- Be built upon a commitment toward internal energy efficiency gains:
As part of their Climate Neutral proposal, companies should include be able to demonstrate an outstanding performance in reducing greenhouse gas emissions internally — before purchasing offsets either as part of their new Climate Neutral portfolio or by pointing to past, current or future on-site reduction activities.
Outstanding performance for internal reductions could be benchmarked by reference to companies outlined in books such as Romm's "Cool Companies" (Island Press) or Hawken/Lovins' "Natural Capitalism".
Performance demonstrated via existing programs, policies promoting energy efficiency or via new internal reductions planned as part of their current Climate Neutral application.
- Reflect the principle sources of greenhouse gas emissions in the solutions they propose.
For example, if currently 60% of GHG emissions are globally attributable to fossil fuel, then, as a general rule, at least 60% of the portfolio needs to be focused on CO2 reductions from fossil/energy sources whether generated by on-site reductions or through offset purchases.
Similarly, only 10-20% to focus on forest sequestration.
A diversified Climate Neutral portfolio can be built over a period of five years, based on an up-front management plan to enable companies to achieve this diversity and still invest in sizeable projects.
Climate Neutral certification is designed to ensure that reductions and offsets meet these criteria. However, companies are individually responsible for the performance of these Climate Neutral portfolios and the Network is in no way liable for any non-performing assets or liabilities arising.
- Create multiple benefits:
Companies are encouraged to invest in offsets which confer multiple GHG savings to compound cost, community and climate benefits (e.g., methane capture which is then used to generate electricity since this has multiple benefits methane and CO2 displacement for fuels generation for local schools' use).
- Foster experimental learning and innovation:
Companies can voluntarily decide to invest up to 5% of their Climate Neutral portfolio's in experimental offset areas (transport, land use planning etc where carbon tons are "softer", less quantifiable), in order to encourage on-going learning and innovation at the leading edge of the offset arena.
- Balance geographic interests:
To reduce investment risk, provide educational opportunities, and support the domestic infrastructure, companies are encouraged to dedicate a substantial majority — at least two-thirds — of their offset investments to domestic investments. The stronger the domestic investment, the more credible the program.
Exceptions can be made to reflect, for example, the European emphasis for domestic reductions that the UK might wish to establish, on an individual case-by-case basis.
- Avoid double counting:
Offsets should be retired (since companies could otherwise trade permits and compromise Climate Neutral status by enabling more carbon to be emitted elsewhere), and cannot increase the US assigned amount.
Climate Neutral offsets are retired in order for the enterprise or product to receive the Climate Neutral mark in perpetuity. The offsets cannot be traded but rather will create long-term permanent trusts to secure these climate gains for future generations.
Any project if registered under JI/CDM cannot therefore be used for Climate Neutral purposes since they would increase the US assigned amount.
- Be tradable only at the margin:
Climate Neutral investments could only be traded at the margin (rather than retired) if companies had voluntarily or otherwise invested in excess of their appropriate Climate Neutral requirements.
- Offset on more than a one-to-one ratio:
Portfolios need to offset the carbon on more than a one-to-one ratio in order, at a minimum, to provide for attenuation/leakage.
Discount factors for different offset projects should take account of cost/precision tradeoffs in the measuring and monitoring process.
- Be responsive and flexible to accommodate the variations in offsets' risks & returns:
Carbon gains can be front-loaded subject to appropriate discount factors to reward 1) investments which offer greater security and 2) investments in advanced technologies which tackle the underlying consumption challenge to accelerate the introduction of products which dramatically reduce average climate emissions.
Given the present state of the market, all offsets can be front-loaded, subject to varying discount rates; "pay as you go" approaches are preferred as the market matures.
Discount factors should take account of quality variations with respect to through-time effects.
Ideally, advanced technology investments (including renewables, technology buy-down funds etc) might comprise, on a voluntary basis, at least 10% of the portfolio (onsite or offsite).
