Designing, implementing and operating a carbon offset project requires the involvement of a large number of parties, stakeholders and authorities. Although the parties involved differ from project to project, some general categories and types of market players can be defined as follows.
The operator and owner of the physical project installation where the emission reduction project takes place. This can be any private person, company or other organization.
A person or organization with the intention to develop an emission reduction project. This could be the project owner, a consultant or specialized services provider.
Banks, private equity firms, private investors, non-profit organizations and other organizations may lend or invest equity to fund a project. Some of the standards have rules as to what kind of funding, aside from offset revenue, is acceptable for an offset project.
Individuals and organizations that are directly or indirectly affected by the emission reduction project. Stakeholders include the parties interested in developing a specific project (e.g. owner, developer, funder), parties affected by the project (e.g. local population, host community, environmental and human rights advocates) and national and international authorities.
Third Party Auditors Validators and Verifiers
The CDM and many of the voluntary offset standards require a third-party auditor to validate and verify a project’s baseline and its projected and achieved emission reductions. Under CDM, the auditors are called Designated Operational Entities (DOEs). To minimize conflicts of interest, the CDM does not allow the validating DOE to also conduct project verification.
In the absence of national and international legislation, standard organizations define a set of rules and criteria for voluntary emission reduction credits.
Brokers and Exchanges
In the wholesale market, emission offset buyers and sellers can have transactions facilitated by brokers or exchanges. Exchanges are usually preferred for frequent trades or large volumes of products with standardized contracts or products, while brokers typically arrange transactions for non-standardized products, occasional trades, and often small volumes.
Professional emission reduction traders purchase and sell emission reductions by taking advantage of market price distortions and arbitrage possibilities.
Offset providers act as aggregators and retailers between project developers and buyers. They provide a convenient way for consumers and businesses to access a portfolio of project offsets.
Individuals and organizations purchase carbon offsets to counterbalance GHG emissions. Therefore, the final buyer has no interest in reselling the offset but will prompt the retirement of the carbon offset.