Memorandum from Carbon Clear Limited

 

INTRODUCTION

 

1. Carbon Clear Limited is a UK company limited by shares. The company helps business and individuals reduce their carbon footprint by providing advisory services on cost-effective in-house emissions reductions, and by sourcing and providing voluntary emissions reductions (VERs) - commonly referred to as carbon offsets. To source offsets, we invest in emissions reduction projects sited in countries that have not set national greenhouse gas reduction targets, and track our carbon credits in an auditable Registry. We aim to maintain a carbon credit portfolio, with 20% of our emissions reductions from tree planting projects and 80% from clean energy (renewable energy and efficiency) projects.

 

2. As an active participant in the UK voluntary carbon offset market, Carbon Clear has an understanding of the process of generating VERs, and the interests, motivations and needs of individual and business purchasers of VERs. The evidence we submit is based on our experience working in this sector and therefore is relevant to the Committee's inquiry.

 

3. The Committee has offered a list of Inquiry Issues related to the need for regulation of the market and industry, additionality, verification and monitoring, permanence, leakage, double-counting and the relative burden of dealing with the impacts of climate change. Carbon Clear welcomes the widespread adoption of transparent and consistent processes and standards that reduce consumer uncertainty and encourage the growth of a robust and credible voluntary offset industry.

 

4. This evidence document assigns each of the Committee's Inquiry Issues its own heading and addresses each Inquiry Issue in turn.

 

 

RESPONSES TO ENVIRONMENTAL AUDIT COMMITTEE ISSUES OF INQUIRY

 

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

5.1. Carbon Clear supports accreditation schemes that can increase consumer confidence in the sector and reduce search costs that might otherwise discourage customers from offsetting. However, we believe that compulsory accreditation schemes are most essential for those industry sectors where failure to meet standards could result in physical harm or even loss of life. Thus electricians, gas fitters, and doctors are rightly included in compulsory accreditation, while broadband service providers, the fast food industry, and mobile telephone operators operate under voluntary codes of practice.

 

5.2. Carbon Clear supports a voluntary code of practice and accreditation scheme for carbon offset projects and/or companies, provided the scheme is developed in a way that addresses the needs of the industry and its customers. Voluntary codes of practice have successfully increased consumer confidence in markets as diverse as organic foods (via the Soil Association), ethically sourced products (via the Fairtrade Foundation), and the like, where the immediate physical well-being of the customer is not at risk. A voluntary code and accreditation scheme for carbon offsets, backed by a credible and cost-efficient auditing mechanism has the potential to strengthen the industry.

 

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

6.1. Carbon Clear does not serve to defend the growth in carbon-intensive activities like flying. Rather we help reduce the environmental impact of those activities when they are unavoidable. Carbon Clear strongly supports efforts to reduce emissions from carbon-intensive activities and regularly offers our customers and visitors to our website recommendations on how to avoid engaging in carbon-intensive activities.

6.2. An intense debate is already underway about whether and how aviation and other carbon-intensive activities should be covered under the European Union's compliance system for greenhouse gas emissions reductions, and we will not revisit those arguments in this evidence document.

6.3. The main challenge for the United Kingdom and the rest of the world is to reduce overall carbon emissions. Offsetting is one of many potential tools for achieving overall and per-capita reductions from activities like flying. However, offsetting not the only tool at our collective disposal. Another way to reduce overall aircraft emissions is to reduce the number of people who choose to fly by offering attractive alternatives like reliable, comfortable high-speed rail services. Yet another alternative is to encourage airlines to operate newer, more efficient aircraft; streamlining aircraft taxi, takeoff, approach, and landing procedures; increasing the ratio of long-haul to short-haul flights; increasing passenger load factors; and increasing the proportion of economy-class versus business and first-class passengers on a given flight.

6.4. Mandating offsets for flying and other carbon-intensive activities without also imposing emissions caps or providing incentives for lower-carbon alternatives might encourage the growth of the offset industry, but might not be the fastest or most cost-effective way to achieve overall emissions reductions.

 

7. 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?

7.1. As with any retail product, there is not always a direct link between the product offerings and the pricing decision of the retailer. The price charged by Carbon Clear and other offset provider will depend as much on the provider's own cost structure, estimates of customer willingness to pay for credits from a particular company or project, and the costs of complying with a given standard or regulatory scheme, as on the cost of the offset project. Carbon Clear believes that, as in other sectors of the economy, pricing decisions should be left to providers, and customers will vote with their feet.

