Are we in a Voluntary Carbon Double Dip?

Recession and riots and price crashes, oh my! The world is watching with bated breath as fiscal policy makers worldwide attempt to stay afloat of a “double dip” recession. Below the surface in the carbon world, the closure of the CCFE, FSA admonishment of offset scams and precipitous decline in compliance offset prices have sent the carbon marketplace into a tailspin.  Read more in this week’s V-Carbon News.        

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 by clicking here.

10 August 2011 | Recession and riots and price crashes, oh my! The world is watching with bated breath as fiscal policy makers worldwide attempt to stay afloat of a “double dip” recession. Below the surface in the carbon world, the closure of the CCFE, FSA admonishment of offset scams and precipitous decline in compliance offset prices have sent the carbon marketplace into a tailspin.

Taken as a whole, recent events – particularly the potential regression to recession – could lead to the same tightening of CSR purse strings among corporate offset buyers that led to the 2009 voluntary market slump. But suppliers say there’s no need to panic – yet?

“Expectations about a European recession have contributed to driving CER prices down in recent weeks,” says UK-based Climate Bridge’s Sarah Chapman. “The voluntary market would be expected to react much more slowly than the compliance market.”

Chapman says that “companies with existing commitments are likely to stand by them” – though new companies may be less willing to make new voluntary commitments to emissions reductions in a bearish environment.

The VER team for project developers Emergent Ventures predicts that the voluntary market’s increasingly niche offerings – from bulk low-priced VERs to exotic project locations and types – could stabilize corporate demand for offsets this time around.

“Unlike CERs, the VER market is not commoditised and is driven by individualistic preferences of corporates,” says Neelesh Sachdeva, Principal VER Consultant. “The overall market won’t go to oversupply anytime soon.”

Timothee Lazaroo, Managing Partner at ecosur america, similarly doesn’t “notice or expect any collapse on prices or purchased volumes in the short to midterm.”

“We still see rising interest on the buy side,” he points out, “newcomers from a broad range of sectors and locations which we believe could absorb part of the downturn from the voluntary market perspective.”

Buyers that are not dispelled by the recession, however, might find the latest round of carbon controversies a turn off – including fresh admonishment from the FSA for the uptick in carbon offset investment scams in the UK.

“Since June, we’ve seen a significant rise in consumers reporting carbon credit trading schemes to the FSA,” said Jonathan Phelan, head of the unauthorized business department at the FSA in an interview with the Guardian.

“We are concerned that the majority of the firms being reported to us are using high pressure sales tactics,” he explained, “and targeting vulnerable consumers with little or no knowledge of commodities and derivatives trading.”

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BGC acquires CantorCO2e North American brokerage

It’s all in the family for BGC Partners Inc., which announced yesterday its acquisition of Cantor Fitzgerald’s North American Environmental Brokerage arm, CantorCO2e. The two brokerage firms have a common origin in Cantor Fitzgerald, which formed BGC in 2004 (named for B. Gerald Cantor), while Cantor’s Environmental Brokerage (est. 1992) and CO2e joined forces in 2007 to form CantorCO2e. Howard Lutnick also serves as chief executive for both Cantor Fitzgerald and BGC, which in June 2011, was hit with controls by the FSA in response to “serious weaknesses in its UK arm’s ‘risk, compliance, control [and] governance procedures.'” The acquisition means a few changes to operations, with former Evolution Markets’ Samantha Unger Katz leading what will now be called BGC Environmental Brokerage Services.

   – Read the announcement on Cantor website


Can’t an offset supplier get some privacy?

Offset project developer ClimateCare recently announced that it has been taken private in a management buyout from JPMorgan Chase & Co. The company, which seeks to expand its investment in the UN offset market, was founded in 1997 and purchased by JPMorgan in 2008 – a year before its purchase of offset buyer EcoSecurities. As of this week, ClimateCare is an independent entity once more, said Executive Director Edward Hanrahan – though he declined to disclose the price paid. So what’s next for ClimateCare sans JP Morgan? “We have a large pipeline of projects which we’re working on at the moment both in the voluntary market and CDM,” said Hanrahan. “We’re working with a number of partners to develop some new projects as well.”

