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The role of offsets in a net zero journey

Solar Offset allows the owners of small-scale solar and wind power systems to sell their carbon emission reductions into the Alberta carbon market. This generates an annual payment for the system owner for a 10 year period, funded by the purchase of their Offset Credits.

As we talked about in another blog, the purchasers of these credits are typically large industrial sites in Alberta. But if large industry is buying your carbon emission reductions, what does this mean for our collective journey to a net zero emissions future?

This question is likely to generate a lot of different answers, depending on who you ask and what they know about offset credits. However, it's important to understand this question within the specific context of Alberta's carbon markets, the principles of market economics and the technologies that are generating carbon offsets via Solar Offset.

Firstly, buying carbon offsets is an alternative compliance mechanism in Alberta. Via the province's TIER Regulation, regulated industrial sites have a number of options to comply with TIER's requirements to reduce their emissions. Other alternatives include making an on-site emissions reduction (through, for example, implementing methane capture or energy efficiency projects) or paying the government for every tonne of emissions they could not reduce (by purchasing what are called Fund Credits).

Of course, when it comes to making internal reductions, these will only happen where the return-on-investment is sufficiently high and the technical means exists to do so. If the measure costs too much, takes too long to pay back, or isn't technically feasible, these companies won't (or can't) implement internal reductions.

In the absence of Offset Credits, therefore, the companies would simply pay the government - and no emission reductions would be guaranteed to be made in the economy at all. But with a functioning carbon offset system, companies can instead fund someone else to make an emission reduction, where that can be made at a lower cost than purchasing Fund Credits or making internal reduction projects. This makes economic sense for them, but also results in an environmental benefit.

Furthermore, as the cost of carbon rises, the economics of this decision making will change. Instead of buying Fund Credits or Offset Credits, therefore, companies will start implementing internal emission reduction projects. A well functioning emission offset system doesn't therefore prevent emission reductions from happening - it simply changes where in the economy they happen at a particular point in time.

Secondly, solar PV systems typically come with a 25-year warranty on the panels. They last for a LONG time! By comparison, participants in Solar Offset can expect to generate offset credits for up to 10 years - but no more than this. During the time they are creating offset credits, it's true that they are selling their emission reductions and therefore the system isn't contributing to their own personal journey to net zero, and it's important that a system owner understands this is what is happening.

Once the 10 year offset crediting period is over, however, that system is no longer eligible to generate offset credits. Yet the system does, of course, continue to generate clean energy for 15 years or more - during which time, all of the emission reductions once again belong to the system owner and reduce their own carbon footprint. So, creating additional revenue by selling offsets doesn't prevent that system from contributing to a system-owner's own carbon footprint reduction, it simply delays it.

Finally, creating revenue by selling offset credits allows a system owner to use the additional funds to invest in the next step on their personal journey to net zero… a heat pump, an EV, etc. So, selling offset credits can help system owners to implement their own net zero / emission reduction projects even faster!

Solar Offset's mission is make solar a more affordable, easier decision for ordinary Albertans - we do this by enabling system owners to access the Alberta carbon market, in the same way that utility-scale renewable energy projects have done for years. We believe that doing so will help accelerate the energy transition for ordinary Albertans - by improving the payback on solar - without compromising our collective long-term goal of reducing our carbon emissions and hitting a net zero goal.

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