Voluntary Carbon Week in Review: Domestic Substitutes Schooling the Market

Nations, states and sub-national governments are planting domestic capital – monetary and political – into stand-alone actions that could school Cancun negotiators on the shape of a future climate compact. Read this issue for a primer on domestic and voluntary carbon market developments – and tell us what you think about their implications for Cancun.

Nations, states and sub-national governments are planting domestic capital – monetary and political – into stand-alone actions that could school Cancun negotiators on the shape of a future climate compact. Read this issue for a primer on domestic and voluntary carbon market developments – and tell us what you think about their implications for Cancun.

NOTE: This article has been reprinted from Ecosystem Marketplace’s V-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.

19 November 2010 |   Nations, states and sub-national governments are planting domestic capital – monetary and political – into stand-alone actions that could school Cancun negotiators on the shape of a future climate compact.    

One of these stand-alone markets – California’s cap and trade program under AB32 – captivates market participants’ attention as voters axed the scheme-killing Proposition 23 in the US midterm elections, only to wake up to another, more subtle threat on November 3rd: Proposition 26.

While some are (rightfully?) concerned about the passage of Proposition 26 – which reclassifies some regulatory “fees” as “taxes,” thus requiring a two-thirds majority vote to levy – California’s in-the-know environmental players say the sleeper initiative may not have teeth. At least not for taking a bite out of cap and trade implementation.

On the topic, National Resource Defense Council’s Legal Director for Western Energy and Climate Projects Kristin Eberhard makes a simple argument. She explains that Proposition 26 only applies to “any change in state statute” that occurs after January 1, 2010. Coincidentally, AB32 was signed into law way back in 2006.

“Although AB 32 implementation is ongoing,” she explains, “authority to impose fees on polluters under AB 32 will not require “any change in state statute” post January 1, 2010.” Another analyst points out that, judging by the sound defeat of Proposition 23, the “intent of the voters” and meaning behind Proposition 26 was not to interfere with AB32 implementation.

Climate Action Reserve President Gary Gero echoes the sentiment of California Air Resources Board Chair Mary Nichols and others in an interview with Ecosystem Marketplace: “The general assessment is that it does not affect AB 32 implementation,” he explains. “We’re feeling better about it.”

“It was a little murky leading up to the election,” he continues, “and even as the analysis was being done not everyone was certain what the impacts would be. But it’s starting to become a little clearer.”

And everyone in the carbon schoolyard should take note of the scheme’s inaugural forward California Carbon Allowance trade between Barclays Capital and NRG Energy. Barclays says the CCAs will be delivered on December 2012. This vintage last week saw offers priced at $11.50/tCO2.

Says Eric Klein, environmental markets director for broker Tradition Financial Services, “There’s a live market. We’re pretty much going to go forward in California.”    

While California is sorting out its ballot challenges, regions and nations are also making some “new school” gestures at market innovation. As it turns out, California decision-makers have already turned their attention from legal minutia to extend a hand to the Brazilian state of Acre and Mexican state of Chiapas – to color the California scheme REDD.

Elsewhere, the Japanese government continues to ramp up development of a domestic carbon trading scheme while the the African Carbon Asset Development Facility farms out finance to domestic projects and Jakarta looks to the future with a futures exchange to bring CDM trades closer to home. All this and more in this week’s issue of V-Carbon news.
—The Editors

For comments or questions, please email: [email protected]

V-Carbon News

Voluntary Carbon

The falling domino principle

The North Dakota Farmers Union’s Carbon Credit program is one of several dominoes that continue to fall as the Chicago Climate Exchange shutters the doors on its emissions trading program. NDFU’s program, which for five years has been issuing contracts to farmers who practice soil carbon conservation, will continue to operate for farmers with current contracts but will not initiate new contracts or renew existing contracts. Union Farmer editor Anne Denholm blames the feds as much as the end of the voluntary cap-and-trade program: “The legislation isn’t supporting the creation of value for sequestering carbon.” Still, CCX’s Brookly McLaughlin says that despite some changes to protocol, “opportunities for farmers will exist,” as the CCX will continue to offer offset contracts.

Read the Jamestown Sun article

Dutch energy company faces the future

Customers of Dutch energy provider Greenchoice are looking to forestry projects in developing countries to Face their low carbon Futures, thanks to Greenchoice’s recent 50% acquisition of the project developer by the same name. With over 50,000 hectares of new forest established over the last 15 years in locations ranging from Ecuador to Malaysia to Uganda, Face the Future has already generated over 2 million verified carbon offsets. “The cooperation with Greenchoice is aimed to secure existing projects and expand our project portfolio with new forest projects,” said Denis Slieker, Managing Director of Face the Future. Greenchoice provides renewable energy and ‘green’ natural gas offset with carbon credits to over 250,000 customers in the Netherlands.

Read more from Face the Future

Global Green’s Optim-al acquisition

Project developer Global Green Carbon Corporation (GGC) recently optimized its market position by signing a Definitive Agreement to acquire Optim Consult, a global carbon emission reduction and asset service provider. GGC, which develops carbon financed AFOLU (Agriculture, Forestry and Land Use) initiatives, hopes the acquisition has strengthened its position in Latin America as it gains Optim’s expertise in global carbon market sectors ranging from REDD to Hydropower. “The acquisition of Optim provides Global Green Carbon diversification into all sectors of the carbon market,” said Christopher Werner, Chief Executive Officer of GGC, adding, “Optim benefits from diversification into forestry and agroforestry markets with revenues beyond carbon.”