   – Read the SFGate article


Tanzania tips the co2balance

Carbon management company co2balance has cooked up a plan to generate 840,000 Gold Standard VERs from efficient cookstoves in Tanzania from 2012 to 2019. The projects will provide the stoves to households in Arusha, near Mount Kilimanjaro, and Tanga on the Tanzanian coast. In an interview with Ecosystem Marketplace, co2balance Marketing Director Steve Hewson said the stoves are also built from heavy materials (each weighs 50 kilos) and cemented to the household floor to prevent them from “walking off” – a challenge he says can accompany projects with more lightweight technologies. He also explains that co2balance engages with local NGOs or directly employs local builders to install the units. The projects utilize the Gold Standard’s existing methodology for Thermal Technologies and Practices that Displace Decentralized Thermal Energy Consumption – and credits are not quantified according to Suppressed Demand mechanisms.  

   – Read the Reuters article


VCS/CCBA afforestation Ventures into India

Emergent Ventures (EVI) has facilitated the validation of the first afforestation project in Asia under the VCS AFOLU 2007.1 standards. Implemented by Prakash Industries Limited, the project – “Reforestation on degraded lands in Chhattisgarh, India” – is only the second project worldwide to achieve both CCBA Gold level (First edition) and VCS AFOLU certification. Located on 282 ha of wastelands, the project is expected to sequester approximately 10,000 tCO2e annually over the next 25 years, employ around 250 locals and promote rehabilitation and ground water recharge in the drought-prone region. Having been successfully validated by TUV Nord, project verification is now underway with VCU issuance expected by September 2011.



ERA’s concession stand

…forest stand that is. ERA Carbon Offsets Ltd. has officially signed the first Forest Conservation Concession Contract awarded by the government of the Democratic Republic of the Congo – reportedly providing the project developer with legal standing to administer the first large scale REDD project in the country. The contract follows the March 2011 signing of the Carbon Rights Agreement (CRA) for an integrated REDD project in the DRC, and the subsequent acceptance by the Ministry of ERA’s Concession Management Plan for the 299,640 ha Mai Ndombe property. ERA reports that full project development is now underway within the concession area, where its forestry team is engaged in the establishment of forest plot networks.

   – Read the press release


California, here comes Camco

Project developer Camco International Ltd. has expanded its North American carbon portfolio – with over 2 MtCO2e of voluntary carbon credits under management in North America and over 1 MtCO2e registered. The firm said in February that it would focus on opportunities in East Asia and the US, and has been concentrating on the development of clean energy projects in the US agricultural sector. Camco currently has seven projects registered with the Climate Action Reserve – with another four on track for registration by the end of 2011 – and has monetized over 100,000 credits from agricultural projects to date. The company has also received a US$1.5 million grant from the US Department of Agriculture to help farmers adopt nitrogen best management practices and monetize offsets generated from reducing nitrous oxide emissions.

   – Read the Reuters article


Just don’t call them offsets

A new Woodland Carbon Code has been launched by the UK Forestry Commission, intended to attract investment in afforestation projects. Using the government guidelines, companies can now count the forestry credits they purchase toward emission reductions they record in voluntary carbon reports. But some developers and retailers of carbon offsets accuse the guidelines of blurring the line over creating carbon offsets. The code specifically avoids calling the emissions reductions “offsets,” as the rules of the Kyoto Protocol prevent tradable offsets from being generated in the UK. However, the code does “tend to stray into the vernacular of the offset,” according to Ed Hanrahan, Executive Director of offset retailer ClimateCare. “It could be construed as misleading,” he said, speaking on behalf of ICROA. Eleven projects have so far been submitted for validation under the code, with the potential to sequester over 258,000 tCO2e.

