Offsetting in carbon taxation systems

Analysis of the potentials and limits of different offset standards in bilateral and global CO2 price systems.

An increasing number of countries and regions developed CO2 pricing mechanisms, including carbon taxes and emission trading systems. Some of these countries are designing or plan to design standards for the use of offsets in their pricing systems. Three interesting countries in this respect were Chile, Mexico and South Africa, all of which either have introduced or planed to introduce a carbon tax that might be linked with an offset mechanism in the future. Taking these countries as examples, this project analysed how offsets can be used in national carbon pricing systems in order to support other national climate policies and targets that go beyond cost reductions. In addition, it was investigated which potential a national carbon tax might have with regard to the global offset market, seeking to identify the ‘common substance’ of different offset mechanisms and to give recommendations for the role of offsets in the development of a global carbon market. The German emission trading authority (DEHSt/UBA) funded this research project which was conducted by a consortium of NewClimate Institute and Wuppertal Institut.