Memorandum submitted by Climate Care
Climate Care was set up in 1998 to tackle climate
change by reducing greenhouse gases in the atmosphere. We do this
by providing offsets to individuals and companies voluntarily
choosing to offset all or part of their carbon footprint.
Over the last eight years we have established
a robust mode of operation and are scrutinised by an independent
environmental steering committee.
Climate Care's experience and presence in the
market put us in an excellent position to offer meaningful input
into this government inquiry.
1. Ought there to be a compulsory UK or European
accreditation scheme for carbon offset projects or companies?
If so, how should this operate?
Robust and common standards are vital to the
voluntary carbon market.
Ideally the minimum benchmark would be European-wide
and closely modelled on established procedures in the CDM to ensure
quality in key features including additionality, baseline calculation,
monitoring and verification. However, the standard must be appropriate
for the market.
The voluntary market has an important role as
a pioneer, and any accreditation scheme should ensure industry
is encouraged to innovate, and not be restrained. Meanwhile, voluntary
market consumer preferences are for "value-added" offsets
which support additional benefits typically found in small scale
projects often in the less economically developed countries. Standards
should avoid restricting development of such important projects.
For these reasons specific failures within the
CDM procedures must be addressed to be applicable to the voluntary
market. In their "2006 State of the CDM" report, the
International Emissions Trading Association identified the principal
issues. Notably for the voluntary market these include issues
related to bureaucracy and delay in decisions, transaction cost,
barriers to new methodologies (particularly with reference to
non-renewable biomass) and inappropriate procedures for small
scale projects (outlined in the response to question 8).
Such project standards are critical to ensure
offsets are genuine, not double counted, and at least not negatively
impacting on sustainable development. However, accreditation need
not only apply to projects. Offsets are an extremely complex subject.
The only realistic way to provide consumers with the reassurance
needed their purchases are genuine emission reductions is through
recognition the retailer itself is approved. This accreditation
should be provided by a formal body based on their established
procedures and proven adherence to the formal project standards.
2. Should offsetting become mandatory for
some of the more carbon-intensive activities, such as flying?
A mandatory scheme for the more carbon intensive
activities should be the ultimate aim. In the transition, such
industries should be incentivised to voluntarily participate in
an offset scheme, on an opt-out basis. This would ideally use
voluntary emissions reductions (VERs), regulated to a strong minimum
standard as outlined above. Certainly at this point in time, compliance
credits are not appropriate as the only mechanism for a voluntary
opt out scheme.
A progression should occur from participation
by early adopters and pioneers, through education, persuasion
and the voluntary opt-out schemes, with the objective being a
broad mandatory scheme, like a "domestic tradable quota"
or similar personal allowance scheme. Such a scheme would automatically
include carbon-heavy industries like aviation.
It is important to have a clear understanding
of the progression, and how the different instruments and tools
should be used towards this ultimate aim.
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?
Offsets are a virtual and intangible product,
surrounded by substantial technical complexities and issues usually
beyond the interest and comprehension of the general public. A
common standard would impose a level of transparency needed to
improve clarity, widely absent in the current market.
However, the only realistic way to provide sufficient,
widespread reassurance is through government/European accreditation
of offset providers themselves. This would impose the necessary
rigour (though appropriate to the voluntary market) without the
need for consumers to individually research and grasp the many
difficult issues. Differentiation above and beyond such a rigorous
benchmark can then be achieved through normal marketing channels.
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?
With respect to land use change and forestry,
the science is not the most important issue. Greater focus must
be given to the issues of economics, permanence and timescales.
When an alternative land use is imposed (that
of a carbon sink) to ensure its viability as a carbon store and
its continuation into the future (its permanence) it must be protected.
This applies not just to natural mechanisms such as fires and
insect damage, but to use of the forest services by local communities.
If the forest has previously been used for its economic services,
such as for fuel wood or agriculture, demand for these services
will be fulfilled from elsewhere leading to "leakage".
It is only in very specific circumstances where the land use has
not been used for an important economic purpose, that the issue
of leakage is not applicable.
The crisis of climate change is no longer far
in the future, but one to be faced in the next 10 to 20 years.
Emissions reductions from forestry take too long to be realised,
in the vicinity of 35-100 years, and attention should be given
to more immediate methods.
Nevertheless, land use, land use change and
forestry play an important role in global emissions. Given estimations
that reductions needed are as much as 90% (eg Tyndall Centre "Decarbonising
the UK" 2006), land use and forestry must play a role in
overall efforts. Greater focus should therefore be placed on specific
avoided deforestation projects, for example those which introduce
high efficient stoves, and displace charcoal production (non-renewable
biomass).
The CDM has yet to approve a suitable methodology
and has procrastinated on the issue. However, the International
Emissions Trading Association recently noted this as a critical
concept, which must be addressed ("2006 State of the CDM").
Knowledge and science is sufficiently robust that an adequate
methodology can be formulated, but it must be given the priority
it deserves.
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?
