Memorandum submitted by CO2e
OFFSETTING GREENHOUSE
GAS EMISSIONS
Introduction and overview
CO2e believes that carbon offsetting is about
empowering communities through commerce and tackling climate change
at the same time. It's about empowering people to make a difference.
CO2e's comments in this memorandum are given
with the understanding that offsetting emissions is considered
a voluntary activity.
CO2e's experience and relevance to the Committee's
inquiry
CO2e.com Ltd (CO2e) is an environmental brokerage
firm, owned by Cantor Fitzgerald and Mitsui. CO2e delivers market-based
solutions to help companies address climate change issues and
opportunities. CO2e has successfully closed transactions for tens
of millions of tonnes of emission reductions, and together with
our sister company Cantor Environmental Brokerage, have facilitated
environmental transactions totalling more than US$10bn. CO2e works
in the international carbon markets, has a European desk brokering
screen-based and voice-brokered transactions of European Allowances,
secures long-term power purchase agreements for renewable energy
and helps provide structured finance solutions to projects in
these market places. CO2e has won the Environmental Finance Readers
award for the past three years for best broker of Kyoto credits,
and several other industry awards.
CO2e has been involved in the voluntary offsetting
market since the company was founded in 2000. We have brokered
tens of millions of voluntary emission reductions from large,
small, industrial, energy, energy efficiency and forestry projects
from across the globe. Locations of projects include South America,
Asia, Oceania, Africa, the Caribbean and North America. We serve
our global network through direct offices in the UK, Canada, USA,
Mexico, Chile, Brazil, India and Japan, and through agents in
many other parts of the world.
We are unusual, in that we are owned by Cantor
Fitzgerald and Mitsui—both strong, global, financially focussed
institutions—whilst we have probably facilitated the transfer
of more carbon dollars to small-scale sustainable projects through
emissions trading than any other organisation in the world. There
are no other City brokerage firms that have invested the time
and effort we have to building markets for small projects and
finding ways of moving money to the less-commercial regions of
the globe, such as Africa.
A significant proportion of the reductions we
have brokered have been Verified Emission Reductions (VERs), some
from large projects, traded before the Kyoto Process was developed,
and others on an ongoing basis from smaller sustainable projects.
As mentioned previously, we supply to many of the companies that
sell to individuals, and are also very much involved in public
sector activities.
ANSWERS TO
SOME OF
THE INQUIRY
ISSUES
Ought there to be a compulsory UK of EU accreditation
scheme for carbon offset projects or companies? If so, how should
this operate?
CO2e feels that the real opportunity for sustainable
development represented by the voluntary carbon market is due
to it being voluntary and outside the legislated and regulated
compliance market. The voluntary market is where project develops
can experiment and small projects can flower without excessive
overhead. Having an accreditation scheme or other regulatory frameworks
would limit the variety of opportunities. It is difficult to legislate
for diversity. Diversity helps to find and come up with a multitude
of solutions to combat and mitigate climate change.
Because the voluntary market is outside the
scope of accreditation schemes like that of the Clean Development
Mechanism (CDM) market, it is not limited to Kyoto geography or
to particular methods or technologies in reducing emissions and
therefore is able to do more and reach communities and projects
that were unable to benefit from carbon financing under the Kyoto
Protocol.
Should offsetting become mandatory for some of
the more carbon intensive activities, such as flying?
Many of the carbon intensive activities like
power generation are already in the European Union Emission Trading
Scheme (EU ETS) and airline travel is to be added to the mandatory
scheme soon. Thus, there is no need to include offsetting under
a mandatory scheme if the more carbon intensive activities are
already under legislation.
Is there enough clarity within the offset market
to allow customers to make informed choices based upon robust
information about different schemes at different prices?
We feel providing clarity is not something which
is a job or role that should be fulfilled and enforced by Governments.
Clarity to help customers make informed choices is something that
companies should provide to help distinguish them from the competition.
Customers should, when making a purchase, ask
questions about what they are purchasing before handing their
money over to a potentially unknown source. CO2e is open with
all of its clients and insures that all clients' needs are met
and they understand the different schemes and possibilities available
for their offsetting needs, whether they are Verified Emission
Reductions (VERs), Certified Emission Reductions (CERs), or European
Union Allowances (EUAs)—all of which are available to CO2e's
customers.
Many offset projects involve afforestation or
reforestation. Is the science sufficiently coherent in this area
to accurately to assess overall long-term carbon (or other GHG)
gains and losses from such projects?
We feel there is sufficient coherent science
to accurately assess the carbon gains and losses from forestry
projects. This is evident by the UN approving methodologies to
calculate the emission reductions from such projects. Moreover,
we feel it is up to the offset purchaser whether they want to
support such activities. It doesn't really matter whether the
emission reduction calculation for a particular tree is 1 tCO2eq
or 1.5 tCO2eq, but whether the customer wants to give "X""
amount of money to the project.
Is there sufficient data available to guarantee
accurate amounts of carbon or other GHG mitigation on the sorts
of schemes which offset projects finance?
This must be evaluated on a project by project
basis. There is sufficient data available from the projects CO2e
is working with.
What impact will the voluntary carbon offset market
have on the compliance market if the former continues to grow
as steadily as it has done over the last few years?
CO2e does not see the voluntary market as having
a direct impact on the compliance market. However, we do see some
potentially indirect effects related to public views on emissions
trading. Offsetting can change the public's views towards Kyoto
Protocol and the compliance market. As the general public become
increasing aware of their own carbon footprint and offsetting,
it could lead to a rippling effect and create a more favourable
atmosphere for politicians to tighten the caps on emissions for
industry.
What evidence is there to show that offsetting
helps to change the carbon behaviour of the customer?
This is difficult to measure accurately and
CO2e does not get involved with measuring any changes in clients'
carbon behaviours. However, we as well as any responsible offset
provider should tell their customers to reduce their emissions
as much as possible and only then offset those emissions which
can not be avoided.
To what extent are the schemes and projects funded
by offset companies more broadly sustainable, in an environmental
social or economic sense?
We can only speak for ourselves and the projects
we are involved with and we find the projects in the voluntary
market tend to be smaller, more community based, and provide a
certain level of socio-economic benefits to the regions where
they are implemented. We find in the compliance market, emission
reductions are being purchased because of regulation and buyers
do not necessarily care what project they come from, they just
want to ensure they will be delivered on time for compliance.
In the voluntary market most buyers are looking to be associated
with particular projects, which have great stories and have sustainable
attributes and socio-economic benefits.
In addition, the voluntary market can help fund
sustainable and environmentally friendly projects in countries
that have not signed and ratified the Kyoto Protocol, eg Turkey,
Australia, USA, etc.
January 2007
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