The social value of offsets.

It is unclear how much carbon should be stored in temporary and risky offsets to compensate one ton of CO emissions. Here we cast the social value of an offset (SVO), measured in terms of economic damages avoided, as a well-defined fraction of the social cost of carbon reflecting offset duration, and risks of non-additionality and failure. The SVO reflects the value of temporary storage, and overcomes shortcomings in the climate science and economics of previous contributions. The SVO is policy relevant. An efficient net-zero policy will consist of offsets if their SVO/cost ratio exceeds the benefit/cost ratio of alternatives. The SVO yields an indicator of the equivalence of offsets to permanent carbon storage measured by the ratio of the SVO to the social cost of carbon. We provide a matrix of equivalence factors for different risks, permanence and climate scenarios. Estimation yields a rule of thumb: one offset sequestering one ton for 50 years is equivalent to between 0.33 and 0.5 tons permanently locked away. Equivalence offers a means of replacing perpetual offset contracts by simpler, easy to monitor short-term contracts, has applications to carbon life cycle analysis and the valuation of carbon debts, and can be the basis of comparing offsets of different qualities in the voluntary and compliance markets.