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From the Editors

Reactions to Ecosystem Marketplace’s Raising Ambition: State of the Voluntary Carbon Markets 2016 have been filtering in over the last couple of weeks after our launch at Carbon Expo in Cologne, Germany.

“The first thing we go to is the price,” recalled William Theisen of carbon strategy consultancy Eco-Act, speaking on our launch panel. “And we’re like, ‘Oh no, it’s $3.30.’”

Still, the blow of the record-low average price was pillowed a bit by the fact that voluntary demand for offsets increased 10% in 2015, with 84.1 million tonnes of carbon dioxide equivalent (MtCO2e) transacted. Plus, carbon strategy consulting companies such as Eco-Act and Natural Capital Partners (also represented at our launch) are beginning to see companies take a more holistic approach to offsetting. Some are aligning their purchases with the Sustainable Development Goals, others are setting “Science-Based Targets” in line with the 2 degrees Celsius temperature rise ceiling, and still others are experimenting with “insetting” by verifying emissions reductions within their supply chain.

“I think one of the key takeaways that we can say about companies engaging in voluntary offsetting is they’ve usually already looked at their emissions, they’ve tried to reduce as much as possible, and they’re at that point where they say, ‘Okay, I want to go above and beyond,’” said Kelley Hamrick, the lead author of the report.

Daniela Spießmann of Deutsche Post DHL, a German logistics company that since 2006 has offered customers a climate-neutral shipping option, agreed, noting that offsetting is not something DHL does “on top” of other efforts; it’s an integrated part of their climate strategy. According to the company’s CDP climate disclosures, DHL’s offsetting program has grown every year for the past three, reaching 240,000 tonnes in 2014 (the most recent year for which CDP data is available).

However, Thiesen noted that the real scale in voluntary offsetting may come when more companies begin to address Scope 3 emissions – those tonnes that are embedded within a company’s supply chain or emerge when customers actually use their products. When accounted for, these indirect (but real) emissions may dwarf the number of tonnes that a company emits directly through its own manufacturing or energy production.

“Scope 3 can be major – we can go from 60,000 tonnes to millions and millions,” Thiesen said.

Our upcoming report on the demand side of carbon offsetting will further explore offsetting in the context of companies’ overarching climate strategies, through the lens of their CDP climate disclosures. Analysis of who is implementing internal carbon pricing, experimenting with insetting, and using offsets to address specific climate risks is all on deck. To learn more about how to contribute to or support this unique demand-side research, contact Allie Goldstein at agoldstein@ecosystemmarketplace.com.

In the meantime, we’re going to keep talking about the current state of the voluntary markets, and the fast-moving trends we’re seeing. For those unable to attend our launch event in person, the Climate Markets & Investments Association (CMIA) has agreed to host a webinar about the report findings. Sign up HERE to join us on Wednesday June 15that 11 a.m. EST. Speakers will include lead report author Kelley Hamrick, Sean Penrith of The Climate Trust, and Marc Baker of Carbon Tanzania.

More news from the carbon markets is summarized below, so keep reading!

 
   

HERE’S THE DEAL

Better than paying for extra leg room

A recent analysis by the Australian airline Qantas revealed that 8% of its customers are now opting to offset their flight emissions, a 10% increase from the previous reporting year. Customer opt-ins have led Qantas and its subsidiary Jetstar to purchase a total of 2 MtCO2e since they introduced the program in 2009, according to the companies. Their analysis also revealed that frequent flyers were 75% more likely to offset than infrequent flyers and women were 12% more likely to offset than men. However, fewer than 10 corporate customers have signed up. Qantas’s offset purchases support a conservation project in Tasmania and a clean cookstoves project in Cambodia, among others.

