The problem with thresholds

The Problem with Yes/No Thresholds

• They can be very subjective.

• Can’t reflect uncertainty and missing information

• Once an offset is approved, there is no way for potential purchasers of that ton to differentiate between the performance of different tons.

• Most incentive structures encourage the pass/fail threshold to be set as low as possible.

• Once one offset standard heads “toward the bottom,” others likely have to follow or lose their market share.