   – Read the press release
   – Read more from BusinessGreen
   – Read more from Environmental Finance


Verifying the verifiers

Standards are intended to help achieve consistency and credibility in the global carbon market – but what about the reliability of those validating and verifying emissions reductions? The International Organization for Standardization (ISO) hopes to address that issue with a new standard providing guidance on the level of competency required by those responsible for verifying GHG emissions. ISO 14066 sets out detailed requirements for the skills and knowledge possessed by auditing teams. The UN’s CDM has long held the responsibility of certifying verifiers (in this case, called “Designated Operational Entities” or DOEs). Some market players welcome the ISO’s new certification as filling a gap potentially left by CDM-based certification post-2012.

   – Read the Green Economy article


Buyer beware boiler rooms, says FSA

Proceed with caution when investing in carbon credit schemes, warns the Financial Services Authority (FSA). The regulator issued a warning to consumers last week about the risks of investing in potential scams – specifically highlighting voluntary emission reductions (VERs), which are “increasingly being promoted to UK investors.” Although the FSA did stress that not all carbon credit schemes are scams, it noted that “experience and skill” were needed when trading on over-the-counter markets. “Just because the salesperson mentions the Kyoto Protocol or ‘government-backed’ plans does not tell you anything about the type of carbon credit you are investing in,” it said. The FSA urged anyone concerned about a scheme they have invested in – which sometimes involve cold calling – to notify their bank immediately and contact FSA’s consumer hotline.

   – Read the FSA warning
   – Read more from FTAdviser


JSE eyes voluntary carbon platform

The Johannesburg Stock Exchange revealed on July 28th plans to formulate a draft proposal on the potential introduction of voluntary carbon credit trading “as soon as possible.” BusinessLIVE reports that officials were understood to be in Spain, looking at ways to roll out such a scheme. But according to Chris Sturgess, general manager of the JSE commodity derivatives market, “It won’t happen by tomorrow, as there are challenges.” He also indicated that recommendations would be shared with the relevant parties. The article asserts that the success of such a model – coming at a time of such uncertainty of a global carbon deal – will depend on whether sufficient demand and reasonable pricing can be achieved.

   – Read the BusinessLIVE article


Feds fan flames of Aboriginal carbon ambition

The North Australian Indigenous Land and Sea Management Alliance is developing a model using traditional burning methods to reduce bushfires and carbon emissions. Chief executive Joe Morrison says the Federal Government’s price on carbon is helping to boost confidence, with the Arnhem Land project now being adopted by Indigenous groups in the North Kimberley, Gulf Country and Western Cape York. “People are pretty excited about the prospects of their knowledge and their environmental services being valued in this way,” said Morrison, “that Indigenous knowledge about the management of fire is something that potentially will be taken seriously by the market and people will pay a price for it.”

   – Read the ABC News article


Back to life, back to reality

It’s “Back to Life” for the voluntary carbon market, says a special report in Trading Carbon. Citing Ecosystem Marketplace’s State of the Voluntary Carbon Markets 2011 data, the article reports that with transaction volumes growing by 34 percent in 2010, “the future is looking rosier for this sector of the carbon industry.” The article examines market maturation from the perspective of suppliers and in light of Ecosystem Marketplace findings. “There’s a willingness to jump in and take risk with certain project types and countries in the voluntary market,” said Jamal Gore, Managing Director of Carbon Clear.   But there are two sides to every coin – a subsequent article also warns of the “Voluntary Market Vortex,” where “some companies are promising huge returns on voluntary carbon offsets to unsuspecting buyers.”

   – Read the articles in Trading Carbon (free registration required)


EOS announces new CEO

ODS destruction project developer EOS Climate named Matt Jones as its new CEO last week, replacing co-founder and outgoing CEO Joe Madden. Jones brings 25 years of management experience to EOS from the communications, security, networking, and IT storage industries – most recently serving as President and CEO of CloudShield Technologies. “We are thrilled to bring Matt on board,” said Madden. “His track record of scaling companies and innovation in new markets will be valuable assets for us as we work to deliver the world’s most impactful greenhouse gas (GHG) emission reduction system.” With Jones’ hiring, Madden will now transition into his new position as Chief Business Development Officer with EOS.