- Read more from The Sydney Morning Herald

Say cheese

Camera-maker Canon South Africa purchased 365 tCO2e in 2015 to offset 15% of its greenhouse gas emissions; they plan to up their purchase to 500 tCO2e this year. The company worked with Carbon Neutral Group to purchase the tonnes produced through the distribution of energy-saving “Wonderbags” for cooking within South Africa. They’re also hoping to register their local rural solar lighting initiative as a carbon offset project. “Our goal is to become a carbon neutral business,” said Iza Daly, Canon’s Sustainability Manager. “While we continue to place emphasis on improving the resource and energy efficiency of our operations through various optimization programs, we are also pursuing carbon offsetting.”

- Read Canon’s press release

PROJECT DEVELOPMENT

Coming of age

Cairns Farm in West Lothian, Scotland has become the first verified project under the United Kingdom’s Woodland Carbon Code (WCC). Since the program launched in 2011, all emissions reductions associated with woodland creation have so far been financed upfront, with a reported 259,000 tCO2e transacted in 2015. Many of the Cairns Farm Woodland Carbon Units from its five-hectare plot have already been sold through carbon broker Forest Carbon to the domestic fuel distribution company BWOC. In total, WCC reports 60% of anticipated Woodland Carbon Units have been sold to more than 70 buyers, with prices ranging from £7/tonne to £15/tonne (about USD $10-22/tonne). The program recently reached another milestone: an estimated two million tonnes are now validated.

- Read more from the Woodland Carbon Code

POLICY WATCH

Halloween in June

The California cap-and-trade program’s most recent allowance auction sold only 11% of permits – a significant difference from the previous 14 auctions during which current vintages often sold out. The sharp drop produced a flurry of articles speculating on the cause: did buyers spook over recent action regarding a pending lawsuit against the state’s cap-and-trade program? Regardless of the reason, the lower sales didn’t affect environmental outcomes: the emissions cap remains in place, and the shortfall triggered an oversupply mechanism that will lock away 36 million allowances until two consecutive sell-out auctions. The volatility is of more concern to policymakers than environmentalists, as both California and Quebec banked on earning revenues to support low-carbon projects such as the bullet train.

- Read more from Reuters

Getting warmer

Washington State just released an updated version of its proposed Clean Air Rule that seeks to set a cap on carbon emissions from large emitters in the state. The new draft replaces its predecessor, which was withdrawn in February after sparking criticism from both environmentalists and industry. While the new draft retains some critics, it now includes plans for a state-administered registry to avoid double counting and for a reserve of emissions reductions allowances that can be given out to businesses facing contracted economic growth from the program. While the proposal also suggests that credits (potentially allowances or offsets) would be accepted from the California-Quebec market, California officials say they must examine the proposal more deeply before linking.

- Read more from The Seattle Times

CARBON FINANCE

Tinted even greener

A record $46 billion in green bonds were issued in 2015, and Bloomberg New Energy Finance says that amount could grow to $56 billion this year. The United Nations’ Clean Development Mechanism (CDM), currently home to more than 10,000 projects and programs holding at least $70 billion in debt, sees potential in this growing market. The CDM has teamed up with BNP Paribas to develop a bond structure, and BNP employees are examining how CDM projects could be repackaged into portfolios. Grant Kirkman, a team leader at the CDM, spoke about the potential attractiveness of these bonds, saying, “There’s concern about the greenness of the green bond market. The CDM process may make the climate benefits of a green security more watertight.”

- Read more from Bloomberg

Practicing what it preaches

Though Indonesia is now two years behind its planned progress on Reducing Emissions from Deforestation and Degradation of forests (REDD+), President Joko Widodo recently met with the Norwegian Foreign Minister in an effort to strengthen the Indonesia-Norway REDD+ cooperation program. Norway has pledged to deliver $800 million to Indonesia, but only after the country produces verified emissions reductions. Meanwhile, the Norwegian parliament committed the country to a zero deforestation procurement policy – the first national government to make such as pledge.

