This Week In V-Carbon News…

The Obama Administration last week released proposed rules for power plant emissions that are intended to be as flexible as possible while still being legally defensible. The news boosted allowance prices in the Regional Greenhouse Gas Initiative while California and Quebec announced preparations for their first joint auction in November. Meanwhile, China is exploring ways to convert CDM offsets for use in their domestic emission trading systems.

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


13 June 2014 | North American offset project developers hoping for a boost from US federal regulations for reducing carbon pollution had those hopes dashed last week when the Environmental Protection Agency (EPA) released its proposed rules for emissions reductions from existing power plants.

California and the nine Northeastern states participating in the Regional Greenhouse Gas Initiative (RGGI) turned out to be big winners as the EPA heeded calls to give state and regional cap-and-trade programs a compliance role in its proposed rules, which aim to lower carbon pollution from these plants by 30% from 2005 levels by 2030. But carbon offset projects were not as lucky because the EPA could not find a place for them as a compliance mechanism, meaning these states must be able to show they can hit the federal program’s targets with direct reductions from the power sector.

“I see that as a conservative choice on EPA’s part,” said William Shobe, an economist and professor at the University of Virginia who helped design the original RGGI program. “It doesn’t want to have the whole program overturned by going out on a limb and allowing offsets in the program.”

Carbon offsets can continue to exist as a compliance option within state and regional programs, as they do in California and RGGI. Allowance prices in the RGGI program have been too low to spur development of carbon offsets, although they spiked to record highs last week based on the EPA announcement. California’s carbon offset program is much more active, with the California Air Resources Board (ARB) issuing nearly 8.8 million offsets to date under its forestry, livestock and US ozone-depleting substances (ODS) protocols.

But it’s not all sunshine and rainbows out in California. The ARB – the state agency charged with ensuring the integrity of the state’s cap-and-trade program – is reviewing emissions reductions generated at an Arkansas facility that may have been in violation of its federal permit. Transactions involving ODS offsets generated by projects at the facility have ground to a halt until the “disruptive” review is complete, as the regulators could potentially invalidate the offsets.

“It’s a very important development in the offset market and it very clearly demonstrates the ARB is taking its authority to invalidate offsets quite seriously and will use it when appropriate,” said Julian Richardson, CEO of Parhelion Underwriting, a specialty insurer focusing on the climate finance sector that has developed a policy to cover the invalidation risk in California’s offset program. “In this instance, we don’t know the full details. Certainly the potential impact is that if all of these offsets are invalidated, that’s a very serious issue.”

Ecosystem Marketplace’s State of the Voluntary Carbon Markets 2014 report will discuss the impact of the transition of carbon offsets from the North American voluntary market into California’s compliance program, as well as provide critical information on voluntary carbon markets in other regions of the world. We invite you to join us either in person or via webcast for the launch of the full report on June 24 in Washington DC from 4:30-6:00 EDT.

To register for the event, please RSVP with full contact details to [email protected]. Space is limited and early registration is encouraged. If you are unable to attend in person, register for the live webstream.

These and other stories from the voluntary carbon marketplace are summarized below, so keep reading!

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V-Carbon News

Voluntary Carbon

Pandas love their bamboo
EcoPlanet Bamboo recently announced that its Nicaragua bamboo projects successfully verified their first carbon offsets. These projects are expected to reduce 1.5 million tonnes of carbon dioxide (MtCO2e) over their 20-year lifetime. Troy Wiseman, CEO and Co-Founder, said this milestone came after a patient process of navigating the voluntary carbon markets and is part of the company’s truly long-term vision for triple bottom-line profitability. Based in Barrington, Illinois, the company owns seven bamboo plantations covering more than 8,000 acres in Nicaragua and 1,200 acres in South Africa.Read more here


Chugging right along
Forest carbon projects sold to voluntary buyers were challenged in 2013 by stiff competition from cheaper offsets flooding the market. Chandler Van Voorhis, Managing Partner of project developer GreenTrees, thinks this is a short-term trend, but forest carbon project developers must still do a better job of selling the attractive attributes of their projects. GreenTrees has planted six million trees in the Mississippi Delta over five years through Norfolk Southern’s Trees and Trains project, generating more than one million tonnes of carbon offsets to help offset the railroad’s emissions and restore habitat along its lines.Read more here


Saving the home of the kiwi
Although New Zealand’s Emissions Trading Scheme was the first in the world to accept forestry offsets, many local forestry projects are ineligible for the program, forcing them to turn to the voluntary carbon markets where demand for offsets is limited. Consultancy Carbon Partnership has finished designing and developing a new methodology under the ISO14064-2 carbon standard for New Zealand forests – specifically, for its Rarakau project. While this first project covers only 1,000 hectares, it is part of a larger program that applies to indigenous forests nationally.Read more here


Climate North America

Joined at the hip
California and Québec recently announced plans to conduct a joint practice auction for their cap-and-trade programs that will take place the first week of August in preparation for their first official joint auction of carbon allowances in November 2014. In Québec’s third auction on May 27, 100% of the more than one million allowances for 2014 were sold at the floor price of $11.39/tCO2e. The vast majority of the 1.5 million 2017 vintage allowances that were made available during the auction also sold at the $11.39/tCO2e floor price. On June 9, the Quebec Business Council on the Environment announced the first carbon transaction on its Environmental Markets Trading Platform, which allows users to exchange environmental instruments.Read more here
Quebec press release