Carbon Clear welcomes Chairman

Carbon Clear has announced the appointment of their first Chairman, Mr. James Hall, who has taken on the role from August 1, 2011. Having previously held the posts of Managing Partner at Accenture UK and Chief Executive of the UK Identity and Passport Service, Hall’s corporate strategy and delivery experience is hoped to help develop Carbon Clear’s services and guide its team of carbon management specialists. “Carbon Clear has gone from strength to strength this year despite a challenging economy,” said Mark Chadwick, CEO of Carbon Clear. “We’re thrilled to have James Hall on board and believe his broad experience will help us to achieve even better results for our clients.”

   – Read the Carbon Clear blog


GoldPower hour has arrived

The CarbonNeutral Company has announced a new product on its shelves, designed to bridge the gap between renewable energy and emissions reductions. GoldPower matches clients’ electricity use through certificates in megawatt hours (MWh) with guaranteed emissions reductions from Gold Standard projects in developing countries with no Kyoto targets – ensuring that the reductions are not double counted. Developed by Climate Friendly in association with WWF, the product is designed for companies who want to combine a single, global strategy for purchasing renewable energy with verified carbon cuts. “GoldPower is supported by WWF because, unlike most conventional green power options, GoldPower demonstrably stimulates new investments in new renewable energy capacity,” said Bruce Haase, Acting Head, Climate Business Engagement, WWF International.

   – Read the press release


IETA launches voluntary working group

The International Emissions Trading Association (IETA) is looking towards the future of emissions markets – and sees a growing role for the voluntary carbon market in a possibly fragmented post-2012 world. Having integrated the International Carbon Reduction and Offset Alliance (ICROA) – a voluntary market industry body – earlier this year, IETA now plans to launch a Voluntary Market Working Group via conference call on September 8, 2011 at 3pm GMT. For more information and to join the call, IETA members and other interested parties should contact Sophy Greenhalgh at [email protected].  



Reduce & Retire: The Latest on Carbon Neutral

Chameleon turning to Green (Mountain)

Organic coffee company Chameleon Cold-Brew recently announced its partnership with Green Mountain Energy Company to offset an estimated 165 pounds of CO2 for each 20 shipments of its mail order coffee. The Central Texas coffee retailer is the latest in a line of companies and events turning to Green Mountain for offsets and clean energy, also including Lord & Taylor, Lollapalooza and – most notably – the Empire State Building. Green Mountain Energy Company is the retail business of NRG Energy, where CFO Christian Schade recently announced he would step down in September 2011.  

   – Read the Digital Journal article
   – Read about Lord & Taylor wind/offset purchase


NYSE taking stock of emissions

NYSE Euronext (NYX) has become the first global exchange operator to achieve carbon neutrality – announcing last week that they would purchase both Renewable Energy Certificates (RECs) and carbon offsets retroactively to achieve the environmental goal for 2010. The offsets purchased by NYX are Green-e certified and NYX included its total carbon footprint in its energy calculation, including electricity use, onsite generators, vehicles and employee travel. The company says the project involved months of planning, assessment, measurement and verification.

   – Read the Sustainable Business article


DHL: 1.7 billion packages WENTGREEN

In 2010, DHL offset some 82,000 tCO2e for its customers and shipped over 1.7 billion CO2-neutral GOGREEN items. DHL Global Forwarding and Freight is at it again this year, recently launching a new service for carbon emissions tracking aimed at reducing emissions and increasing supply-chain efficiency. The GOGREEN Carbon Dashboard allows customers to choose from a variety of certified reports to better understand the main drivers of carbon emissions from the various transport modes involved in their supply chain. According to Kathrin Brost, Vice President, DHL Global Forwarding, Freight Green Strategy, up to 50 percent of the carbon footprint of a product comes from the supply chain.

