Examination of Witnesses (Questions 20
- 39)
TUESDAY 20 FEBRUARY 2007
MS RUTH
DAVIS, MR
JOHN LANCHBERY,
MR BRIAN
SAMUEL AND
MS BROOKE
FLANAGAN
Q20 Colin Challen: Finally, how is
this argument between CERs and VERs being played out in the wider
European Union? I am aware of a number of companies that offer
carbon neutrality in Germany and elsewhere. Are they as much into
this debate as we are, particularly in terms of state regulation
or self-regulation?
Mr Samuel: I am not an expert
on this by any means. The one thing I would say, I believe in
Germany that there is a cap on the margins that companies are
allowed to make and the amount of funding that they invest in
advertising, marketing, administration, et cetera, back office
functions, I think that is limited to 30%. So in some areas they
are clearly ahead of us.
Q21 Mark Lazarowicz: We have been
talking about regulation, but obviously we are talking about a
voluntary offset market at the moment and both of your organisations
in your response to our questions agreed that there was not sufficient
clarity in the offset market now to allow consumers to make an
informed choice. Is there any reason to believe that most consumers
do not have any idea what they are getting when they pay for their
offsets? What kind of information should they have and is it going
to be possible to give them that information?
Ms Davis: I think very many people
who are buying offsets do not understand what it is that they
are buying. The point that we were making at the beginning about
the fact that they are not buying emission reductions and they
are not actually buying neutrality is one which is completely
lost on the vast majority of people, and I think people will also
be horrified if they thought that what they were buying in a lot
of contexts was a carbon project which could not guarantee that
it had suitable, social or environmental safeguards or, indeed,
associated benefits, because most people who buy in on a voluntary
basis probably are people who are socially and environmentally
concerned already. There are some proposals in the government
consultation document about the kind of information you might
expect to go with accredited offsets, which are very good and
very worthy but I think at this stage are probably a little too
complex to try and fit into the email or the packaging or whatever
that you are going to get out to people. I think that is really
a genuine challenge but, if nothing else, if we were able to convey
to people the fact that whilst they may be making a contribution
to manage the climate problem by buying an offset we cannot fix
the problem without reducing emissions at home. That one piece
of messaging would be a useful and constructive thing to do.
Mr Lanchbery: I think most people
sell their offsets on the back of something else. I know a lot
of people who do buy offsets buy them on the basis of their biodiversity
value or their social benefit value or something like that, and
they just assume that the carbon value comes with it. They just
assume that if they buy a tonne of carbon it is a tonne of carbon
and it is there now and they can use it immediately as an offset.
So I think they mainly scrutinise the social and environmental
benefit, but not the carbon. Certainly people I know do that.
Mr Samuel: I think from the Energy
Saving Trust perspective that, yes, more information and greater
transparency and clarity is required. I think we are also finding
that more people are considering investing in offsetting, mainly
from the aviation perspective. Historically those people are perhaps
more environmentally aware and would be prepared to do more research
into what they are investing in. As the market expands less and
less people, as a percentage, will be prepared to do that; therefore,
I think it is important to have far greater clarity, particularly
as the demand for offsetting increases.
Q22 Mark Lazarowicz: Do you think
also that people's willingness to enter into voluntary offsets
will be affected if they were more fully aware of the timescale
in which the supposed benefits for offsetting were to take place?
It has been suggested, for example, that even if carbon offsetting
works the benefits of an offset purchase, say, take a flight to
the USA, are not going to be felt for 100 years or so. If people
actually realise that they are not going to be providing the benefit
they think they are going to be providing in anything equivalent
to the timescale in which they are causing the damage, this will
harm the market.
Mr Lanchbery: I do not think most
people realise that at all, no.
Mr Samuel: That is why it is important
for people to take responsibility for their own actions first.
So, yes, do whatever you can in your own home or with your own
vehicle, but then there may be a role for offsetting after that,
and that is what we would like to link into. The fact that people
do offset but you ought to be doing more now in your own home
and in your everyday lives.