Smashing the record
The June 4 RGGI auction resulted in the sale of more than 18 million allowances at a record high price of $5.02 per short tonne. Exchange-traded allowances sold as high as $5.10/per short tonne on June 2 after news of the EPA’s proposed regulations for power plants. The proposed rules aim to limit emissions from the electricity sector within each state. States have flexibility to comply with the regulations through a variety of policies, including a RGGI-style cap-and-trade program. RGGI allowance prices in recent auctions have also been bolstered by program reforms that took effect earlier this year.Read more here
RGGI auction results


Kyoto & Beyond

Leaner and greener
The Executive Board of the Clean Development Mechanism (CDM) has made a change to its project vetting process that should cut the time to registration and reduce the need for changes to project design documents. Projects are now able to finalize the vetting of monitoring plans any time prior to the first request for certified emissions reductions (CERs) issuance instead of prior to project validation. The shift in timing will give project participants some practical experience with their projects before having to submit a detailed monitoring plan, potentially resulting in better plans. The board also simplified procedures for how Programmes of Activities request issuance of CERs. Participants can now request issuance in batches, bundling reductions made at several project sites.Read more here


Global Policy Update

Scaling the Great Wall
Collectively, China is the world’s second largest carbon market, with six active regional pilot programs covering 1,115 MtCO2e and more scheduled to launch this year. The country still faces challenges such as price volatility caused by a lack of liquidity and developing a national registry to utilize eligible offsets across the pilots. Covered entities can utilize offsets for 5-10% of their compliance obligations, or about 110 million offsets annually. The supply of China Certified Emissions Reductions (CCER) offsets could soon increase as officials are proposing a procedure for converting CDM CERs to CCERs.Read more here


Another one caps the carbon
South Korea has announced it will cap carbon dioxide (CO2) emissions from utilities and industry at 1.64 billion tonnes over the 2015 to 2017 period as part of an emissions trading system launching in 2015. The country has a target of reducing emissions 30% below business-as-usual levels by 2020. Officials expect allowances will trade at around $20/tCO2e, but some analysts say the price could reach nearly $100/tCO2e. The South Korean program does not allow for the use of offsets for compliance.Read more here


Missing the boat
By failing to repeal its carbon price before May 31, Australia’s emission reduction target automatically jumped from 5% by 2020 to more than 18%. The Clean Energy Act 2011 passed by the previous Gillard government included a default reduction target as a safeguard against any future government not implementing the law. ”We have always said we will repeal the carbon tax – lock, stock and barrel,” a government spokesman said. A new Senate is set to take office on July 1 and the government is confident it will have the votes necessary to repeal the carbon tax then.Read more here


Putting the Sol to work for nature
Peruvian companies are required to calculate the cost of the environmental impacts of their operations. However, existing laws do not stipulate that companies should pay for those impacts nor do they necessarily encourage wise use of natural resources and the services provided such as clean water, clean air and soil retention. Legislation currently before Peru’s Congress would establish a framework for payment of ecosystem services from those who benefit from nature to those who contribute to its conservation. According to the proposed law, compensation in the form of cash or technical assistance could finance conservation and sustainable management, productive development or related infrastructure.Read more here


Carbon Finance

Spending climate dollars wisely
According to a new study from Ecofys, Chile and South Africa are best positioned to receive climate- related development funds from Germany. Developed nations have pledged to contribute $100 billion annually by 2020 to assist developing nations in addressing climate change. The Ecofys report ranks developing countries according to their potential emissions reductions and ability to influence policies adopted by other countries. Germany could use such a report to guide its funding commitment to have the greatest impact globally.Read more here


A not so risky proposition
The US Agency for International Development removed a giant unknown for investors interested in financing sustainable agriculture projects when it guaranteed the Althelia Climate Fund to the tune of $133.8 million. The guarantee is actually the first deployment of a new mechanism that agency officials say can be used to de-risk other sustainable agricultural projects and encourage private sector organizations to finance them. The agency’s Development Credit Authority uses partial credit guarantees to mobilize private, local financing in developing countries.Read more here


Science & Technology

Calculating nature’s true costs
The Yale School of Forestry & Environmental Studies and Arizona State University have developed an approach to calculate a consistent price for natural capital stocks using similar techniques as those for the pricing of other capital assets. The new method is rooted in both ecology and economics utilizing reef fish in the Gulf of Mexico as the example. Unlike previous attempts at pricing nature, the approach takes into account the “opportunity cost” of losing future productivity of a given natural asset.Read more here
Read the full report


Fishing for deep sea carbon
A new study from the University of Southampton suggests that deep sea fish annually sequester more than one million tonnes of CO2 from UK and Irish surface waters. Fish in the mid-depth range ingest nutrients from the surface at night and then return them to deeper waters in daily migrations. The researchers found that half of all fish living continuously at the seafloor get their nutrients from the daily migrators rather than from settling waste or debris. Since these bottom-living fish never come to the surface, the accumulated surface carbon in their bodies stays at the seafloor.Read more here


Passing more gas
British scientists have found two new chlorofluorocarbons (CFCs) and one new hydrochlorofluorocarbon (HCFC) in the upper atmosphere. CFCs and HCFCs are traditionally of concern to the ozone layer, but the concentrations are stable. However, the researchers are concerned about the global warming potential of the gases as the HCFC identified is estimated to be 127 times stronger than CO2. While the two new CFCs warming potential is presently unknown, similar CFCs have an intensity greater than 5,000 times that of CO2. The gases are believed to be man-made as they have only recently become present in the atmosphere.Read more here

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