This Week In V-Carbon: Insuring The Future

In an uncertain market, voluntary carbon offset projects are exploring new security with political risk insurance. Projects in Cambodia and Nicaragua have successfully obtained risk insurance from the Overseas Private Investment Corporation (OPIC) and the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) respectively. In addition to mitigating risk, project developer EcoPlanet Bamboo also saw lowered interest rates to access capital from political risk insurance.

In an uncertain market, voluntary carbon offset projects are exploring new security with political risk insurance. Projects in Cambodia and Nicaragua have successfully obtained risk insurance from the Overseas Private Investment Corporation (OPIC) and the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) respectively. In addition to mitigating risk, project developer EcoPlanet Bamboo also saw lowered interest rates to access capital from political risk insurance.

This article was originally published in the V-Carbon newsletter. Click here to read the original.

6 September 2013 | While use of insurance in the carbon offset space to cover offset non-delivery and price risks is not new, it is only fairly recently that insurers have been expanding their scope to also cover political risk for carbon offset projects  – with early movers largely representing  projects in the voluntary space.

Beyond its work backing Terra Global Capital’s (TGC) investment in the Oddar Meanchey REDD Project in Cambodia – in what was the first instance of political risk insurance being used for a forest carbon project – the Overseas Private Investment Corporation (OPIC) is looking to support other REDD and sustainable forest management projects, including new prospects in Colombia, Brazil, and Indonesia. Forestry aside, OPIC has also insured solar and wind carbon offset projects as part of its broader focus on renewable resources.

The World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) also offers political risk insurance,  recently insuring a carbon offset project for the first time  on the Atlantic Coast of Nicaragua, where EcoPlanet Bamboo (EPB) has been developing a bamboo reforestation project that is dually validated by the Verified Carbon Standard (VCS) and the Climate, Community, and Biodiversity (CCB) Standards.


“Once we had political risk insurance, you could take the risk argument away because the cost of capital would come down,” says Troy Wiseman, CEO and Co-Founder of EPB, noting that he was initially attracted to MIGA’s political risk coverage due to its ability to lower the interest rate at which EPB could access capital. “It came down for us by about 40%.”


As for the insurance itself, Wiseman notes that having MIGA on the contract reduces the risk that expropriation even occurs in the first place. MIGA underwriter Gloriana Echeverria says that’s partly because the Nicaraguan government is a shareholder in MIGA, which means it’s literally invested in its performance.


“This reduces the chance of expropriation because the government is unlikely to interfere with a project that has MIGA – and therefore the World Bank – as its partner,” she says. “We’ve gotten involved in over 100 cases where the investor has a certain problem with the government interfering. MIGA can mediate between the government and the investor to arrive at a solution that will make both parties happy.”  


Read Ecosystem Marketplace’s full coverage of the issue  here. These and other stories from the voluntary carbon marketplace are summarized below, so keep reading!


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Voluntary Carbon

Hectares to cover before we sleep

Following the landmark use of political risk insurance on a REDD+ project in Cambodia, project developers elsewhere have also tapped into the insurance – most recently on a bamboo reforestation project in Nicaragua. Despite these examples of early mover activity, awareness of political risk coverage and how it can help finance carbon offset projects is still very limited. A new Ecosystem Marketplace article provides a case study on the use of political risk insurance in Nicaragua before discussing the capacity for it to be used on other carbon offset projects, and additional innovation that seeks to cover a broader set of risks, political included.

   – Read Ecosystem Marketplace article


A different sort of insurer

European insurance giant Allianz is considering expanding its business of sourcing carbon offsets after buying enough credits to cancel out its own emissions using offsets from Infinite Earth’s Rimba Raya REDD+ Conservation Project in Indonesia – one of the world’s largest REDD projects, developed in accordance with VCS guidelines. According to Nicolai Tewes of Allianz, the insurer is looking into potentially investing in other offset projects on behalf of its clients. Allianz has a history of sourcing offsets from other projects, including the Kasigau Corridor REDD project in Kenya that was developed by Wildlife Works and validated and verified to VCS and CCB.

   – Read more


Having beef with emissions

The American Carbon Registry is inviting public feedback on a new methodology to quantify the carbon savings from innovative feeding practices and management strategies to decrease the carbon intensity of beef cattle production. Developed by a team convened under the US Department of Agriculture’s Conservation Innovation Grant, the methodology pulls from three Alberta Offset System Quantification Protocols for beef cattle feeding and addresses greenhouse gas emissions reductions from emission sources based on changes in feeding strategies and other technologies that cut the carbon intensity at feedyards. Comments are due by COB September 20.