Q23 Mark Lazarowicz: Does that not
also point to a vulnerability in the system? If there becomes
a greater public awareness—take that example of your offset
for a flight to the USA is not going to reap the supposed carbon
benefits for 100 years, then people might understandably decide
it is not worth entering into those voluntary arrangements, and
that could have quite a serious effect on the market. Does that
not illustrate that there is a real danger of having a market
that is very vulnerable to media comment, to informed information
on these issues and that in itself illustrates a problem of developing
this type of approach?
Ms Davis: I think that is true
because in a very kind of vox populi way, if I go through
a process of talking to my informed lay colleagues about their
purchase of an offset, generally by the time they have understood
exactly what it is that they are doing they will make a different
choice. The choice might be to reduce more in their own homes,
or it might be to say, "I would prefer, because I think it
is more honest and straightforward, to make a contribution to
a sustainable development project in a small African country ..."
let us say, "...rather than buy through an offset provider
where I do not know what the mark-up is going to be, I am not
sure that I can guarantee that I understand what the product will
be at the end of it, and the proposition is that I am being sold
some kind of neutrality which does not really exist." So,
coming back to why we had some fundamental issues with the market
altogether, and our agreement with the proposition to regulate
the market, it is simply that it is there now and does exist.
But I do not think we should necessarily see the promotion of
the voluntary offset market in itself as something which is going
to make a huge contribution to managing climate change. I do not
think it is.
Q24 Mr Stuart: Could timing be key
to saving offsetting if the rules were such that the carbon had
to be saved before it was sold? It would certainly doubtless lead
to a transformation of the cost base.
Mr Lanchbery: That would certainly
be helpful, yes. It would certainly make it much clearer to the
consumer, and it would also deliver more climate benefits.
Q25 Mr Hurd: Ruth, can I pick up
on your point? Are we in danger of getting this issue a bit out
of perspective? Yes, the voluntary market is growing but it sits
at the margin of the compliance block. At the end of day are we
not just talking about a bunch of well meaning people who are
prepared to spend a bit of money to do their bit for the planet?
They are probably exactly the same sort of people who doing the
right things in their home or thinking about doing the right things
and we are missing the main point, which is that two-thirds of
the population are not thinking of doing anything at all? Should
not we get this a little more into perspective as an issue? It
is pretty harmless, is it not?
Ms Davis: I think that is a really
good point, that because it is complex and difficult we can spend
an enormous amount of time worrying about it and, in a way, it
is a distraction which is partly why I get a bit exasperated with
it, precisely because it is a distraction in a sense. But I think
the messaging underneath that, maybe, is slightly more important
than you are implying by your question, because precisely the
people who may buy an offset or want to buy an offset are the
people who are potentially catalysts for change because they are
potentially those people who are aware of green issues, will engage
with yourselves on the doorstep when you come round to talk to
them about things, and will talk to their neighbours. So that
group of people is rather precious and it is, I think, very important
to keep telling people the truth about the climate, and the truth
about the climate in the end is that we will not avoid dangerous
climate change unless we change our own lives dramatically. It
is unpalatable, it is difficult but we are going nowhere unless
at least the engaged part of the population understand and realise
that and express that as a message to others.
Q26 Mr Hurd: Transparency standards,
we have received some evidence from people like the Co-Operative
Group warning that quite honestly transparency information will
not work and is in danger of being too onerous on the offset providers,
and last week I heard evidence of one large budget airline that
was going to scrap its offset programme because it felt that what
the government was pushing it towards to run were too stringent
requirements in terms of transparency standards. Do you think
that there is a risk of overkill here? Would you not rather have
that budget airline with an offset in the market rather than absolutely
nothing today?
Mr Samuel: I would rather that
budget airline was actually taking its own steps to improve the
fuel efficiency of its fleet.
Q27 Mr Hurd: I know; of course you
would say that, but you know the reality of the situation is that
that is not going to happen overnight and would you not prefer
to have some mechanism in the market which enable passengers using
that airline to do their bit, even if it is just in five years'
time?
Mr Samuel: If you ask me the question
would I prefer to have robust carbon offsetting that delivered
carbon reductions in the future or nothing then I would go for
the former.
