Carbon offset providers to reject government code

Only one carbon offset provider has so far had its products accredited by the government’s new code. Interest in offsetting is affected by the recession.

None of the UK’s big carbon offset providers will apply for approval of their credits under the government’s carbon offsets scheme until it accepts voluntary emissions cuts (VERs), ENDS has learned.

In January, the Environment Department (DEFRA) finally launched its quality assurance scheme for carbon offsets - a year later than planned (ENDS Report 398, p 50). It hopes to raise standards in the market and bolster consumer confidence in offsetting.

DEFRA set up a website explaining how carbon offset providers can seek approval for their products.1,2 Consultancy AEA Energy & Environment is the scheme’s approval body.

The final guidance differs little from that issued a year ago. Notably, it still excludes VERs. Therefore, anyone who wants to buy a government-approved offset is restricted to certified emissions reductions issued under regulatory regimes such as the EUETS and the Kyoto Protocol’s clean development mechanism (CDM).

Voluntary offsets only get a brief mention in the guidance. They may be allowed "at a future point… subject to a satisfactory level of assurance becoming available about their quality". DEFRA is concerned about whether VERs can prove they are additional - coming from emissions reduction projects that only went ahead due to financial or technical assistance from an offset developer.

The code has been poorly received by offset providers. Only one small firm, Clear, so far has approval for its products although AEA says others have applied. Many firms already ensure their offsets meet one of two standards - the industry-developed Voluntary Carbon Standard or the NGO-backed Gold Standard. They claim these meet criteria equivalent to certified credits.

A year ago, DEFRA said it would only accept voluntary offsets if firms agreed to develop a single standard. It has now accepted this will not happen, but appears under no urgency to accredit the existing standards.

Its attitude seems odd for the Gold Standard, given the scheme has been in operation for six months. Last August, the Gold Standard launched a registry to track offsets and ensure they are retired. Two Turkish wind farms also became the first schemes accredited to issue Gold Standard VERs under the scheme’s finalised rules.

Jasmine Hyman, the standard’s director of partnerships, said she welcomed the government’s efforts to regulate the industry, especially if this raises consumer awareness. But "it remains to be seen how relevant the code is in practice" given the prominence of voluntary offsets. She hopes DEFRA will change the code once it is more established.

The Voluntary Carbon Standard is not yet fully operational. It will launch a registry to track offsets this spring. The VCS has been criticised for unclear additionality criteria (ENDS Report 395, pp 15-16). However, its exclusion has still caused consternation. "We applaud the government in trying to uphold quality in the market," said Edward Hanrahan, spokesman for ICROA, the International Carbon Reduction and Offset Alliance, a trade body for offset providers. "Unfortunately, it still fails to recognise VERs and we feel very strongly there’s no reason for this."

Both the VCS and Gold Standard have additionality criteria equal to the CDM, he said. VERs also offer benefits CDM projects cannot, such as involvement in small-scale renewable energy initiatives.

JP Morgan Climate Care will not apply for any of its offsets to be accredited, Mr Hanrahan said, who is also the firm’s executive director. ENDS understands none of the UK’s other big offset providers such as the CarbonNeutral Company will apply either.

The government’s decision seems stranger still given the recession, with buyers of offsets looking to spend less. A VER is generally cheaper than a certified credit.

According to Neil Braun, CEO of the CarbonNeutral Company, price is "becoming more important" to firms. "There are commodity buyers simply looking to buy bulk emissions reductions at the lowest price. But there are other companies that still want to engage in projects and pay a premium," he said. Interest in offsetting has not declined but has dropped in firms’ priorities. He expects them to take longer to commit to buying offsets this year than previously.

Mr Hanrahan agreed. Firms such as BSkyB and HSBC that have publicly committed to offsetting their emissions continue to do so (ENDS Reports 377, p 4). However, firms "that do offsetting on a campaigns basis - the plant-a-tree types, who buy an offset every time a customer signs up to a new product - they have fallen by the wayside." There also appears to be a drop in interest for buying offsetting among individuals, he said.

Lisa Ashford, head of commercialisation at EcoSecurities, which develops projects for offset retailers, said the offsets people buy are also changing. "People are smarter with their purchases. They are more willing to use tonnes from large-scale industrial efficiency projects and then blend them with more picturesque projects.

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