   – Read more


Do you have the smarts for agriculture?

As the Gold Standard expands away from its traditional focus on renewable energy and energy efficiency into forestry and land use, the standard is seeking members to join its advisory panel on climate-smart agriculture, to inform the development of social and ecological criteria for the standard’s new climate-smart agriculture scope. The panel is open to Gold Standard Supporters, Fairtrade-related organizations, and market experts experienced in social and ecological issues, governance of standards and/or technical expertise in climate-smart agriculture. The deadline for submissions is September 6.

   – Read more


Getting jurisdictional

The Governors’ Climate & Forests Fund (GCF Fund) has just issued its first Request for Proposal through a grant funded by the US Department of State. Civil Society Organizations are invited to partner with GCF states or provinces to submit proposals to address collective needs to improve forest carbon assessments and capacity. Funding will be provided to proposals which strengthen or improve GCF state and province forest carbon assessments and capacity, and strengthen or improve subnational REDD+ programs and measurement, reporting and verification methodologies and capacity that support national REDD+ strategies.  Under this round of funding, the GCF Fund expects to support projects in all GCF tropical forest countries: Brazil, Indonesia, Mexico, Nigeria and Peru. Proposals are due on October 11.

   – Read more


A toast to Australian biodiversity

At 153 years old, Australian winery Tahbilk is Victoria’s oldest family-owned winery. As of calendar year 2012, Tahbilk joined the ranks of seven carbon-neutral wineries worldwide, balancing outstanding carbon emissions associated with its wine production using carbon sequestered from its own revegetation program, as well as through the purchase of offsets from projects that improve Australia’s biodiversity. The firm plans to be self-sufficient in carbon neutrality within five years, meaning it would maintain carbon neutrality solely via emissions reductions and carbon sequestration from its revegetation program without buying carbon offsets, which currently cost the firm about $25,000 annually.

   – Read more


Flying colors for Zambia

Zambia’s first REDD+ project just passed its validation with a “Gold Level” designation awarded from the Climate, Community and Biodiversity Alliance (CCBA) Standards. The BioCarbon Partners’ (BCP) Lower Zambezi REDD+ Project is among the first REDD+ projects in the South African Development Community to achieve all three Gold Level validation criteria in communities, biodiversity and climate change adaptation. The project combats deforestation through 18 community-based interventions such as conservation farming and eco-charcoal harvesting. Strong community involvement is credited with the project’s success. Local traditional leaders and government authorities even wrote letters of support to the CCB auditors. BCP now aims to achieve VCS validation by the end of 2013.  

   – Read more


Cooking up impact on the ground

In Uganda, project developer Impact Carbon is using carbon finance to help bring the cost of Ugastoves – insulated cookstoves that cut charcoal usage by half and reportedly last longer than traditional clay stoves – down from $26 to $8 each. Impact Carbon sells carbon credits based on the carbon savings from each new Ugastove compared to a traditional cookstove, before feeding proceeds back to Ugastove as subsidies that reduce the cost of the cookstove. A total of 250,000 Ugastoves have been sold so far and have been responsible for cutting carbon emissions by 1 MtCO2e.

   – Read more


Nature and nurture

An Oregon conservation group has proposed a health initiative called the Forest Health Human Health program that links landowners with carbon offset buyers, to be used in Willamette Valley, Oregon. The program is already in place elsewhere in the state, in Columbia County. Based on sustainable forest management, 90% of money from carbon credit sales would go into a healthcare account and the landowner would receive an “ATreeM Card.” The balance would go toward community health programs such as a scholarship fund to educate doctors on how to practice medicine in rural areas. The initiative can work for woodlots as small as 20 acres, and permits timber harvesting in the form of tree thinning or underbrush removal.

   – Read more


Climate North America

Rice on ice

The California Air Resources Board (ARB) disappointed many stakeholders in its cap-and-trade program with news that its planned rice cultivation protocol, expected to go before the board this October for approval, has been tabled for next spring based on issues raised during the stakeholder consultation process. While disappointed by the delay, many groups understood the need for better environmental safeguards and robust stakeholder engagement, as this protocol is set to be the first land-based offset protocol adopted by the ARB.


Meanwhile, the mine methane capture protocol will be considered by the ARB board at the October 24-25 board meeting. If adopted, it could be effective as early as next year. But the debate continues over the ARB’s draft version of the protocol, which currently restricts early action activity to projects produced under the Climate Action Reserve versions. Stakeholders countered that mine methane projects produced under VCS could easily find a place in the compliance program, an argument that the ARB appears willing to embrace.