Mr Lanchbery: I do not see transparency
as being that hard. They must have developed a set of rules whereby
they have developed their products, and they can publish those
and they could have periodic reviews—not necessarily terribly
frequently, but say once a year. The CDM is very good on transparency—at
least its decision-making process is. Almost nobody takes advantage
of it but all of their board meetings are on the web, so if you
really want to know what goes on at the CDM you can watch all
of their meetings live on the web, which is one way of achieving
transparency.
Mr Samuel: Companies are used
to dealing with regulation, it is an everyday issue for them.
I do not see it being that great a problem.
Ms Davis: Forgive my cynicism
in that situation as well, but I cannot help feeling that perhaps
the bit of the transparency that they have a problem with is actually
on the mark-up that they are making between the costs that they
have to face in the market and the prices that they are giving
to their customers. Anecdotal evidence from talking to colleagues
who work on the carbon market last week suggested that projects
generating credits to do with avoided deforestation were selling
them at €3 or €4 a go, and the same credits were being
sold on to customers by car hire companies and airlines at about
€20 to €30 a go. With the best will in the world, I
cannot believe that that is administration costs and if I were
in that situation I would not want to be transparent either.
Q28 Mr Hurd: Is there a more fundamental
problem about the possibility or impossibility of proving additionality?
We have received evidence from people like Corner House and the
World Development Movement who basically say that the whole basis
is fundamentally and intrinsically flawed and that you cannot
prove additionality and if you cannot then it is not worth having.
Is this a fundamentally imprecise product?
Mr Lanchbery: There have been
quite long debates about that in the Kyoto process. Ultimately,
no, you cannot prove additionality because you can never prove
what would have happened when it does not and you do something
else. So, philosophically, you cannot prove additionality. But
you can, in most energy-related products, get a good proxy for
it. If, for example, you were going to build a new type of power
plant you would know that the type of power plant in, say, a poorer
African country, would be a diesel generating set, and you know
that the emissions from standard diesel generating sets. So if
you build, say, some sort of renewable generation then you will
save the emissions from a standard diesel generating set. Other
things are more difficult to estimate. Again, anything to do with
land use change is often much more difficult to estimate, but
you can get around that. You can take the conservative estimate
so that if there is an uncertainty band on it you take the maximum
uncertainty and only claim credit for the bit that is left. So
there are ways of dealing with that. But, in practice, you can
normally find a reasonable proxy that most people will accept.
Mr Samuel: It is never going to
be perfect but, as I say, it is what is an acceptable degree of
risk and you can minimise that degree of risk by erring on the
side of caution on the carbon savings. As John says, it is easier
to do it with energy efficiency renewable projects than carbon
storage projects.
Q29 Mr Chaytor: Can I ask about the
relationship between offsetting schemes and behavioural change?
Do you think—accepting your scepticism—that there
is a value in terms of the long-term effects on behavioural change?
Ms Flanagan: I think that is a
little unclear at this stage. As I think everyone has stated,
it can be seen as a bit of buying my way out of my guilt rather
than taking responsibility for my own behaviour. We would obviously
prefer to see the focus on energy efficiency, renewables and behavioural
change in the home and in transport choices.
Q30 Mr Chaytor: Are the two mutually
incompatible? Is an interest in offsetting in itself—and
this seemed to be Ruth and John's argument earlier—a step
towards a wider understanding of the need to reduce net emissions
within the household.
Ms Flanagan: I think that depends
on who you are talking to, really. You have a lot of environmentally
green conscious consumers who will look at offsetting as part
of a range of other things. You also have your affluent consumers
who are looking at it as a process of taking a flight and things
like that; it is not cost-prohibitive to them to do that. Whether
they have thought of that as part of a range of other behaviours
is not really clear. The other thing is just having information
and awareness does not automatically mean that people change their
behaviour—it is part of it and can be part of it but it
does not necessarily follow that once they are aware of their
carbon emissions from a flight, for instance, they will go and
insulate their home. But it could be used as a means of attracting
their attention to a wider carbon saving debate.
