Memorandum submitted by EDF Energy
EDF Energy is one of the UK's largest energy
companies with activities throughout the energy chain. Our interests
include coal and gas-fired electricity generation, combined heat
and power plants, electricity networks and energy supply to end
users. We have over five million electricity and gas customer
accounts in the UK, including both residential and business users.
We welcome the opportunity to respond to the
Environment Audit Committee's inquiry on the Voluntary Carbon
Offset Market. EDF Energy is fully committed to tackling climate
change and we share this commitment with our parent company EDF.
We support the UK government's ambition to move progressively
to a low carbon economy and to play a leading role in the global
effort to address climate change.
In 2006, EDF Energy launched its new Climate
Balance product as part of its environmental product offerings
to customers. Climate Balance allows residential customers to
reduce the impact of carbon dioxide (CO2) emissions associated
with the gas and electricity they use in their homes and SMEs
to do likewise in respect of the electricity they use, in both
cases by off-setting their CO2 emissions. EDF Energy is a purchaser
of emissions reduction credits from the voluntary carbon offset
market. However, we are not currently involved in the development
and ongoing management of emissions reduction projects that generate
these credits.
The voluntary carbon offset market generally
sources project credits from small size emissions reduction projects
in developing countries. The market is supporting a number of
community based projects in the developing countries that help
reduce CO2 emissions and provide other environmental, social and
economic benefits. These projects have a strong emphasis on local
community and local benefits.
EDF Energy recognises the importance of ensuring
legitimate and robust carbon offset projects that produce genuine
greenhouse gas emissions reductions. We support the development
of a minimum standard for the voluntary offset market focusing
on the project development and recommended assurance requirements.
However, in the development of a minimum standard, care must be
taken not to unnecessarily increase development, transaction and
compliance costs and thereby jeopardise these projects and the
benefits they provide to the local communities.
We believe carbon offset products based on project
credits that meet the proposed minimum standard could be specifically
branded or labelled to assist in providing consumer confidence
in and credibility for the products.
EDF ENERGY RESPONSE
TO QUESTIONS
RAISED
In 2006, EDF Energy launched its new Climate
Balance product as part of its environmental product offerings
to customers. Climate Balance complements EDF Energy's ongoing
energy efficiency activity and demonstrates its commitment to
tackling climate change through helping both residential and small
medium enterprises (SME) customers to reduce their carbon footprint.
Climate Balance allows residential customers to reduce the impact
of carbon dioxide (CO2) emissions associated with the gas and
electricity they use in their homes and SMEs to do likewise in
respect of the electricity they use. For every tonne of C02 produced
by customers taking up this product, EDF Energy will invest in
a wide range of sustainable projects to achieve an equivalent
reduction in emissions in ways that will bring benefits to local
communities both in the UK and around the world.
EDF Energy is a purchaser of emissions reductions
credits from the voluntary carbon offset market. However, we are
not currently involved in the development and ongoing management
of emissions reduction projects that generate these credits.
1 Ought there to be a compulsory UK or European
accreditation scheme for carbon offset projects or companies?
If so, how should this operate?
1.1 The voluntary carbon off-set market
generally sources emission reduction credits from small size emissions
reduction projects in developing countries. These are not economically
attractive to larger Kyoto-based carbon markets, largely because
of the high transaction and compliance costs involved in the development
of these projects and the ongoing requirements under Kyoto Protocol
and Clean Development Mechanism Executive Board rules, for example
the costs and fees associated with administration, registration,
documentation, approval, validation and verification.
1.2 EDF Energy recognises the importance
of ensuring legitimate and robust carbon offset projects that
produce genuine greenhouse gas emissions reductions. We support
the development of a minimum standard for the voluntary offset
market, focusing on the project development and assurance processes.
This standard could be based on a self-regulation approach that
promotes transparency of methodologies for determining emissions
reductions of the projects, guidance on documentation and outline
monitoring, reporting and verification requirements. We recommend
that this minimum standard be prepared by an industry led working
group drawing on appropriate existing and draft standards such
as the WRI GHG Protocol for Project Accounting, The Gold Standard
for Voluntary Offsets and The Voluntary Carbon Standard. However,
in the development of a minimum standard, care must be taken not
to unnecessarily increase development, transaction and compliance
costs and thereby jeopardise these projects and the benefits they
provide to the local communities.
1.3 EDF Energy is concerned that the development
of a compulsory UK or European accreditation scheme for either
projects or companies would increase the cost of developing these
small scale projects and place unnecessary administrative burden
on these organisations for little value. This could limit the
projects being undertaken, resulting in a reduction in technology
and capital transfer associated with these projects.
2 Should offsetting become mandatory for some
of the more carbon-intensive activities, such as flying?
