Memorandum from Energy for Sustainable Development and the Edinburgh Centre for Carbon Management

Ought there to be a compulsory UK or European accreditation scheme for carbon offset projects or companies? If so, how should this operate?

No: ESD believes that transparency, not prescription should be the key to shaping effective voluntary offsetting and other voluntary actions. We are concerned about potential confusion and negative consequences that might arise from combining initiatives for voluntary action with regulated emission markets.

1) DEFRA's proposed linking of voluntary and regulated carbon offset markets will create confusion leading to weaker regulatory frameworks. The government's main role in carbon markets should be the strict allocation of compliance instruments to regulated entities. If the government also uses public funds to buy back GHG instruments for offset purposes, and if it expects business and the public to tighten the market through their own offsetting initiatives there is a danger that this will lead to calls by business for greater allocations. There is also the question of whether it is a good use of public money to purchase GHG instruments that have been allocated to regulated businesses.

2) The potential for negative impact on existing standards currently under development.
There are already several NGOs and industry groups working on schemes for international harmonisation and standards for voluntary sector projects. These initiatives should be encouraged, and one or more could be endorsed by the government, but there is no need for an additional standard to be added to the numerous ones already under development.

3) The potential for hindering innovation and development in voluntary and regulatory standards for carbon projects. Currently the voluntary markets are providing projects for a number of different types of consumers, and are being developed to work slightly differently in different regions / parts of the world. This has encouraged diversity of approaches that can act as a testing and/or training ground for future regulatory models. It would be a waste to stifle this diversity and innovation by turning the voluntary market into a regulatory one.

4) The probable outcome will be to reduce support for offset projects that have high poverty reduction benefits or other sustainable development benefits. These types of projects are generally more difficult to verify and assess in a precise way, but are eminently suitable for voluntary public and corporate support, so long as customers are aware of the risks and uncertainties.

5) There is little clarity on what the UK government or the EU's mandate is to intervene in on voluntary actions. The government does not vet the effectiveness of aid donations, medical charities, or ethical investments - so it is unclear as to why they would see the need to intervene here. Would these governments not be better placed to use any additional resources to regulate sectors that are better served through government action? Examples include: aviation, public transport, energy efficiency in building/appliances etc.

Should offsetting become mandatory for some of the more carbon-intensive activities, such as flying? 

If offsetting is mandatory it is no longer voluntary - it becomes a regulation or tax on activities such as flying. In this case it would be sensible to apply regulated emission certificates and include this as a formal part of the EUETS.

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?

The clarity and accuracy of information provided to the public about carbon offset schemes is highly variable. We recommend the development of more standard classification of different types of offset offerings and better provision of supporting information.

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?  

Current science can provide approximate estimates (+/- 20%) of the long-term carbon benefits from forestry and other land use activities (IPCC). However, individual projects cannot guarantee long-term performance. As long as purchasers or investors in forestry activities are aware of the margins of error and the risks associated with long-term delivery they should be free to support such activities.

Some offset providers provide insurance or replacement guarantees that provide additional levels of assurance.

Is there sufficient data available to guarantee accurate amounts of carbon or other GHG mitigation in the sorts of schemes which offset projects finance?

Firstly it is important to determine what the goals of voluntary offsetting are, and then determine which level of information about a project is required. One reason why carbon offsetting excites so much debate is that offsetting means different things to different people and organisations. Here are three alternative definitions:

"Cancelling or neutralising my emissions"

· Implies an expectation that the act of offsetting fully cancels out GHG emissions associated with my actions.

· Implies that responsibility or guilt related to personal environmental impacts that may be resolved or absolved through compensatory action

· May be interpreted as "I no longer need to worry about my emissions because I have offset them".

 

"Doing something to compensate for the effect of my emissions"

· Implies offsetting action may be approximate or partial in its effect

· Implies acceptance that my actions have an effect and that by supporting actions to reduce emissions, I am doing something positive about it.

· Does not suggest absolution from guilt or responsibility

 

 

"Helping or co-operating with others to reduce emissions"

· Simply an extension of my personal efforts to reduce emissions

· Implies that whether or not I reduce my own emissions, I can do some good by helping others to reduce emissions.

· Do not expect offset action to absolve any guilt or responsibility.

There are very few offset projects that can provide an absolute guarantee of carbon mitigation benefits. Those that are able to provide a strong guarantee are often less "additional" - less in need of financial support to achieve those benefits.

However, if a customer's aim is to achieve an approximate compensation or simply to co-operate with international efforts to reduce GHG emissions there may not be a need to provide an absolute guarantee. Analogies include:

· Pension schemes or share investments do not generally guarantee a certain level of return

· Poverty reduction or environmental charities do not guarantee specific levels of social and environmental benefit

In our view the customer should be provided with information of sufficient quality to be able to determine what it is they are supporting and how likely the activity is to succeed.

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?

The voluntary market if allowed to grow organically, and not regulated as is proposed above, will play two important roles in enhancing and complementing the compliance market:

1. As outlined under the first question, voluntary markets can play a critical role in acting as a testing and/or training ground for future potential regulatory models/systems

2. The voluntary markets will play a critical role in engaging and educating individuals, and allowing them to participate in carbon markets. Governments at the federal or regional level are probably least suited to provide mechanisms for individuals to reduce their carbon footprints, and so voluntary markets play -- and will continue to play -- an invaluable role in this space.

What evidence is there to show that offsetting helps to change the carbon behaviour of the customer?

It should be recognized that the voluntary carbon market is very young and still very small (the UK voluntary carbon market is estimated at about £20 million per year.

There is little publicly available information on consumer understanding of climate change and the importance of carbon mitigation, but what proprietary research has been done shows that there is a great deal of confusion in the US and UK on both issues. One study by Halifax Travel Insurance showed that 10% of Britons would consider making a financial donation to offset their travel carbon emissions, and that the same percentage were prepared to fly less to reduce the impact on the environment. Those who are willing to change their carbon behavior MAY be the same as those who are purchasing offsets - but in order to get a clearer picture of public awareness and willingness to make behavior changes -- further publicly funded research in this area would be invaluable.

In terms of corporates, one would assume that it would make business sense (in terms of cost savings) to first address and reduce the internal carbon footprint prior to embarking on an overall carbon neutral/carbon offset strategy, and in the UK the majority of companies that are looking to offset some of their carbon emissions have also taken steps to identify, monitor, and mitigate their overall carbon footprint. However, more study into corporate behavior in this area would also be useful, and this type of publicly available research would be very valuable to the market.

To what extent are the schemes and projects funded by offset companies more broadly sustainable, in an environmental, social or economic sense? 

There is a great deal of variation. Some offset companies are providing projects that are virtually identical to compliance CDM or JI projects, but in countries or situations where formal compliance is not possible. Some companies are providing projects that have very strong poverty reduction or local environmental benefits with less accurate or less certain GHG benefits.

 

January 2007