Mr Samuel: There is definitely
an opportunity to do so.
Q31 Mr Chaytor: Again, this is the
function of any accreditation scheme, is it not?
Ms Flanagan: Putting it in its
rightful perspective I think is a very important part of that.
Q32 Mr Chaytor: It is a bit like
the government health warning on a packet of cigarettes, is it
not? Offset schemes could be required to have some kind of additional
information that made the point about net reduction of emissions.
Mr Samuel: Like the Energy Saving
Trust help line number and website!
Q33 Mr Chaytor: This is precisely
one of its functions. What is the role for the EST and RSPB? Ruth,
earlier you were critical of the market but do the RSPB have any
plans to intervene in the market? Surely there is an opportunity
here for you? You sell all kinds of goods and services.
Mr Lanchbery: It is a market in
which to intervene and we do intervene in one climate related
market, we do provide a renewable energy product where the service
provider purchases ROCS and retires them—Renewable Obligation
Certificates. We have thought of doing that in the context of
the EU ETS or possibly the Kyoto Protocol, but it is more difficult
there because retiring EU allowances, although it does tighten
the cap very slightly it is very, very, very slightly, given the
huge amounts. So we are not thinking of developing a product per
se. What we do instead is we do work within the international
and European systems to try to bring on more officially recognised
credits, so one of our main themes at the moment is to try to
bring avoided deforestation into the international system and
have that recognised in an appropriate way. So we tend to work
that way around rather than doing our own little products.
Ms Davis: We experience it as
a very painful internal dilemma because there is money out there
in the carbon market. As I say, it is the only market that exists
for environmental goods and as a consequence of that those people
who have been looking desperately for many years for funds to
support decaying, fragile ecosystems all over the world cannot
help but look with greedy eyes at this one functioning environmental
market. It is extremely hard to resist doing that and it is even
harder in the context of tropical deforestation where there is
an overwhelmingly good case to make to say that that is making
a huge contribution to climate change. So we do struggle with
this and, as John said, in the context of the forest projects
that we are developing we are looking to try and bring those on
alongside the development of some sort of formal mechanism, to
get those within a post-Kyoto process. I do think that there is
a really, really important point here, that we should not wonder,
in a sense, that everybody is desperately trying to load their
social and environmental benefits on to the carbon market in a
way that perhaps the carbon market cannot withstand, and it is
simply a reflection of the fact that it is globally the only place
in which we have actually managed to create a market with flows
of government and private capital into a payment for environmental
goods, and until we find ourselves in a similar situation with
biodiversity projects or with social projects we are always going
to find that people will treat the carbon market as an opportunity
in a desperate situation.
Q34 Mr Chaytor: Could I come back
to Brian and the EST, briefly? Again, is there some scope in an
accreditation scheme for the EST to get its logo in there and
provide further handy information to people?
Mr Samuel: There is certainly
a potential for the Energy Saving Trust to be involved. I think
what I would like to see as a starting point is for us to target
those people who are taking offsetting measures and see if we
can convert them into taking their own actions as well. Obviously
some people are already doing that. Again, if you then have robust
schemes as a minimum we would be looking to signpost people to
those robust schemes ahead of other ones. We have undertaken,
as John mentioned earlier, accreditation activities on renewables
prior to the renewables obligation and green certificates. That
is far easier than doing so in a carbon offsetting market, but
if the opportunity arose we would consider the opportunity of
being involved.
Q35 Mr Hurd: We talked a bit before
about the pricing in the voluntary market and the links, if any,
to the social cost of carbon, about which opinion varies enormously
about what that social cost should be, ranging from the Defra
£70 to the Stern whatever it is and to Richard Tol's £5.
In theory do you think that there should be some explicit linkage
between whatever figures we come up with, with the social cost
of carbon and the price of the offset market?
Mr Lanchbery: In theory, yes,
it would be nice to have a link to the social cost of carbon.
