Carbon connoisseur

Aug 13th 2007
From Economist.com

The baffling menu of emissions-offset options

WHEN all you want is a drinkable wine at an affordable price, the sommelier's list in a posh restaurant can seem more of a hindrance than a help. So it is with carbon offsets. The list of options can seem long and confusing when set against the simple objective of getting somebody else to reduce greenhouse gases on your behalf. And, given the intangible nature of offsets, buying a dodgy short on a tonne of carbon is just as easy as getting a corked bottle.

Quality is the offset market's most pressing issue, according to a new study of the voluntary carbon market by Ecosystem Marketplace and New Carbon Finance. The report counted 14 third-party offset standards, and seven registries, few of which are more than a year old. Offset retailers that accredit and verify their own products according to proprietary standards at least double these totals. With the price of offsetting a tonne of CO2 ranging from 45 cents to $45, and growing fears of sharp practice by "carbon cowboys," the industry needs guidance on quality.

Clarity will soon emerge, says Ricardo Bayon, director of Ecosystem Marketplace. He bets that the Voluntary Carbon Standard (VCS) hatched by the International Emissions Trading Association, the Climate Group and the World Economic Forum, will capture the largest offset volumes. After nearly two years of consultation with a wide range of carbon-industry players, the final version of the VCS was published on July 27th. In part, the recent proliferation of standards results from the vacuum created by delays in the VCS standard-setting process. Now that the standards have been made public, Mr Bayon believes companies and individuals seeking offsets will turn first to the VCS.

Sometimes, though, a tonne of carbon is not simply a tonne of carbon. For this reason, two standards developed by NGOs will also likely survive the winnowing of offset norms. The Gold Standard, developed by the World Wildlife Fund, focuses on renewable energy and energy-efficiency projects in the developing world. Generating "premium-quality carbon credits" that fetch higher prices than commodity offsets based on standards like the VCS, Gold Standard-accredited projects—mostly solar, wind and biomass energy schemes—emphasise sustainable development in local communities as strongly as greenhouse gas reductions.

Similarly, the Climate, Community and Biodiversity (CCB) standard, run by an NGO of the same name, hails the ancillary social benefits of the projects it sanctions, which are exclusively based on forestry. The emissions-reduction potential of these projects is controversial, with forestry-based offsets making up less than 1% of those generated for Kyoto-compliant regulated carbon markets. In the voluntary market, however, planting trees—or preventing them from being cut down—is the most popular source of offsets, accounting for more than a third of credits sold last year. Despite concerns about the permanence of emissions reductions generated by these projects, raising saplings has a stronger emotional appeal destroying industrial gases. This makes forestry a favoured source of offsets for companies looking to improve their public image.

When Mr Bayon and his colleagues surveyed major offset-sellers about which standards best fit their future needs, they chose the VCS, Gold Standard and CCB, in that order. These three grades satisfy the main reasons that companies, which account for 80% of the voluntary market, to go carbon neutral. Cheap, bulk offsets go most of the way towards reducing their emissions footprint, while a sprinkling of happy-green initiatives like tree-planting brings PR benefits and added moral heft. As the industry matures, the coming shakeout of standards will cut down on confusion and allow carbon buyers to choose the perfect vintage for the occasion.

Original article >>