- Read more from the Jakarta Post

Vamos, Peru

Peru recently inked a $6.1 million deal with Norway to conserve more than 250,000 hectares of forest. The transfer is the first payment of Norway’s $300 million pledge to Peru in 2014. The donor nation offered to pay Peru to reduce deforestation, with $50 million on the table for “readiness” efforts and $250 million slotted to pay for verified emissions reductions. The recent $6.1 million cash flow will also facilitate land titling for 68 native communities in the regions of San Martín and Ucayali.

- Read more from La República Peru

Make it count

As average prices on the voluntary carbon markets fall, market participants are looking for new ways to channel finance to emissions reductions activities – sometimes by quantifying different impacts. The Gold Standard is planning to test-drive methodologies related to health, water, and more as it develops its 3.0 protocols, and the American Carbon Registry is looking at habitat creation and water quality metrics alongside its rice protocol. Many project developers are quantifying their impacts against the Sustainable Development Goals. However, the merging of the climate and sustainable development agendas is not without contention. When sustainable development reporting was made available for CDM projects, only 40 chose to use the (optional) tool.

- Read more from Ecosystem Marketplace

NEW RESEARCH

Lots of talkers, few walkers

From Adidas to Disney, 366 companies have now made 579 individual commitments to produce palm, soy, cattle, and timber & pulp without encroaching on forests, according to a new report by Supply-Change. Companies active in palm are the most likely to have made pledges (61% have one in place) while just 19% of companies active in soy and 15% of companies involved in cattle have commitments – though cattle causes 10 times the deforestation compared to palm. It’s difficult to tell whether companies have made progress towards meeting their goals: Though some are already past due, information on progress is available for only one in three commitments. Commercial agriculture accounts for 70% of tropical deforestation globally, which in turn accounts for up to 15% of global carbon dioxide emissions.

- Read more from Ecosystem Marketplace and check out the Supply-Change report

Jobs

Land Use Analysis and Stakeholder Expert – Winrock International

Based in Jakarta, Indonesia, the expert will develop and implement low-emissions development projects in Indonesia related to land use. The position requires working with a team of global experts to provide inputs to a series of web-based spatial analysis tools. The successful candidate will have a master’s degree with demonstrated coursework in Geographic Information Systems and at least five years of experience collaborating with public and private sector stakeholders.

Read more about the position here

Climate Finance Analyst – Climate Policy Initiative (CPI)

Based in San Francisco, California, the Climate Finance Analyst will perform rigorous quantitative evaluation of national and international climate finance mechanisms and climate and energy policies. The position involves engaging clients throughout the research process and advising policymakers on the implications of research findings. The successful candidate will have at least two years of professional experience; a master’s degree in a relevant field and private sector or government experience is preferred.

Read more about the position here

Commercial Lead – The Nature Conservancy

Based in Arlington, Virginia, the commercial lead will development business and investment models that promote land restoration as a critical pathway to mitigate climate change. This may involve conducting cost-benefit analysis of landscape restoration models and financial opportunities. The successful candidate will have an MBA or equivalent industry experience in forest economics and at least five years of experience with forest management, investment banking, commercial lending, or similar. An understanding of US timber and carbon markets is required.

Read more about the position here

Development Associate – The Climate Registry

Based in Los Angeles, California, the development associate will support The Climate Registry’s fundraising efforts and its work to design and operate voluntary and compliance greenhouse gas reporting programs. The position involves maintaining donor relationships, assisting with general communication and outreach, and representing The Climate Registry at events. The successful candidate will have a bachelor’s degree and at least three years of experience at an organization with at last a $3 million budget.

Read more about the position here

   
   

ABOUT THE ECOSYSTEM MARKETPLACE

Ecosystem Marketplace is a project of Forest Trends, a tax-exempt corporation under Section 501(c)3. This newsletter and other dimensions of our voluntary carbon markets program are funded by a series of international development agencies, philanthropic foundations, and private sector organizations. For more information on donating to Ecosystem Marketplace, please contact info@ecosystemmarketplace.com. 

 

 
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