What you really get in markets, which is what we are looking at,
even in a capped market, is the cost of reaching the cap. That
is what you get in a cap market. So although it would be really
nice to get the full social value of carbon I do not see how you
get it through some sort of regulation. You could get it from
perhaps green consumers of these products who might want to pay
the full damage cost, if you like. But I cannot see it catching
on more broadly somehow because it is very difficult to regulate
in that sort of way.
Q36 Mr Hurd: Is there a risk in the
current market that people are being taught a false price for
carbon?
Mr Lanchbery: I think people get
very confused about carbon prices because there are several costs.
There is the damage cost, the cost of meeting a target and they
are quite different; if the target is lax then the price is low.
In an unregulated market, where there is no cap at all then the
price is always likely to be low because the lowest price in the
market will tend to prevail. So, yes, it is a nice theoretical
idea but I do not know how you achieve it.
Ms Davis: I agree with John, but
to perhaps pick up on some of the discussion earlier about what
health warnings could go with offsets, one health warning that
could go with offsets is that a conservative estimate of the social
cost of carbon is around $70 a tonne, or whatever, and just remember
therefore when you are paying $20 that you are actually paying
for something which is cheap because the world at the moment does
not recognise that cost. That may make people aware of the fact
that actually they should be looking for more expensive and higher
quality products.
Mr Samuel: I think all you have
to do is look at the price in the EU ETS at the moment, which
is not much more than one and a half euros.
Q37 Mr Stuart: Could you explain
why you feel that mandatory offsetting might be appropriate for
aviation?
Mr Samuel: There is a gap in aviation
at the moment, so there is an argument, perhaps more so for aviation
then other sectors. You do have the air passenger duty at the
moment, which is a very blunt instrument. Would it be better to
have a mandatory offset at that level and that then being ring
fenced and going into robust carbon saving activities that might
actually be taking place now? That is one angle. I am not convinced
that the mandatory offsetting for aviation is a good thing. There
is an option around that and it is certainly better than what
we have at the moment.
Q38 Mr Stuart: If, after including
aviation in the EU ETS, it became apparent that airlines were
simply passing compliance costs on to consumers, rather than making
efficiencies themselves, do you think that there would then be
a role for mandatory offsetting in that case?
Mr Lanchbery: Not really. We were
not in favour of mandatory offsetting for aviation. We have been
pushing—like we do internationally—for aviation emissions
to be opted into the EU ETS, and we are on several Commission
groups looking into that. Whether that works or not is another
matter, it depends whether the Council and the Parliament have
the guts to put a tight cap on aviation emissions. In that case,
of course, they will still be able to buy credits from elsewhere,
almost certainly, although not for a while because the aviation
emissions, as you probably know, are not included in the Kyoto
Protocol, and all EU allowances are backed by Kyoto Protocol credits,
so the aviation allowances will not be backed by Kyoto credits.
They will have to set up a little scheme, which is actually separate
from the rest with no net flow of credits in and out of it, otherwise
they may go out of compliance with Kyoto. So it is interesting—all
of the NGOs have been trying for a little separate system. In
fact, in practice, that is probably what we will get because there
should not be any net interchange. They will have to have what
is known as a gateway, and from past experience gateways have
always acted as completely closed doors in that sort of instance.
Ms Davis: I must say that the
idea of mandatory offsetting is quite a strange one really because
what are you actually doing? You are applying, effectively, some
kind of tax on top of what people are paying, which then instead
of going to government goes to a wide range of schemes and there
is probably quite a substantial mark-up and the tax itself is
not going to be set at any level which encourages behavioural
change because the tax is actually set by the price or cost of
a tonne of carbon on the voluntary market. So I am a little confused
as to how we could see that as being a particularly effective
or appropriate, or, indeed, cost effective way of tackling aviation
emissions.
Q39 Chairman: Do you have any reason
to suppose that the government it is more cost effective in the
way it uses the revenue from air passenger duty?
Ms Davis: It is a very good question,
but I think if you were to ask me about air passenger duty as
a policy instrument I would say that it needed to be substantially
higher and if the government wants to retain credibility over
its green taxation programme it has to demonstrate transparency
in where that goes.
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