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Carbon Offsetting Trends Survey 2008

EcoSecurities and ClimateBiz have just released their survey on carbon offsetting. For those who are members on our sister site CleanTech.Org, we are proud to have supported this project. Thank you to those of you who participated in this survey.

The Executive Summary is as follows:

The voluntary carbon markets continue to welcome new participants on both the supply and demand sides. Companies that previously committed to become carbon neutral appear to be continuing with their offset initiatives in 2008. In Europe, the emergence of the Gold Standard and Voluntary Carbon Standard (VCS) as the market leading standards is a notable development. The former is facing some minor supply issues which have in our view pushed up its issued price whilst the latter is working with several parties to establish central registries by year end for transfer of ownership and guaranteed retirement.

The primary markets on the development side are very active with new projects coming on line around the world to meet an increase in real demand for VERs and the expected increase in corporate’s looking to balance their unavoidable emissions. In the US, the rapid expansion in demand appears to favour US-located emission reductions, and this same force is shaping the types of offsets most in demand. Forestry remains a standalone sector, which has a real mix in sentiment from buyers. You either love it or you hate it. Whether the projects are reforestation or avoided deforestation, they appear to have mixed feedback in part owing to the lingering questions about effectiveness, immediacy and risk in investing in said projects. Conversely, the types of projects most favoured by this survey’s respondents are well-known projects which have an immediate impact, projects of the ‘charismatic carbon” variety: energy efficiency and wind power. Landfill and agricultural methane collection projects also scored highly in this study.

Reputation is pushing demand not only in types of offset projects in which companies most want to invest, but also in whom they purchase offsets from. When seeking out carbon brokers or retailers, experience and reputation were the top-rated factors, while project types, locations and price rounded out the top five requirements for offset projects.

Interestingly, despite the growth in project development the market has witnessed increases in primary market prices. On the other hand, global economic difficulties do seem to be pushing secondary market prices downwards, thus squeezing the difference between primary and secondary pricing. This perhaps reflects the reduced risk of developing projects as the markets grow and also an increased confidence among larger organizations in originating their own offset projects in the primary markets, a result that surprised us from our survey responses.

Australian voluntary carbon market Opened

by Nick Bruse

Australia’s first carbon trading exchange opened last week and its now one week on. The initial prices for carbon was set at A$8.50 (US$7.50) per metric ton under the voluntary scheme. Current price isA$8.55 per metric ton. I’ve pieced together my research on the ACX from a variety of stories run after its opening.

Australian Climate Exchange (ACX) established the joint venture aimed at cutting the country’s greenhouse gas emissions and bracing firms for possible pollution limits five years ahead of the introduction of a government-backed scheme.

About 1,600 tonnes of Voluntary Emission Reductions (VERs) changed hands, opening at A$8.50 per tonne for 2007 and closing at A$8.60. The total value of the trades was A$13,610, according to data on ACX’s Web site http://www.climateexchange.com.au/

This compared with prices of 19.50 euros ($26.96) for European Union carbon emissions on the ECX exchange for delivery in December 2008, the first year of commitments under the U.N. Kyoto Protocol on climate change.

Australia has not ratified Kyoto, which sets binding limits on emissions and envisages global emissions trading, but Prime Minister John Howard has pledged to establish a national carbon trading scheme by 2012.

The ACX exchange is the fourth voluntary market, following schemes in the United States, UK and Japan.

ACX Limited Managing Director Tim Hanlin said businesses wanted an opportunity to sponsor clean technology now.

“This is a voluntary emissions trading market and it’s business to business trading of greenhouse gas emissions,” Hanlin told Australian Broadcasting Corp. (ABC) radio.

Carbon trading involves putting a price and limits on pollution, allowing companies that clean up their operations to sell any savings below their allocated level to other companies. ACX is a joint venture with companies trader Australia Pacific Exchange
Reuters

“Under the ACX system, buyers and sellers trade the VERS in minimum lots of 100 tonnes. Each offset unit is certified by the government greenhouse watchdog and must be lodged with the ACX registry first before it can be traded. The registry tracks the traded offsets until they are extinguished – that is when an owner acquits the offset against emissions.”The Australian

The ACX is the first cab off the rank with further initiatives to be launched by the National Stock Exchange (NSX) and the Australian Stock Exchange (ASX)

The NSX, which recently bought a water trading exchange used by farmers, has said it wanted to launch a carbon emissions trading platform next month. The ASX has said it would proceed with its scheme after the federal government’s pricing details were known. The Australian

Whilst presenting an opportunity for companies to begin mitigating their carbon emissions, and also providing a market to source credits for voluntary offset retailes, not everyone is so sure that these voluntary schemes are a positive step. The world bank was quoted in a May 2007 article in the UK paper the Guardian.

The World Bank cautioned that moves in carbon offsets outside the regulated “cap and trade” systems could pose a threat to the development of the overall market. There has been growing criticism that schemes where companies or individuals seek to offset their emissions by investing in projects to cut emissions elsewhere, are either not delivering or funding developments that would have been financed anyway. Critics say that the system needs a greater degree of standardisation.

The World Bank said that on some estimates voluntary carbon offset schemes could rise to 400m tonnes by 2010. It added: “This high potential voluntary sector, however, lacks a generally acceptable standard, which remains a significant reputation risk not only to its own prospects, but also to the rest of the market, including segments of regulated emissions trading and project offsets.” The Guardian

If you would like some more dialogue with the Managing Director of the ACX, Tim Hanlin you can find it here, in an ABC radio interview transcript. There is a conference, Voluntary Carbon Markets, set to be held in London in a few months to address some of these questions regarding voluntary carbon markets as well.

If your interested in understanding the detail of carbon emissions trading schemes, you can listed to an interview I conducted with Rob Fowler from Abatement Solutions Asia Pacific on The Cleantech Show. Rob is heavily involved in helping the Australian Greenhouse Office with the development of the Australian Emissions Trading Scheme. On the show he provides a significant amount of insight into the trading schemes and the process of setting them up. You can listed to the show here.


Nick Bruse runs Strike Consulting, a growth venture consultancy specialising in the cleantech sector and hosts the cleantech show, a weekly podcast of interviews with leaders involved in clean technology research, entrepreneurship, commentary and investment.