The buyer’s dilemma – what makes a good carbon credit?

The buyer’s dilemma – what makes a good carbon credit?

Governments, companies and investors take different approaches to weed out carbon credits they deem lacking in environmental integrity, making it tricky for airlines to anticipate buying options in what will become the world’s biggest offsetting scheme.

Carbon Pulse is gathering a range of carbon offset buyers and other experts in London on Sep. 26-28 for the second annual Carbon Forward conference, aimed at collecting critical insights into how buying decisions are made and identifying patterns than can be used to anticipate future trends and regulations across carbon markets worldwide.

Initial recommendations on which credits should be allowed in the UN’s new CORSIA global aviation offset scheme are due this year, potentially giving airlines and low-carbon project developers the first investment signals in what is expected to be a multi-billion dollar carbon market that will feature demand for some 3 billion credits over 2021-2035.

“Airlines are facing considerable uncertainty as to what steps to take ahead of their CORSIA obligations as the rules on credit eligibility are yet to be agreed,” said Andreas Hardeman, an aviation industry consultant who was closely involved with the CORSIA negotiations in his former role at airline association IATA.


**Click here for the Carbon Forward 2017 agenda or to book your tickets**


Many airlines have long faced carbon market obligations as part of the EU ETS and have sourced voluntary offsets to help climate-conscious customers offset their flights.

But with the launch of CORSIA approaching, its offset eligibility rules are being developed in the wake of EU-imposed bans on many Kyoto credits and research that flagged credibility issues other types of the UN’s CDM credits.

“Unless these rules are designed and accounted for properly, the aviation industry could potentially use carbon credits that do nothing to compensate for their rapidly growing climate impact,” said Kelsey Perlman of environmental campaigners Carbon Market Watch, part of a group sitting on an ICAO technical committee developing recommendations for CORSIA on the eligibility of carbon credits.

CORSIA must exclude credits that have not proven to be effective, and with recent studies finding that most units from the UN’s CDM are unlikely to deliver genuine emission reductions, the potential supply is shrinking,” she added.

SETTING STANDARDS

Adding to the complexity of the range of offsetting standards such as the CDM, Gold Standard, VCS and Plan Vivo, buyers have frequently applied further criteria to suit their needs.

Norway is the world’s biggest sovereign buyer of carbon credits, acquiring some 60 million UN-backed CDM units this decade to comply with international climate targets.

But the government has been prepared to pay over six times the EU market price for credits in applying its own additional standards that blacklist several offset types and give priority to projects in poorer countries.

“Throughout the first Kyoto Protocol period [2008-2012], Norway supported the emerging carbon market which was based on the CDM. When this market collapsed due to low ambitions and falling demand we analysed how Norway could continue to make a difference and decided to focus on projects that were at risk of being discontinued and on new projects,” according to Sigurd Klakeg, an official leading Norway’s credit buying programme.

As a global company operating in over 220 countries, logistics firm Deutsche Post DHL Group sources credits from a wide geographical area to make it easier for customers to identify with the offsets offered as part of a climate neutral transport option.

“For our Climate Neutral service, we aim to have long-term commitments with the projects we buy credits from. It is a better way of ensuring the projects are making a positive contribution to local communities,” said Deutsche Post DHL’s Marysol Ramirez.

Deutsche Post DHL buys around 250,000 offsets a year under the climate neutral offering, about 10% of which come from a clean cookstove project in Lesotho that it has owned since 2010.

Dutch utility Eneco also faces obligations under the EU ETS, for which most companies have long since exhausted their offset quotas before a 2020 deadline.

But the company also has long-standing investments in Althelia Ecosphere’s REDD forest projection projects in Peru, generating carbon credits that the company uses alongside other CDM, VCS and Gold Standard credits to offset its internal business and travel emissions, as well as to provide them to business and domestic power customers for similar purposes.

“It is possible to buy REDD credits for much less, but those cheaper units do not provide co-benefits that are really what a lot of customers are interested in,” said Jan-Willem Beukers, head of Eneco’s carbon desk.

He said companies large and small were taking a greater interest in voluntary climate action since the 2015 Paris Agreement, with bigger firms adopting voluntary targets under initiatives such as RE100 or Science-Based Targets.

All those quoted in this article are confirmed speakers at Carbon Forward 2017.

CARBON FORWARD FACTFILE

  • Speakers are already confirmed from the European Commission, an unprecedented line-up of at least eight carbon market analysts, leading participants from utilities, industrials, banks and trading houses, and the governments of Brazil and Norway.  Click here to see the full list.
  • The two-day conference (Sep. 27-28) is being held at the 5-star Canary Riverside Plaza Hotel, while the venue for the pre-conference Training Day (Sep. 26) is just down the street at the Citigroup Centre, 25 Canada Square.
  • It is shaping up to be the event for companies affected by the growing carbon markets. If you have not already done so, reserve your place now
  • Last year’s inaugural Carbon Forward 2016 conference attracted more than 180 delegates & speakers from 27 countries, and this year’s event will be even bigger. Participants, decision-makers, and top-flight speakers are drawn from industry, utilities, brokers / trading houses, government, and trade organisations.
  • Sponsorship opportunities remain for Europe’s top carbon market intelligence and networking event: We have limited sponsorship packages remaining. If your company would like to maximise exposure at the premier carbon conference for managing risks and opportunities in the EU ETS and carbon markets worldwide, get in touch with Mariann Csikesz at info@carbon-forward.com
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