   – Read the RTTNews article


For those about to rock…

…Lollapalooza will offset you! That’s what concert organizers offered last week as one of its several greening initiates designed to minimize the music festival’s environmental impact. Festival-goers were offered the chance to add a US$3.00 Green Mountain Energy Fan Tag to their tickets, each offsetting 220 pounds of CO2. For the past five years, the festival’s producers have also offset emissions from the event’s generators, shore power, staff travel and vehicles – helping to offset approximately 4,983 tCO2. All the offsets purchased for Lollapalooza will be from Climate Action Reserve projects in the Midwest. Other festival greening initiatives include waste diversion, a Rock & Recycle program, bicycle valet and green volunteer teams.

   – Read more from event website


Putting the CarbonFreeze on LG emissions
Manufacturer LG Electronics and the Foundation recently announced that several LG products have earned the new CarbonFree Certification label. The companies teamed up to produce life cycle analysis for six products – an LCD TV, LCD monitor, refrigerator, clothes washing machine, LED lamp and solar panel – which were then registered with and offset based upon actual sales. “LG’s environmental leadership is further proof that what’s good for the environment is also good business,” said Foundation President Eric Carlson. The products – several of which are also ENERGY STAR qualified – are expected to be available in the US by early 2012.

   – Read the press release
   – Read more from the Independent
   – Read more from Green Technology World


Goodbye, Ruby emissions

El Paso Corporation announced in late July that, following three years of construction, its carbon neutral Ruby Pipeline is now in service. The US$3.5 billion project – which runs 680 miles, linking Wyoming to Oregon – is the first interstate natural gas pipeline to achieve carbon neutrality in both its construction and operation. According to El Paso Corp., emissions were offset by carbon credits and other means. In 2009, Ruby Pipeline LLC began its first reforestation project in partnership with the National Forest Foundation (NFF). The project was expected to reforest 561 acres of fire-damaged forest in the Plumas National Forest, mitigating up to 50,000 tCO2 over its lifetime and restoring a watershed important to the town of Quincy, California.

   – Read the press release
   – Read more from the Herald and News


Climate North America

The ICEman cometh for CCFE

Intercontinental Exchange Inc (ICE) has confirmed that it plans to close the Chicago Climate Futures Exchange at the end of next year’s first quarter. ICE acquired the platform’s parent company Climate Exchange PLC last year for about US$600 million, but a lack of US action on cap-and-trade, proposed regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act and low volumes have left the exchange operating at a loss. As a parting gift, in its note to traders ICE indicated that it will list OTC forwards for California offsets and allowances on August 29 on the ICE OTC platform, with options to follow on September 19.

   – Read more from Bloomberg
   – Read more from Reuters
   – Read more from BusinessGreen


California regulation frustration

Carbon market participants continue to express frustration over the California Air Resources Board’s (ARB) stance on offset liability, which puts the holder of the offset on the hook to replace invalidated credits – a condition some market players find tough to swallow. Many are in favor of an offset credit account, or “buffer pool,” which could be tapped to replace invalidated credits. But this proposal was rejected – with the ARB instead adding a line into the regulations indicating that the offset project registry may offer an insurance mechanism to cover the liability. “This is not the answer,” said Josh Margolis, CEO of CantorCO2e (now BCG Environmental Brokerage!). “ARB’s hands-off policy is not consistent with its traditional responsibility to protect both the currency and the environment,” he said. On July 25, ARB released its revised cap-and-trade regulation for a 15-day public review. The modified text and additional documents are available for comments on the ARB website until August 11, 2011 at 5pm.

In other California news, Linda Adams officially concluded her career as the Secretary of the California Environmental Protection Agency at the end of July, replaced by Matt Rodriguez. Adams will continue to serve the environment through other endeavors – most notably as the chair of the Board of Directors of the Climate Action Reserve.

