To be credible, however, an offset must be additional-it must reduce emissions below the quantity emitted in a business-as-usual scenario-among other criteria. In the U.S., there are no federal requirements to limit emissions and offsets may be purchased in a voluntary market. Outside the U.S., offsets may be purchased on compliance markets to meet requirements to reduce emissions.

The Congress is considering adopting a market-based cap-and-trade program to limit greenhouse gas emissions. Such a program would create a price on emissions based on the supply and demand for allowances to emit. Under such a program, regulated entities could potentially substitute offsets for on-site emissions reductions, thereby lowering their compliance costs.

Government Accountability Office worked to examine the challenges in ensuring the quality of carbon offsets in the voluntary market; the effects of and lessons learned from the Clean Development Mechanism (CDM), an international offset program; and matters that the Congress may wish to consider when developing regulatory programs to limit emissions.

GAO identified four primary challenges related to the United States voluntary carbon offset market. First, the concept of a carbon offset is complicated because offsets can involve different activities, definitions, greenhouse gases, and timeframes for measurement. Second, ensuring the credibility of offsets is challenging because there are many ways to determine whether a project is additional to a business-as-usual baseline, and inherent uncertainty exists in measuring emissions reductions relative to such a baseline.

Third, including offsets in regulatory programs to limit greenhouse gas emissions could result in environmental and economic tradeoffs. Fourth, offsets could compromise the environmental certainty of a regulatory program if offsets used for compliance lack credibility. ?EUR??,,????'??? Courtesy of Government Accountability Office