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Energy efficiency projects create offsets by reducing the energy demand for a given activity or location, then selling the resulting avoided carbon emissions.
Many products or systems can be replaced in ways that use less energy to perform the same task. For example, if an old, inefficient air conditioner were replaced with a more energy efficient one, electricity would be saved. If the electricity powering the air conditioner comes from the burning of fossil fuels (e.g. a coal-burning power plant), the reduction in electricity usage will lead to a corresponding reduction in greenhouse gas emissions. Alternatively, installing more efficient stoves in developing nations can and has been done to reduce coal and wood consumption.
Energy efficiency projects need to be carefully evaluated for their economic, environmental and social benefits. Because they are often decentralized and small-scale, many energy efficiency projects have relatively higher costs than large centralized renewable energy production projects. These costs include planning, installation, operation and maintenance.
Moreover, because of their decentralized and small-scale nature, the monitoring and evaluation of energy efficiency projects can be challenging. Finally, it can also be difficult to establish a reliable estimate of baseline emissions in many cases.
Despite these challenges, well implemented energy-efficiency projects are among the best offset projects.
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