There is no reason why voluntary market operations
should be materially less rigorous than the compliance markets
with respect to the key elements of baseline calculation and measurement
of reductions. Within the CDM methodologies are being produced
which ensure carbon reductions are measured to an acceptable level.
Currently some schemes in the voluntary
market do not operate at a level of rigour that can sufficiently
guarantee accurate amounts of emissions mitigation. However, with
the introduction of an appropriate and common voluntary market
standard, preferably a government or European led scheme, such
projects should be eliminated.
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?
Given the level of robustness needed within
the voluntary market, it is likely the voluntary and compliance
markets will begin to converge over the medium term. Furthermore,
as the CDM Executive Board refines its processes and increases
the number of approved methodologies, so the number of projects
outside its scope, and therefore only viable in the voluntary
market, decreases.
In the meantime, provided credits are of a high
quality, the voluntary market's existence is great benefit:
— The absence of a long term signal
for commitments within the CDM has deterred investment and created
substantial uncertainty for project developers. By providing reassurance
of a market demand, the voluntary market can continue to stimulate
project development past 2012.
— It can also act to provide stability
to the market by acting as an outlet in times of price turbulence,
providing greater reassurance to project developers and again
helping to stimulate projects. Climate policy is so difficult
that attempting to address it with one market is unwise. As Stern
recommends, a multiplicity of approaches is advisable, which can
spread carbon pricing through the economy to the extent possible.
— With its greater flexibility the
voluntary market can offer huge value in pioneering and refining
methodologies and addressing new project types in anticipation
of entry to the compliance market. Whilst the compliance market
is still developing, the voluntary sector can therefore broaden
the carbon market's scope to include new but important project
types.
— The voluntary market offers great
opportunity for those developing countries which remain outside
the scope of the CDM, yet are in great need of finance to help
them achieve a lower carbon development path. Countries such as
East Timor (one of the least developed economies) and Turkey (one
of the fastest growing economies) are not currently able to participate
in the formal markets yet offer great potential for emission reductions.
— If offsets are to succeed, they must
work for consumers. Consumer motivations differ between markets,
from the compliance drivers of the CDM to the more altruistically
or politically motivated voluntary participants, focused on a
"value-added model" (Bayon et al 2006, "Voluntary
Carbon Markets") of additional sustainable development benefits.
The CDM has evolved in consequence to produce a much more commoditised
product, suiting the compliance buyers focused on least cost.
However, the voluntary market has adapted so it can meet its consumer
preferences for greater variety and additional benefits.
7. What evidence is there to show that offsetting
helps to change the carbon behaviour of the customer?
Behavioral change is a complex issue, but it
is accepted that change will not happen until there is awareness
and understanding. In a Climate Care survey to over 3,000 of its
customers (with 33% response rate) almost 80% agreed that Climate
Care's web calculator had increased their understanding of their
own impact on climate change.
It also demonstrated that 90% had also done
one or more of home energy efficiency improvements, driven less
or flown less. Although the primary instigator cannot be determined,
it at least shows that offsetting does not decrease the propensity
to "do the right thing".
8. To what extent are the schemes and projects
funded by offset companies more broadly sustainable, in an environmental,
social or economic sense?
In contrast to the compliance market, projects
with additional benefits are extremely prevalent within the voluntary
market and are often more aligned with the CDM's twin objectives
than the dominant CDM project types.
This feature can be attributable to the voluntary
market's response to customer preferences for additional benefits,
and to certain design and procedural issues within the CDM which
render the typically smaller projects with strong sustainable
development unfeasible. The failure to incorporate sustainable
development benefits is particularly clear in the absence of CDM
projects in Africa, where less than 1% of CERs originate.
Key failings of the CDM have been outlined by
the International Emissions Trading Association's report, "2006
State of the CDM". Of particular relevance to projects with
strong sustainable development are:
— Lack of technical competence and
institutional uncertainty, notably with reference to the key concept
of non-renewable biomass. This is a critical concept for projects
(often using biogas digesters and cookstoves) in the least developed
countries.
— Failure to adapt the CDM's overly
complex and bureaucratic processes to small scale projects. This
is demonstrated clearly in SouthSouthNorth's cost comparison of
their South African low cost housing energy upgrade project (http://ecosystemmarketplace.com/pages/article.opinion.php?
component_id=4126&component_version_id=5905&language_id=12).
Under the CDM the project is not viable whereas the simplified
and appropriate procedures in the voluntary market lower the transactions
costs and bring the project into profitability without losing
its rigour.
— Substantial delays in the approval
of new methodologies, which "lead to quality projects, with
significant sustainable development benefits, to go undeveloped"
(IETA, 2006).
What's more, projects in the least developed
countries with strong sustainable development benefits often require
upfront funding. In contrast the tendency within the CDM is to
make the project developer assume delivery risk. This is exacerbated
by the absence of a long-term signal for investment in the CDM
beyond 2012, which has negatively impacted projects with long
paybacks. In particular this affects smaller projects which have
high proportionate transaction costs and often rely on long paybacks
as a consequence. It also impacts projects with a risk of delay
in delivery, often in the less economically developed areas where
infrastructure and resources are weak.
January 2007
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