Special Report

Introduction

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Special Report: Carbon Offsets 2010

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Voluntary carbon offsetting has been battered but is still managing to stake out a viable future for itself, says Charles Henderson

CarbonNeutral Company’s Uchindile-Mapanda Reforestation Project, Tanzania: indigenous seedlings being grown
CarbonNeutral Company’s Uchindile-Mapanda Reforestation Project, Tanzania: indigenous seedlings being grown

Welcome to ENDS Carbon Offsets 2010, our third annual review of voluntary carbon offsetting. First, a word on the report’s focus.

Our aim is to review current developments in carbon offsetting from the perspective of the voluntary buyer – that is, organisations which buy carbon credits not for the sake of compliance or market speculation but rather to support environmental, carbon reduction or marketing strategies.

A carbon market perspective is important, and we quote extensively from key sources on carbon market trends, including annual reports issued by the World Bank and Ecosystem Marketplace Bloomberg New Energy Finance. But instead of markets, our special focus is on voluntary offsetters and the offset supply industry that serves this demand.

The report is written primarily from a European, and within that from a UK, perspective. This does not prevent it having international significance, however, because British carbon offset providers and voluntary buyers continue to be at the cutting edge of voluntary carbon offsetting practice.

The report reaches a number of conclusions. The first is that, despite the financial crash and sustained criticisms, voluntary offsetting has not died. Rather, both buyers and providers of voluntary offsets have grown smarter.

Just as the quality of voluntary offsets has improved, so questions have intensified around compliance-grade credits, and especially UN Clean Development Mechanism certified emission reductions (CERs). Until the UN scheme makes significant further improvements, properly verified voluntary offsets now arguably offer a stronger quality proposition to non-compliance buyers.

Buyers now predominantly offset only under credible, broader carbon strategies. Many use offsetting in more discriminating ways, for example tied to product offerings. More offsetters are getting directly involved in designing carbon-cutting projects that are aligned with their business and customers.

The most obvious development in offsetting has been the continued entry of major financial institutions into the voluntary market. But the immediate future is not certain. Some of these recent takeovers could be described as premature, or strategic, with office closures soon after.

The huge potential of forestry offsets will be an exciting new chapter, but an uncertain policy framework, erratic carbon supply pipeline, further recessionary fears and competing carbon legislation mean voluntary offsetting is not out of the woods yet.

The main sections of the report cover:

  • Section one considers the impact of the financial crash and recession on voluntary offsetting and picks out the highlights of emerging new practices over the period.
  • Section two reviews the evolution of standards to meet the core demand of voluntary offsetters for credits to have environmental integrity.
  • Section three examines key trends in the way voluntary offsetters are designing and implementing offset programmes.
  • Section four reviews developments in the carbon offsets supply industry, looking at projects, their developers and retailers.
  • Finally, section five looks ahead and attempts to sketch likely next steps in voluntary carbon offsets and offsetting.