 

7.2. A recent survey by Clean Air Cool Planet suggests that not all offset providers supply enough information to allow consumers to know how different offset mechanisms or projects compare. In some cases this may simply result from attempts to condense extremely lengthy and complex technical project data into an attractive and presentable format. While the CleanAir-CoolPlanet survey did not report any fraudulent activity, Carbon Clear feels that customer confusion is limiting the growth of the industry, and call for a consistent approach to the way companies describing their offerings and methodologies.

 

7.3. Carbon Clear supports the use of ISO 14064-2:2006 or equivalent best practice for relevance, completeness, consistency, accuracy, and transparency in the evaluation, selection and communication of our and other offsetters' project mechanisms and practices.

 

8. 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?

8.1. Forest management is a mature discipline, and mechanisms exist to accurately assess the health of tree plots and forests, and the overall long-term carbon gains and losses from afforestation and reforestation projects. These range from on-the-ground surveys that physically measure all or a representative sampling of trees, to dual-camera aerial videography using laser altimeters and computer measurement to track tree growth over time. These methodologies have been field-tested in various parts of the world, and with a wide range of tree species, with considerable success.

 

8.2. The Clean Development Mechanism (CDM) Executive Secretariat recognises afforestation and reforestation as an accepted mechanism for generating Certified Emission Reductions. As with any offset project, issues of additionality, leakage, and permanence must always be satisfactorily addressed before a methodology is accepted by the CDM Executive Secretariat. Carbon Clear believes that the fact that the CDM Executive Secretariat has already approved multiple afforestation and reforestation project methodologies around the world indicates that the science is sufficiently coherent in this area accurately to assess overall long-term carbon (or other GHG) gains and losses.

 

8.3. In the popular press, the most common concern about these projects is that the stored carbon may be released when the trees die, thus jeopardising the permanence of emissions reductions. The extent to which this actually occurs depends on the ultimate fate of the tree. If the tree burns or decomposes, some of its carbon will be released to the atmosphere and some will be stored in the soil. However, if the tree is cut down and used, for example, to produce furniture and houses, most of the carbon stored in the above-ground part of the tree will remain sequestered. Furthermore, most trees will over their lifetime release seeds that germinate naturally or will be planted by hand, thus reabsorbing any carbon that is released.

 

8.4. While the lifetime of any given tree cannot be predicted, the average lifetime for a population of trees can be determined to a very high degree of confidence with statistical sampling. Thus, while a project may not be able to guarantee how long carbon will continue to be absorbed by any specific tree, the average carbon savings over the entire project can be predicted. What is more, many afforestation and reforestation projects "over-plant" to compensate for anticipated tree mortality. In the tree-planting projects that Carbon Clear supports, for example, 11 trees are planted for every tonne of CO2 we offset through afforestation or reforestation, and we use a conservative crediting period that only counts the carbon sequestered in the first ten years of a tree's life. By involving local community members in the project and choosing species whose continued growth provides ancillary livelihoods benefits, the projects we support provide incentives for local stakeholders to keep the trees alive. Again, a robust monitoring methodology helps to address leakage from these and other sources.

 

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

9.1. Many investments in carbon offset projects provide emissions reductions over many years. As a result, carbon credits are often registered by "vintage" to reflect when the emissions reductions are expected to occur.

 

9.2. Since it is impossible to predict the future, investments made to produce reductions some years in the future may not always achieve the desired result. Anything from natural disaster to political instability to changed market conditions can affect the long-term effectiveness of a project.

 

9.3. In many cases, credits for future vintages are priced to account for this risk. Where this is not the case, Carbon Clear believes that offset providers should guarantee to refund or replace any future credits that subsequently fail to materialise, and ensure that their monitoring system and registry account for any deviation between expected and actual reductions in each year.

 

9.4. Offset providers around the world currently support a diverse array of project technologies, approaches, and sizes in countries around the world. Given sufficient resources. As a result of this diversity, no one methodology can be applied to every project. A range of data collection methodologies have been developed and employed to measure the greenhouse gas emissions reductions that result from these projects. It is important that these methodologies reflect best available practice for ensuring relevance, completeness, consistency, accuracy, and transparency. We follow the ISO 14064:2-2006 recommended practice in this regard, as adopted by the British Standards Institute.

