Permanence and Leakage

Permanence and leakage have not been as problematic as additionality,but they have been quite challenging in their own right. Particularly for categories of offset projects like those involving forestry and land-use change.

Offset Permanence

Tackling permanence involves both policy and technical questions that include:

  • How long is permanent enough?
  • Is there monetizable value to temporary carbon sequestration?
  • How does permanence rigor influence offset economics?
  • Should potentially reversible (non-permanent) offsets be treated as a separate commodity from the rest of the offset market?

There are no “right answers” or even “obvious answers to these questions, but an enormous amount of work has been done over the last 20 years to grapple with them.

One thing that is clear is that how offset permanence is handled can dramatically change the economics of carbon offsets from some sectors, and even effectively eliminate those sectors them as a source of offsets.

Offset Leakage

Leakage too has proven to be a challenging criterion as market participants have proposed receiving offset credits for projects like shutting in oil and gas fields, prematurely closing a coal mines, or shutting down a factory. All of these project types would result in close to 100% leakage.

Leakage is a potential problem whenever a proposed offset project is also involved in standard markets, e.g. a reforestation project and its potential interaction with global fiber markets. Closing a coal mine does not result in a reduction of CO2 emissions if that mine’s production is made up for at other coal mines. Closing a factory does not result in a reduction of CO2 emissions if it is simply being moved from the U.S. to China. All of this is leakage.

Like additionality, leakage can usually not be empirically measured when evaluating carbon offsets, and often requires similar policy determinations.