   – Read more from the ARB
   – Read more about the revisions row from Reuters


8% or 85%? A matter of symantics

The latest row over California cap-and-trade program design illustrates the power of one word to make or break stakeholder support. Will offsets comprise 8% of total program emissions reductions through 2020 – or 85%? It comes down to this: as currently written, the California regulation allows for 8% of companies’ “total emissions” to be covered by offsets. But is that 8% of a company’s total emissions or 8% of what’s left uncovered by freely allocated allowances (i.e. the carbon cuts left to make)? Market observers say the nuanced change in terms from “emissions reductions” to “total emissions” emerged with other cost-containment measures in fall 2010. David Hunter, U.S. director for the International Emissions Trading Association (IETA), says concerns about overuse of offsets may not be valid, as ARB’s restriction to four protocols limits the volume of offsets that can come into the system anyway. “Those four methodologies would not yield anywhere near the tons to come close to the 8 percent [of total emissions] limit.”

   – Read the New York Times article


Kyoto & Beyond

Carbon trailing in commodities race

Slow and steady wins the race? Carbon traders hope so – with carbon offsets reaching a record low last week, confirming their status as the world’s worst performing commodity. Prices are hovering around cost in developing countries, increasing the pressure on project developers. According to Reuters, London-listed Camco’s shares were down nearly 40 percent over the past month. Rival developer Trading Emissions recently put the brakes on a proposed sale of its assets, sending its share price to two year lows. “The Board has concluded that to sell the company’s entire portfolio now, at a time of extreme market volatility, would not be in line with the Company’s stated investment policy of a tactical and controlled realization,” the firm said in a statement.

   – Read more about carbon market performance
   – Read more about Trading Emissions


Fly away home

That’s the message the EU is getting from US airlines, who continue to want no part in what one Republican calls an “ill advised and illegal” program. “This appropriately named EU ‘scheme’ is an arbitrary and unjust violation of international law that disadvantages US air carriers and kills US aviation jobs,” said John Mica, a Florida Republican who chairs the House Transportation and Infrastructure Committee. Congressional leaders and witnesses recently told an aviation subcommittee hearing on Capitol Hill that US airlines would pay more than US$3.1 billion to the EU between 2012 and 2020, which could double if the price of carbon escalates. The bi-partisan Congressional Transportation Committee has introduced a bill that would legally prevent US carriers from taking part in the scheme, which the EU argues is a pollution ceiling consistent with international law.

   – Read more from BusinessGreen
   – Read more from Climate Connect


CDM’s new law of supply and Suppressed Demand

CDM projects such as wind turbines, hydro-electric dams and efficient cookstoves in Africa and beyond may attract up to US$1 billion in investment following a UN agreement that may grant such projects more carbon credits, according to ClimateCare. Bloomberg reports that “guidelines on the consideration of suppressed demand in CDM methodologies” were approved during the Executive Board’s July meeting in Marrakech, and include ways to calculate emission reductions in poor areas against a benchmark that represents so-called minimum service levels for heat, water and light – which many communities have not yet achieved. “This guidance has been controversial in the past because it questions baseline assumptions in the world’s poorest and most undeveloped regions,” said Martin Hession, chairman of the CDM Executive Board, in an email.

   – Read the Bloomberg article


Global Policy Update

All talk, no climate action

Despite the glacial pace of climate negotiations, is there still hope for a global deal to succeed the Kyoto Protocol? Don’t hold your breath, advises New Zealand’s top climate change negotiator. Following two days of climate talks with industrialized nations in Auckland, Minister of Climate Change Negotiations Tim Groser says that  a gap after the first commitment period expires in 2012 is inevitable. “It’s like water dripping away at a stone,” said Grosner. “I don’t think there’s a single negotiator who’s going to make the same mistake as Copenhagen, of thinking we’ll have a full and ratifiable agreement.”  He does not, however, see this as a major setback in the fight to tackle climate change – with domestic schemes such as those in the EU and New Zealand car

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