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Readers Select top Voluntary Carbon Stories of 2010

Molly Peters-Stanley

As Ecosystem Marketplace wishes you and yours some New Years luck in this special edition, we offer a look back at 2010 – replaying your reader-ranked Top (20)10 Stories and sage predictions for the coming year from some of the market’s most influential players.

As Ecosystem Marketplace wishes you and yours some New Years luck in this special edition, we offer a look back at 2010 – replaying your reader-ranked Top (20)10 Stories and sage predictions for the coming year from some of the market’s most influential players.

NOTE: This article has been reprinted from Ecosystem Marketplace’s Voluntary Carbon Newsletter. You can receive this summary of global news and views from the world of voluntary carbon automatically in your inbox every two weeks by clicking here.

31 December 2010 | The voluntary carbon market experienced a series of meaningful wins peppered with some striking losses in 2010. Fortunately, veterans of the tumultuous 2009 market emerged from “Nopenhagen” with more realistic expectations about the coming year – in which political indecision heralded the downturn (or emergence) of compliance markets while non-regulated buyers’ investments continued to ride the wave of economic downturn to recovery.

As it became clear that the US Senate would not agree upon meaningful climate legislation, pre-compliance demand fell and the Chicago Climate Exchange – already painfully oversupplied – shuttered the doors on its voluntary carbon trading program at the end of 2010.

Some market players turned to California, where the state’s AB32 cap-and-trade program cleared the ballot challenge hurdle and was approved by regulators – making way for the scheme’s use of several carbon offset protocols first employed in the voluntary market and for surrounding jurisdictions to tackle the details of their own carbon trading programs in line with their Western Climate Initiative (WCI) commitments.

California also recognized what voluntary carbon buyers have known for years about the carbon mitigation potential of reduced emissions from deforestation and degradation (REDD). Market participants that scaled up 2010 forestry activities in anticipation of a UNFCCC REDD agreement were vindicated by Cancun’s REDD and REDD+ outcomes – notably at the sub-national level.

In fact, domestic efforts reigned in 2010, which saw the emergence of the first sub-national environmental asset registry, real results from the Governors Climate and Forests Task Force (GCF), a host of provincial pilot low-carbon programs across China and a loose network of proposed carbon trading schemes and bi-lateral agreements on REDD finance to carry market activity into the new year.

Readers cited these and other stories as the most important developments in the 2010 voluntary carbon market. Check out the ranking below and read some insightful predictions from a few movers, shakers – and V-Carbon readers.

Reader Retrospective 2010
A reader-ranked summary of the year’s top stories impacting the voluntary carbon market


10. Country, County, City, Home: From China and Chile to Chiapas and California, domestic action on climate change took center stage in the absence of international clarity around carbon trading. In the case of the Governors’ Climate and Forests Task Force and freshly launched “R-20” coalitions, sub-national leaders actually carried the REDD torch ahead of international actors. 2010 even saw the launch of the first personal carbon trading scheme, as was considered several years back in the UK.

9. Counting Carbon: Along with emerging markets came a multiplicity of new market mechanisms and programs – particularly in developing countries – like Africa’s Carbon Credit Exchange and a new Colombian carbon platform. Domestic climate efforts were accompanied by place-based voluntary standards, like China’s Panda Standard and Brazil’s Brasil Mata Viva. The market also saw the launch of the first spot trading platform for voluntary credits, and the National Carbon Offset Standard and Carbon Farming Initiative in Australia.

8. Climate Capitalism: Legislative battles in 2010 proved that corporate buy-in can make or tank climate efforts. By some accounts, CSR activities did pick up steam last year as providers noted that economic recovery enabled more corporate discretionary spending than in 2009. Indeed, 2010 concluded with the first ever private-sector Gigaton Awards from the Carbon War Room among many signs that corporate actors won’t take climate inaction lying down.

7. Crying Foul: The voluntary carbon market can hardly divorce itself from the regulated markets – so when controversies strike the compliance markets they also affect the voluntary market’s image. Throughout the State of the Voluntary Carbon Markets 2010 report process, offset providers noted that hot button issues like the HFC-23 debate, VAT fraud and forest carbon controversies in turn affected buyers’ opinion of voluntary credits.