2.1 EDF Energy is concerned that mandating
the off-setting of more carbon-intensive activities would duplicate
emissions reduction activities within specific sectors and add
an unnecessary additional cost to the products of emissions intensive
industries. We believe the following three key approaches to reducing
emissions should be pursued:
— reducing energy consumption and improving
energy efficiency;
— investment in low carbon technologies
and reducing carbon intensity; and
— then off setting the remainder of
emissions.
2.2 We believe the Government should continue
to focus on reducing carbon emissions via energy efficiency and
investment in low carbon technologies. We do not support mandatory
off-setting of greenhouse gas emissions and believe it should
remain the choice of consumers and industry.
3 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?
3.1 Purchasers of voluntary emissions reduction
(VER) credits would benefit from a greater level of transparency
in the development and verification activities associated with
emissions reduction projects. We would encourage greater disclosure
of the following information to assist in the selection of VER
credits:
— the type of emissions reduction project
and its coverage;
— the method for determining emissions
reductions;
— sustainability benefits;
— monitoring and verification process
over the project's life; and
— outcomes of the validation and verification.
3.2 The level of information made available
by some sellers of VERs varies considerably. We believe that both
the voluntary offset market and customers would benefit from the
development of a minimum standard for project development and
recommended assurance requirements. This would increase the robustness
of the projects and potentially increase purchasers' confidence.
3.3 EDF Energy believes that providing information
in a clear, concise and transparent manner is key to allowing
consumers to make an informed decision when considering the purchase
of products like EDF Energy's Climate Balance. We believe that
carbon offset products based on project credits that meet the
proposed minimum standard could be specifically branded to assist
in providing consumer confidence in and credibility for the products,
for example the Australian Greenhouse Office's Greenhouse Friendly
trade mark.
4 Many offset projects involve afforestation
or reforestation. Is the science sufficiently coherent in this
area accurately to assess overall long-term carbon (or other GHG)
gains and losses from such projects?
4.1 We believe that the methodologies used
to estimate the emissions reductions from afforestation or reforestation
projects should be based on the methodologies developed internationally,
for example CDM methodologies, approved by the Clean Development
Mechanism Executive Board for emissions reductions for afforestation
or reforestation projects and the WBCSD/WRI The Land Use, Land-use
Change, and Forestry Guide to GHG Project Accounting.
5 Is there sufficient data available to guarantee
accurate amounts of carbon or other GHG mitigation in the sorts
of schemes which offset projects finance?
5.1 There are currently numerous guidance
documents to assist in the development of projects and the estimation
of emissions reductions including Clean Development Mechanism
(CDM) approved project methodologies, WRI GHG Protocol for Project
Accounting and ISO14064 Greenhouse Gas Accounting and Verification.
The accuracy of estimated greenhouse gas emissions reductions
is dependent on:
— the methodology for determining emissions
reductions including baseline and additionality criteria;
— the boundaries of the projects and
accounting for leakage;
— the robustness of the monitoring
and reporting plan; and
— Monitoring and verifying emissions
reductions during the life of the project.
5.2 Through a robust assurance process covering
the above activities, it should be possible to guarantee the accuracy
of emissions reductions estimates.
6 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?
6.1 EDF Energy believes the voluntary carbon
offset market, ie an unregulated market, will have little impact
on the compliance markets, including EU Emissions Trading Scheme
(ETS) and Clean Development Mechanism (CDM) markets. The voluntary
carbon offset market generally sources project credits from small-size
carbon offset projects in developing countries that are not economically
attractive to larger Kyoto based carbon markets that have high
transaction costs.
6.2 It should be recognised that both the
EU ETS and the CDM markets share considerable political uncertainty
owing to a lack of international and EU long term frameworks.
This is hindering potential investment in low carbon technologies
within the EU and is also hindering investment within developing
countries. CDM project developers are currently facing difficulties
with gaining forward contracts beyond 2012 to underwrite their
investments. The voluntary market provides an additional opportunity
for CDM contracts beyond 2012 to assist developers during this
period of political uncertainty.
7 What evidence is there to show that offsetting
helps to change the carbon behaviour of the customer?
7.1 We believe that off-setting carbon emissions
can assist in changing customers' behaviours. The monitoring and
reporting of emissions increases customers' awareness of their
emissions profile and provides a value for carbon associated with
their behaviours.
7.2 Based on EDF Energy's research, customers
likely to take up voluntary environmental products, like EDF Energy's
Climate Balance, are already aware of their carbon footprint and
are undertaking action to manage their emissions and energy efficiency.
8 To what extent are the schemes and projects
funded by offset companies more broadly sustainable, in an environmental,
social or economic sense?
8.1 The voluntary carbon offset market generally
sources project credits from small size emissions reduction projects
in developing countries. The market is supporting a number of
community based projects in developing countries that help reduce
CO2 emissions and provide other environmental, social and economic
benefits. These projects have a strong emphasis on local community
benefits.
8.2 In the development of a minimum standard,
care must be taken not to unnecessarily increase development,
transaction and compliance costs and jeopardise these projects
and the benefits they provide to the local communities.
January 2007
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