CARBON OFFSETTING
TABLE 1: V
vides a third stream of project finance,
OLUNTARY STANDARDS
where the project developer can instead
Some volutary offset standards, associated project types & additionality requirements
opt to sell credits up-front without
SPONSORING PROJECT ADDITIONALITY undergoing the painful, expensive and
STANDARD ORGANISATION TYPES REQUIREMENTS
uncertain approval process. Developers
Volutary Cabon IETA, Climate Group, List of 15 categories; Steering Committee complain that approval typically takes
Standard (VSC) v.2 World Economic Forum LULUCF, others to be to specify
months and can cost upwards of
specified
Draft Green-e Center for Resource Not specified Allows benchmark
€100,000 in fees to consultants.
standard for carbon Solutions test (top 10% efficient
Point Carbon is building a more
reductions technologies)
detailed registry of voluntary offset
ISO 14064 International Standards Any Specifies its own
Organisation
transactions in the US, where much of
Gold Standard for Gold Standard Foundation Renewable energy, Same as CDM
the new growth is being generated. Still,
volutary emissions energy efficiency
the voluntary market only accounts for a
reductions
fraction of the global emissions market-
VER + TÜV SÜD Any except nuclear, Same as CDM
large hydro
place. Even if the entire voluntary offset
CCBA project design Climate, community and Land use Specifies its own
industry did the UK’s bidding and
standards
sourced CERs only, it would account for
Voluntary Offset European carbon investor Any except nuclear, Same as CDM
under 5% of the CDM market, and the
Standard (VOS) services (ECIS) HFC-23, large hydro
CDM is not the largest segment of the
Source: Point Carbon
global emissions trading industry.
Small Fry According to Point Carbon’s mid-year size of the market update,
The voluntary offset market, where the EU ETS, the Kyoto Protocol project markets, Australia’s New
individuals or companies decide to off- South Wales emissions trading scheme and the voluntary Chicago
set their emissions by buying credits Climate Exchange, 1.2 billion tonnes of CO
2
equivalent transacted
generated by projects that reduce in the first half of 2007.
greenhouse gas emissions, is growing in Together they were worth an estimated €15.8 billion. These volume
stature. However, the public interest it and value numbers suggest a weighted average world carbon price
receives belies the relative size of the of €13/tonne CO
2
e. This marks an increase of 41% in value terms
voluntary market compared with the and 45% in volume compared to 2006 in annualised terms.
market regulated by Kyoto. The largest market segment is still the EU ETS, with an estimated
A recent survey of brokers and retailers 775 million tonnes of CO
2
changing hands in the first half of 2007.
of offset credits suggested that in 2006 This gives a total value of €11.5 billion.
the voluntary market hit 13.4 million
tonnes of CO
According to Point Carbon’s mid-year size of the
2
equivalent (MtCO
2
e).
However, a small fraction of this volume
market update ... 1.2 billion tonnes of CO
2
would have come from the CDM.
equivalent transacted in the first half of 2007
Another 10 MtCO
2
e was traded on the
Chicago Climate Exchange, a voluntary Trades in CERs totalled an estimated 372 MtCO
2
e in the first half
exchange with its own brand of carbon of 2007, worth just over €4 billion. Total volume in the primary CDM
credit, the CFI. The authors of the sur- market was 292 Mt CO2e by Point Carbon’s estimates. To arrive at
vey concede that their calculation is this number, we weighted different categories of trades from our
imperfect and expect the actual number database of confirmed transactions – (the total figure may be high-
to be higher, (but that depends on the er). The secondary CER market comprises trading in CERs after the
truthfulness of the respondents as well). primary sale. This segment saw a CER volume of 80 million tonnes in
As this volume grows, developers of the first half of 2007 with a value of €1.3 billion (calculated using an
projects to reduce greenhouse gas emis- average CER price of €15.70). The value is higher per tonne in the
sions may choose not to sell through the secondary market because the risk is much lower than in the primary
Kyoto mechanisms. Ultimately, in the market. At time of writing (mid-August), the secondary market
secondary market they could currently closed at €16.35.
earn up to €16.50, but that would mean It is also just €0.55 short of the price quoted to me by the offset
implementing the project and carrying website, to ‘green’ my weekend break with Iris. It looks like good
the cost of the reductions until the CERs value. A clear conscience at half a euro over the wholesale price for
are actually issued – which occurs retro- low-risk CERs. Athens, here we come
•
spectively. Otherwise, they can receive
Andreas Arvanitakis is Senior Analyst with Point Carbon.
finance up-front by selling them on a
Point Carbon Research & Analysis is a world-leading provider of
forward basis, with delivery and pay- independent analysis for the power, gas and carbon markets. Point
ment conditional on gaining CDM sta- Carbon Consulting capitalises on access to Point Carbon’s world class
tus in time for delivery.
databases, models, networks and team of carbon and energy analysts.
The voluntary market for CERs pro-
www.pointcarbon.com
28 SEPTEMBER 2007 COMMODITIES NOW
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