   – Read Ecosystem Marketplace article
   – Read more about mine methane from McGuireWoods


Auctioning off the future

The ARB received good news this week when a California judge issued a preliminary ruling in the agency’s favor in a lawsuit challenging the ARB’s decision to implement a cap-and-trade program that includes the use of auctions to distribute allowances and generate revenues from carbon sales. The judge’s decision was unsurprising because AB 32 gave the ARB wide discretion to implement a program that would achieve California’s emissions reduction goals, says Cara Horowitz of UCLA School of Law. The judge has yet to rule on arguments that the auction is an illegal tax, enacted with less than the two-thirds majority of the state legislature required for tax increases under California’s Constitution.  

   – Read more
   – Read more


In it for the long haul

The ARB recently held the Californian cap-and-trade program’s fourth auction, in which the state saw the lowest demand yet for 2013 permits but sold out of 2016 permits for the first time. The ARB received 1.69 bids for every 2016 allowance offered, leading to 9.56 million permits for 2016 being sold at $11.10 each, $0.39 above the clearing price of all previous sales. “It certainly appears that the market is bearish Phase One,” says Lenny Hochschild of Evolution Markets, but the sellout for 2016 permits “really shows that these companies, probably the big oil companies, are preparing for the longevity of this market,” says Emily Reyna of the Environmental Defense Fund.

   – Read more


RGGI gets its groove back

Allowance prices in the Regional Greenhouse Gas Initiative (RGGI) have soared over the first half of 2013 since the nine Northeast states participating in the regional cap-and-trade program announced a comprehensive revamp that will significantly lower the emissions cap in 2014. Prices cleared at $3.21 per ton in the June auction after selling at the $1.93/t floor price throughout all of 2012. Allowances have averaged about $3.40/t on the futures market in the second quarter after jumping 70% in the first quarter on news of the planned overhaul. Trading activity has also skyrocketed in the once-dormant program, with 9.8 million allowance transfers recorded between unaffiliated firms in the second quarter, an increase from 5.8 million allowances in the prior quarter and 1.1 million in the second quarter of 2012.

   – Read RGGI market report


Kyoto & Beyond

CERs shoot, they score

The supply of UN Certified Emission Reductions scored a new high for issuances through the first eight months of a year since the UN began issuing offsets in 2005, according to UN data compiled by Bloomberg. Issuance of CERs through the end of August grew 24% percent from the same period last year to 223 million metric tons. The 2013 figure was also 5.2% higher than the eight-month total in 2011, according to the UN data. But the supply of offsets in the month of August was down 2.7% from July and 43% from August 2012.  


   – Read more


Bogota’s big housewarming

On September 1, the United Nations is slated to open the doors to a new carbon markets office in Bogota, Colombia as part of its efforts to raise interest in emissions trading in Latin America. The regional collaboration center is tasked with identifying opportunities for potential programmes of activities eligible under the Clean Development Mechanism (CDM), as well as supporting the design and development of projects. While the office is based in Colombia, it is intended to provide support to all countries on the continent. The UN opened three other regional centers this past year – in Togo, Kampala, and Grenada.

   – Read more


Global Policy Update

Shenzhen gives the EU a run for its money

Economists say that in a best-case scenario, China’s carbon emissions could start falling as early as 2023. This of course relies on variety of factors, including the Chinese government’s decision on whether to move forward with a nationwide carbon market, which in turn relies on the success of China’s seven pilot cap-and-trade schemes. Last week, the price of carbon in Shenzhen – the first of China’s seven pilots – rose to 43 yuan ($7/tCO2e), up from the 28-32 yuan seen on the scheme’s first day of trading back in July. This new high is above the price found in the EU market.

   – Read more from Bloomberg
   – Read more from RTCC


Electricity casts light on carbon price

If prices in the electricity markets are any indication, it looks like Australia’s biggest polluters will still have to pay for their carbon emissions – if not under the originally conceived 2014 fixed price (at A$25.40/tCO2e, which would be the world’s highest) – then perhaps a modified or floating price – regardless of who wins the upcoming September 7 election. While Prime Minister Kevin Rudd seeks to reduce the cost of emissions permits to about A$6/tCO2e (US$5.48), and his rival Tony Abbott stands by his vow to scrap carbon prices completely, power futures signal that the cost of emissions will be about A$10/tCO2e by 2015.


In the meantime, Australia’s domestic Carbon Farming Initiative continues to expand its scope despite uncertainty about what the carbon price will look like going forward, with recent news that pastoral leaseholders in New South Wales will be able to apply for carbon farming offsets from the government.

