and that sellers of these products make appropriate disclosure to their customers.
  3. Contact these firms and have them help you determine the amount of carbon dioxide equivalent emissions resulting from your building’s use of purchased steam or from natural gas, propane, or fuel oil combusted on site.
    • Note that the U.S. Green Building Council recommends that you mitigate the environmental impact of your building’s electricity use with renewable energy certificates (RECs), not carbon offsets. You can view a list of Green-e Energy-Certified REC providers here.
  4. Determine the type of carbon offset you wish to purchase. Carbon-balancing service firms will be able to help you to understand the different types of carbon offsets and which will best suit your building or project.
    • For example, should your offsets be sourced from a wind farm, from a landfill gas capture project, or from a sustainable forestry project?
  5. Purchase your carbon offsets from a provider and inform your building’s tenants and other stakeholders of your commitment to mitigate the environmental impact of your building’s energy use.
    • If your project is seeking LEED certification under the LEED for Existing Building v3 guidelines, your carbon offset purchase might enable you to secure points through the Green Power Credit.

An investment in carbon offsets may or may not be the right decision for you or your company. Only research will tell you whether you can benefit from mitigating your environmental impact through carbon offsets. If the required return is feasible, and the choice is made to invest in carbon offsets, be assured that your building’s marketability and bottom line will both improve from your decision.

Michael Tolson MBA, LEED AP

Michael Tolson is an entrepreneur focusing on "green" real estate development in Toledo, OH and surrounding areas. He currently owns Tolson Construction, and The Tolson Development Company. In an attempt to further drive businesses, Michael has completed an Executive MBA and a Graduate Specialization in finance from the University of Toledo. His companies focus on commercial and residential buildings using the United States Green Building Council’s LEED rating system. With this in mind, Michael has earned his LEED Accredited Professional designation.

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