 

9.5. The greatest challenge facing the monitoring of GHG emissions reductions comes from the costs. It is easier and more cost-effective to apply a detailed and complex monitoring methodology like that required for Certified Emissions Reductions to large projects where large volumes of emissions can be tracked with a single meter. It is considerably more expensive to apply that monitoring system to a project involving large numbers of relative small emitters - for example, providing efficient cookstoves to 10,000 rural villagers. Attempting to track emissions from thousands of small point-sources could easily outweigh the value of the carbon credits destroy the viability of the project.

 

10. 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?

10.1. In 2005, the global voluntary emissions reduction (VER) market generated about 6.1 million tonnes of voluntary carbon offsets, while the compliance market generated 365 million tonnes of Joint Implementation and Certified Emission reduction credits, according to Dr. Venkat Ramana of the World Bank. The European Union has just announced new emissions reduction targets that could increase the size of the market for CERs five-fold over the next decade. Since the VER market would have to grow at nearly 50% per year for the next 15 years to approach the scale of the compliance market, and we expect airlines to be included in the compliance market by 2011, Carbon Clear does not believe the voluntary market will have a significant impact on the compliance market for the foreseeable future.

 

10.2. Furthermore, these are by definition two separate markets and the motivations of suppliers and customers in these markets are quite different. Participants in the compliance market purchase emissions reductions because they are forced to do so when their emissions exceed a given target. These emissions reduction credits are a commodity, to be sourced at the lowest price possible, which provides a competitive advantage to large-scale projects. Participants in the voluntary market do not face explicit government compulsion and participate in the market because they want to make a broader societal contribution or they want to demonstrate their social responsibility to others. As a result, the types of projects that attract voluntary market investment are often materially different from the ones that attract compliance market investment.

 

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

11.1. Firms and individuals who choose to voluntarily offset their emissions are by definition under no legal obligation to change their behaviour. Therefore, while behaviour change is desirable, Carbon Clear believes that it is inappropriate to judge voluntary offset providers on the extent to which their customers change behaviour.

 

11.2. Carbon Clear believes that all offset providers should urge customers to voluntarily reduce their own greenhouse emissions, and to offset only the reasonably unavoidable emissions that remain. Carbon Clear not only encourages behaviour change, but also provide regularly updated advice on easy and cost-effective ways for individuals to reduce their greenhouse gas emissions at home, at work, and in transit. Carbon Clear provides advisory services to businesses who wish to develop internal carbon management strategies to reduce their own carbon footprint.

 

11.3. The proportion of individuals who choose to offset remains extremely small compared to the overall number of UK households, motorists, and airline passengers. We estimate that only 1-2% of individual consumers currently choose to offset. These customers tend to be "early adopters" - people who are concerned enough about climate change to take the effort to learn about offsetting and make a voluntary payment. Since offsetting is voluntary, Carbon Clear believes this is also the group of people most willing to take action in their own lives.

 

11.4. Better data on this issue is welcome. Carbon Clear encourages Defra and the Environmental Audit Committee to conduct an in-depth survey of the UK population to provide statistically significant data on the extent to which people who offset are more or less willing to change their behaviour.

 

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

12.1. Individuals and companies who choose to purchase voluntary offsets are motivated in part by a desire to contribute to broader sustainable development goals, whether environmental, social, or economic. As a result, most voluntary offset providers focus their investments on smaller-scale projects that provide broader sustainability benefits.

 

12.2. Carbon Clear feels that it is important for these claims to be backed by evidence. For greenhouse gas emissions reductions, we support the use of ISO 14064-2:2006 best practice for relevance, completeness, consistency, accuracy, and transparency in the evaluation, selection and communication of our carbon offsetting mechanisms and practices. For broader social and environmental impacts, we encourage the use of DfID's sustainable livelihoods criteria to gauge the effectiveness of projects.

 

12.3. Projects funded by voluntary offset companies tend to score higher on broader sustainable development criteria than those funded by the compliance market. According to the World Bank, in 2005, 74% of compliance market CERs came from refrigerant destruction, landfill gas, and coal-mine methane capture projects. Only 15% of CERs came from the energy efficiency, renewables, and tree planting projects favoured by voluntary offset providers because of their broader sustainability benefits. Only about 2% of all compliance market CERs came from investments in Africa, the poorest continent.

 

 

January 2007