EcoSecurities Report on Carbon Offsetting Trends Survey 2008
EcoSecurities and Climatebiz released a report titled: Carbon Offsetting Trends Survey 2008. The report concerns the trends in the Voluntary Carbon Market. The data was collected from 65 large and multinational organizations. The responses were collected via an online questionnaire posted on www.greenbiz.com, www.climatebiz.com, www.cleantech.org, www.ecosecurities.com, www.2degreesnetwork.com between the 23rd July 2008 and 22nd August 2008. In addition, EcoSecurities also directly emailed more than 300 contacts from their own in house database in order to ensure the response sample was geographically and sectorially diverse.
The report paints a bright future for the Voluntary market in the US and North America particularly, which is growing and developing in response to companies indicating they will become carbon neutral. EcoSecurities is one of the largest and leading organizations in the business of sourcing, developing and trading emissions reductions or carbon credits. Their portfolio covers Voluntary markets such as the Gold Standard and Voluntary Carbon Standard (VCS) and in the Kyoto compliance markets the Clean Development Mechanism or (CDM) credits.
According to the report, “88% of responding companies are either offsetting/looking to offset or would consider offsetting in the future. In contrast, only 4% of the sample surveyed would never offset. If 74% have already implemented internal emission reduction activities, the fact that 56% of companies already offset or will consider offsetting in the next 1-2 years suggests that offsetting is valued as a complementary part of an organization’s overall carbon management strategy…Companies are planning ahead with regards to their offsetting, which is a good thing. 25% of companies are planning to offset in the next 1-2 years“.
The Survey’s respondents showed that, “the most important and effective emissions reduction activity was energy efficiency at 33.9% compared to only 8.7 % of respondents indicating interest in renewable energy. Another interesting finding is that, “the most desirable location for emission reduction projects is in North America. It seems that US buyers desire most to purchase offsets from domestic projects. The least preferable ‘not preferable’ ratings were Australasia, the Middle East and Western Europe”.
Dr Jan Hamrin, from the Environmental Tracking Network of North America commented at a private luncheon hosted by Neal Dikeman, CEO of Carbonflow in San Francisco in September 08, “that adding renewable energy to the utility grid still faced decade old challenges with the lack of investment in infrastructure for transmission lines out to renewable power suppliers“. This remark seems to be in common with the Ecosecurities report findings that perhaps, utilities did not provide or were slow to respond in a number of ways including: ”the lack of choice of competitive renewable tariffs from electricity suppliers”, which would encourage renewable energy uptake.
The report emphasized the importance of energy efficiency and the use of offsetting under the Voluntary Carbon market as a very powerful tool for companies to use in addition to work on absolute internal emission reductions and carbon footprint analysis.
However, there are issues with the on-going use of energy efficiency in the future in California, which concern how these Voluntary Energy Efficiency Credits would work with the new CA Cap and Trade system.
The future use of energy efficiency credits in the Voluntary market under a proposed California, Cap and Trade system requires that regulators understand the issue of how to deal with ‘double counting’ on the one hand and how to manage the issue of ‘verification’ on the other.
The issue of “double counting” has been best addressed in a Linked-In discussion by Cleantech.org called, “Discussion on energy efficiency carbon credits in the California Cap and Trade”, Simon Dawes of Carbonflow has commented that concerns about double counting on energy efficiency credits under a Cap and Trade system in CA can be worked through.
He states that, “Double counting is clearly the issue that drives concern over this process. In essence, if an energy efficiency program receives credits under a cap and trade system (when it is within the cap) and no other action is taken then double counting can happen. The energy provider sees a reduction in attributable emissions and the end user gets a credit to sell to someone else.
However, depending on the design of the system this effect can be readily prevented. Essentially, if the issue of an energy efficiency credit is matched by the cancellation of an emission permit or a reduction in the cap then double counting will not occur.
An alternate process could include the requirement that all energy efficiency credits are acquired and retired within the sector where they are created. The cancellation process is adopted for international trade in JI credits (one sending country reduces its cap and the receiving country increases its cap) and with the Voluntary Carbon Standard where a Volintary Emission Reduction originating from within a capped sector of an economy has to be matched with the cancellation of a regulated compliance instrument. Exactly how energy efficiency projects can be included depends on the design of the cap and trade scheme. Critical issues are banking and borrowing of permits, the balance of free allocation and auction of permits, and how the cap is managed over time. In any case, there are measures whcih can be taken to allow energy efficiency proejcts to operate within a capped sector without double counting”.
Simon Dawes, was an auditor with DNV for over 12 years, specializing in auditing of the emerging carbon markets before joining Carbonflow.
Dr Hamrin, in May 24th 2007, in a report, “The Potential for Energy Savings Certificates (ESC) as a Major Tool in Greenhouse Gas Reduction Programs”, indicates support for this view where she says that, “Energy efficiency savings that meet additionality standards and have not been claimed elsewhere could be sold/traded in the voluntary GHG emissions market”.
The second issue is a practical one concerning verification. Both the EcoSecurities and the Hamrin report commented on the time and cost of the verification of micro-generation of energy efficiency credits from project activities for the VCS market.
Dr Hamrin’s, report elaborated this issue as follows, “Some of the major barriers to utilizing energy savings was the instituting of a rigorous system of energy savings evaluation, measurement and verification (EM&V) as it introduces additional costs, while at the same time, there are also benefits associated with greater certainty of the energy savings results that give these programs greater credibility”.
Neal Dikeman CEO, of Carbonflow has been aware of this problem for some time and has successfully set up a company, which in part will address the issue of verification of micro-credits. He has said that the ‘Carbonstep’ software is designed to automate and reduce the transaction of collecting energy efficiency micro-credits at the utility level”.
My conclusion, from this report is that there needs to be great attention to making sure that when mandatory systems are put in place some of the good initiatives that have thus far occurred in the voluntary market are not lost.