6. Creative Crediting: Governments and exchanges weren’t the only ones trying to streamline and spur new market activity and entrants in 2010. Third-party standards introduced a plethora of new offerings, like the Gold Standard’s appeals procedure, CAR’s Guidelines for Aggregating Forest Projects, the VCS Program 2011 Update and Proposed Compensation Mechanism for Methodology Elements and ACR’s Risk Mitigation Product for forestry projects.

5. Cap-and-Trade is Dead: At best, the absence of a US Senate bill gave the carbon markets some long-awaited clarity around US domestic carbon commitments (or lack thereof) – at worst, it left in a lurch those who funneled millions of dollars into pre-compliance activities and relegated carbon regulation to the legally vulnerable US EPA. In our Carbon Crystal Ball feature below, however, some market players predict that the offsets market may still have a card or two left to play at the federal level.

4. Consolidation and Closure: The US Senate’s failure to secure passable climate legislation dramatically altered the voluntary carbon landscape. Some programs and companies backed out of the market entirely (CCX cap-and-trade program, Greenhouse Friendly, Climate Leaders, North Dakota Farmers Union, Agragate, EcoSecurities’ US desk, Cantor CO2’s EU desk) while others saw some significant M&A, partnerships and agreements (Barclays + Tricorona, GE + Stormfisher, Acorn Capital + Climate Bridge , Orbeo + Axens, Mercuria + MGM International).

3. Carving our REDD credits: The voluntary carbon market is once again leading compliance markets in its pursuit of transparency and quality – this time around credits from forest carbon projects and specifically REDD. After years of anticipation, REDD methodologies fell out of the pipeline like dominoes, tackling issues from mosaic deforestation to land use change in undrained peat swamps to broadly applicable REDD modules.

2. California Role: Throughout the year, California’s Air Resources Board progressed in its design of the AB32 cap-and-trade program, approved in December 2010. Unsuccessfully threatened by Proposition 23, the California scheme will take some cues for its offset program from the voluntary market’s Climate Action Reserve and consider additional voluntary programs throughout 2011.

1. Copenhagen to Cancun: Copenhagen came and went in late 2009, failing to achieve the (overly?) ambitious goals set out for negotiators. This year, the world came together to negotiate what many saw as a more realistic set of goals en route to Durban – and emerged with the Cancun Agreements around REDD+, MRV and a $100 bn Green Climate Fund.

Carbon Crystal Ball 2011
What voluntary carbon market movers and shakers are saying about 2011


Mary Grady, Director Marketing, Communications and Operations

American Carbon Registry
“ACR predicts the voluntary carbon market will continue a slow and steady regrowth in 2011, fueled not only by traditional CSR motives but also new drivers like mandatory GHG reporting and SEC-mandated climate risk disclosures. California will flesh out carbon market rules, including approving new protocols to increase offset supply, such as those focused on agriculture. In Washington, expect modest and incremental clean energy incentives rather than big plays from Congress, but don’t underestimate EPA’s ability to find room for offsets in the Clean Air Act.”

Emilie Mazzacurati, Head of Carbon Research North America

Point Carbon
“In 2011, voluntary transactions will become clearly distinct from pre-compliance deals. Pure voluntary transactions will be driven by corporate compliance, and focused on project types not eligible in California/WCI, like renewable or coal-mine methane. No big growth expected there. We expect the pre-compliance market will really pick up ahead of the California market, with a lot of guessing game around which new project types will be allowed in the system, landfill gas and ag projects being the strongest contenders.”

Dr. Sascha Lafeld, Co-chair

International Carbon Reduction and Offset Alliance (ICROA)
“On the demand side, the voluntary market is likely to grow further in 2011. Besides growing demand from players in Western European countries, I expect to see new countries getting more familiar with voluntary action, e.g. China. On the supply side, we will see a decrease in pre-CDM VCUs since the the number of CDM projects especially from countries like India and China will shrink over the next years. Small scale “charismatic” projects will therefore gain more market share in 2011 as compared to earlier years. Looking e.g. at the Gold Standard’s project pipeline, I am confident that the high number of these charismatic projects will fill the supply gap from the decrease in pre-CDM VCUs.”