   – Read more about carbon price projections
   – Read more about CFI developments


Up in the air

The organization responsible for developing carbon regulations for the aviation sector has so far had difficulty convincing China and India to get on board. The International Civil Aviation Organization (ICAO) has not yet developed a plan that these two countries would agree to that could forestall an EU compliance mandate for the aviation industry. The EU gave ICAO a year to get a deal done or face the prospect of the EU resuming its plan to incorporate the sector into its ETS, a proposition that has led to fierce opposition from China, India and the US and raised concerns about triggering a trade war.  


   – Read more


Carbon Finance

Tracking REDD+ tracking (continued)

Forest Trends’ REDDX and the Overseas Development Institute’s Climate Funds Update recently launched Part V of the organizations’ collaborative series that explains existing REDD+ finance tracking projects while identifying niches and cross-over areas to directly support more comprehensive assessments of REDD+ policy and finance gaps and needs. The series includes Forest Trends’ own new REDDX expenditures tracking initiative. In “Private Lessons for the Public Sphere,” Ecosystem Marketplace explores what policymakers can learn from today’s private-sector projects, including due recognition of private sectors’ early action via public support of credited project-level activities; enacting policies that favor “zero-deforestation” or low carbon products/commodities; and engaging with private actors to explore “carbon-linked” funding mechanisms.

   – Read REDDX article


Featured Jobs

Specialist in Environmental Economics & Regulation – World Resources Institute

Based in Mexico City, the Junior Specialist in Environmental Economics & Regulation will be responsible for developing research papers, workshops and reports in order to foster the implementation of a national new vehicles’ fuel efficiency standard through the design and architecture of a cap-and-trade market. Candidates should have a B.A. in Economics, Finance or Mathematics, 2 years of work experience, and fluency in English and Spanish.  

   – Read more about the position here.


Program Assistant – Ecosystem Marketplace’s Valorando Naturaleza

Based in Washington, D.C., Ecosystem Marketplace’s Spanish language sister siteValorandoNaturaleza.Org is seeking a temporary part-time program assistant. The position will run for an initial 4-month consulting contract, beginning as early as September 2013, with potential for extension. The Program Assistant will help maintain the website by managing content, researching news and events and supporting the development of a news brief. Candidates should have native Spanish with strong English communication skills and excellent Spanish writing skills and basic knowledge of the carbon markets or other ecosystem services finance mechanisms.  

   – Read more about the position here


Carbon Sourcing Manager – The CarbonNeutral Company

Based in London, the Carbon Sourcing Manager will conduct technical due diligence, commercial deal structuring/negotiation and sourcing of emission reduction projects in coordination with sourcing director. Candidates should have a postgraduate degree, ideally with training in engineering, emission reduction technologies, economics and 2-3 years working within the carbon markets.  


   – Read more about the position here.


Communications Coordinator – Indigenous Peoples’ Biocultural Climate Change Assessment Initiative

Based in Peru, the Communications Coordinator will facilitate a range of internal and external communications by promoting the continued efforts and findings of IPCCA Local Assessments, creating recognition of IPCCA’s work within national and international arenas, and assisting in the dissemination of broader findings and concerns made by IPCCA regarding climate change and indigenous peoples. Candidates should have a Bachelor’s degree in communications, journalism and/or related field, English and Spanish fluency, and more than two years of related experience.  

   – Read more about the position here.


Regional Coordinator, Mediterranean Renewables Network – Climate Parliament

Based in Paris, the Regional Coordinator will recruit legislators from North Africa and Southern Europe, organize events and support the members of the network to launch concrete policy initiatives in their parliaments. Candidates should have a university degree, French and English fluency, and a familiarity with European energy policy and the European Union.  

   – Read more about the position here.


China Coal Cap Policy Project Senior Analyst – Natural Resources Defense Council

Based in Beijing, the Senior Analyst will provide analytical and project management support for a coal cap policy project, including coordinating with project partners on the research and design of an effective coal consumption cap policy for China to meet environmental, health, climate, and sustainable economic development goals and conducting research related to coal cap policy design. Candidates should have a science, engineering or economics graduate degree, fluency in English and Chinese, and 3-5 years of work experience in a relevant energy and environmental field.

   – Read more about the position here.


Policy Officer – Carbon Market Watch

Based in Brussels, the Policy Officer will lead the Carbon Market Watch’s EU policy work leading up to the COP-19 and the European Council Meeting by analyzing and influencing relevant climate and energy policies. Candidates should have three years of experience with EU lobbying or European climate change policies and demonstrated analytical and project coordination skills.  

   – Read more about the position here.





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