Barriers to achieving additionality in carbon offsets: a regulatory risk perspective

Abstract

The Specified Gas Emitters Regulation (SGER) in Alberta, Canada was the first North American regulation to mandate reductions in greenhouse gas emissions. Regulated entities may use carbon offsets to meet their emissions reduction obligations. Although conceptually sound, the offset market has fallen short of its potential to reduce emissions. By analyzing the policies and operations of the Alberta Emissions Offset System (AEOS), enabled by the SGER, we illustrate how participants are impacted by uncertainty in the Alberta carbon offset development process, using ECB Lethbridge Biogas as a case study. Our analysis shows that existing uncertainty from regulation creates risk for projects, which builds barriers that prevent regulated entities, project developers, and the province of Alberta from reaching the full potential of the regulation. We provide recommendations that will help to achieve additionality within the offset system by encouraging increased participation from high-quality projects, ultimately resulting in greater emission reductions.