David Antonioli, CEO

Voluntary Carbon Standard Association
“The first REDD credits verified to a major global standard will be issued in 2011 and this will have a profound impact on the voluntary carbon market. Folks have been eagerly awaiting this, partly because REDD credits embody environmental and social benefits that are very appealing to buyers and because REDD’s advance is in general a positive sign for future compliance markets. The bottom line is, REDD makes intuitive sense to potential buyers, whether corporate or government, so we expect significant demand for REDD credits in 2011 and beyond.”

Robert Falls, PhD, RPBio, CEO and Director

Ecosystem Restoration Associates
“The United Nations General Assembly declared 2011 as the International Year of Forests in order to raise awareness on sustainable management, conservation and sustainable development of forests. This not only mirrors the agenda of current forest carbon market participants, but also reflects the growing pro-forest sentiment we are seeing in the international carbon markets, both voluntary and compliant. The recent progress made under AB 32, where forestry is to play a significant role, is a tangible development that will catalyze regional programming not only for California, but for all WCI participants and voluntary market players. This indeed will be the Year of Forests, and just might be the year forest carbon offsets take their rightful place in the international effort to address climate change.”

Jonathan Shopley, Managing Director

The CarbonNeutral Company
“In 2011, the flight to quality leads to consolidation. Virtually all non-regulated carbon will be VCS or Gold Standard accredited. CCX signed its own death warrant due to its lack of independently established quality standards. The non-regulated carbon market will shrink to a smaller and more solid base after the collapse of the CCX, from which it will grow strongly as voluntary carbon buyers flock to quality and established carbon management providers.”

Gary Gero, President

Climate Action Reserve
“We expect that the market will be largely focused on pre-compliance for the California and WCI cap-and-trade program. But, as the economy picks up toward the end of 2011, we will begin to see renewed interest in pure voluntary transactions as part of corporate sustainability efforts. We would also expect to see growth in international projects as offset sources for both pre-compliance and voluntary market participants.
 

 

Katherine Graham, Manager of Registry Infrastructure
APX, Inc. (soon to be NYSE Blue)
“2011 will be a year for the voluntary carbon standards to position their offsets in cap and trade programs. Furthermore, entities such as WCI in North America, California’s ARB and provinces in China will be looking to implement their programs and establishing the necessary infrastructure which will ensure market confidence and growth. Creating this infrastructure which links the voluntary carbon markets and compliance markets will be critical as regulators want to show the world how a cap and trade program could function at national levels some day.”

 


Caitlin Sparks
, Associate Director North America Commercialization

Camco

“The voluntary market matured and strengthened in 2010 – buyers want bigger volumes, with clear co-benefits, and ease of transaction. As the economy further recovers in 2011, Camco expects to see increases in demand for all renewable project types and high-quality forestry projects. Gold Standard and Plan Vivo projects will remain in high demand, and more volume will be transacted through exchanges.”

Cecilia Michellis, Director Social Carbon Standard

“Small-scale projects will continue to grow in popularity, with REDD+ and POAs emerging as popular instruments. Intervention, however will be needed to not follow the same course as CDM, which so far has primarily benefited large organizations.”

Michael Streck, Communications

Forest Carbon Group
“We expect to see a growing interest especially in forest carbon offsetting projects from European industries. The myriads of benefits to societies, economies and the environment that forest protection and restoration offer will continue to attract more and more buyers.”

Adrian Rimmer, CEO

The Gold Standard Foundation
“The fragmentation of the international compliance market will increase in pace, with regional initiatives seeking to fill the likely post-Kyoto vacuum.”

Renat Heuberger, CEO

South Pole Carbon Asset Management Ltd
“The voluntary carbon markets are ready for a thrilling year 2011: many projects to chose from, absolute transparency, and loads of exciting stories about positive impacts on the local communities. The carbon world is totally different compared to when we started ten years ago.”

 

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