Read the press release

Meet the new climate leaders

Yes, the EPA is still planning to phase down its voluntary Climate Leaders program. In its place, the EPA’s Brian McLean mentioned at the first ever Association of Climate Change Officers Summit that the EPA might pursue expanded recognition of private sector climate action, “to provide thousands of organizations with higher standards for recognizing superior efforts on climate change.” Think recognition for sustainable supply chain management or excellence in emissions reporting. Similarly, ACCO announced it’s Climate Leadership Award winners, recognizing Bonneville Environmental Foundation and the Gold Standard Foundation as its winner and runner-up for its non-profit sector award. Of Bonneville’s climate contributions, one judge remarked, “BEF has developed deep relationships in the California, Oregon and Washington communities, helping some of the largest companies in the world headquartered in those areas develop climate sensible strategies.”

Read more from Yahoo News

Markit registry puts its money on gold

Last week the price of gold reached record highs – maybe this is what inspired Markit to admit Gold Standard credits as the latest third-party standard to become accessible via the Markit Environmental Registry. Christoph Grobbel, CFO of South Pole Carbon, said, “This is really great progress for the voluntary market. The new collaboration between Markit and the Gold Standard Foundation will further increase transparency in the VER market for our customers.” The global registry already issues carbon credits under recognized standards like the Voluntary Carbon Standard, and is the exclusive registry provider for the Social Carbon standard and the Climate Community and Biodiversity Standards.

Read the Markit press release

Australia ploughs ahead with Carbon Farming Initiative

The Gillard government has taken the first step under Australia’s Carbon Farming Initiative by establishing the Domestic Offsets Integrity Committee, charged with assessing how farmers and landholders can generate offset credits. Duncan McGregor, co-head of Minter’s climate change practice, was appointed chair of the committee by Minister for Climate Change and Energy Efficiency Greg Combet. “Once the credits are verified, they can be traded on Australia’s voluntary carbon market and on overseas markets, generating revenue while reducing carbon pollution,” said Combet. Despite Obama’s decision to abandon plans for a cap and trade scheme in the U.S., Prime Minister Gillard has expressed determination to press ahead with putting a price on carbon.

Read the press release
Read more from the Sydney Morning Herald
Read more from the Australian

There’s no place like home…

…at least that seems to be the case for Andy Kruger, who recently announced his return to CantorCO2 as Vice President and Manager of its Sulfur Dioxide (SO2), Nitrogen Oxide (NOx), emission reduction credit (ERC), and greenhouse gas/carbon credit desk. Kruger previously worked for CantorCO2 for nine years, but since then also worked at ICAP, AER*X and most recently with Evolution Markets. Andy, who has brokered millions of tCO2 in the US, Canada, and the EU, says his renewed goal at Cantor is “to help our clients understand and participate in emissions credit markets, mitigate liabilities, take full advantage of their trading opportunities, and promote sound and environmentally-beneficial solutions.”

Read more from the Vancouver Sun

Clean water on carbon’s tab

It’s not exactly news that some carbon credits’ environmental and social co-benefits are as attractive as the emissions reductions they’re associated with. For the LifeStraw technology, clean, free drinking water is clearly the main story – with a carbon finance subplot. In a developing world rife with an under-supply of clean drinking water and oversupply of profit-motivated water companies, carbon finance is an increasingly attractive way for projects like LifeStraw to provide free, filter-laden, emissions free drinking devices. Profits from the technology will come from carbon credits that are generated because users will no longer burn firewood and coal to boil and purify drinking water. Technology developer Vestergaard hopes to win approval from an unspecified carbon credit market by February 2011 and reach out to 4 million Kenyan families in April.

Read the New York Times article

Ghana take that carbon to the bank

These days, the viability of emissions reductions projects is definitely boosted by other (ahem, non-carbon) revenue streams. The latest landfill gas project co-developed by Cleantech company Blue Sphere Corp. in Accra, Ghana, has the added benefit of four potential revenue sources. The project will destroy methane gas from two closed landfill sites containing approximately 1.5 million tonnes of municipal solid waste. Depending on the flow and quantity of gas, the project may also produce electricity under a separate agreement – and garner municipal tipping fees and revenues from the sale of compost and other reconstituted products. The annual emissions reductions from the project are expected to start at 90,000 tCO2e in 2011, falling to 32,000 tCO2e by 2031.

Read more from Marketwatch
Read more from Business Wire

Enjoy your (GREEN) STAY!

Canadians concerned about the carbon footprint of their hotel stay may now rest easy. Integrity Energy Brokers Inc. recently announced that they would be partnering with Globalive Communications Corp. to offer the GREEN STAY Clean Energy Program to the Canadian hospitality market. Participating hotels will be able to offset their energy consumption with both Ecologo certified renewable energy certificates (RECs) and carbon offsets certified to the Voluntary Carbon Standard (VCS) or ISO 14064-2. The program also offers advice on achieving sustainability targets and allows hotels to improve their Green Key rating, attracting eco-conscious guests.

Read the press release

Reduce & Retire: The Latest on Carbon Neutral

Give Chinese airlines some credit(s)

Airlines Cathay Pacific Airways and Dragonair have purchased another 30,000 carbon offsets from China-based Climate Action for their FLY greener offset programme, which allows passengers to voluntarily offset their travels. The offsets were generated from three Voluntary Carbon Standard (VCS) verified projects in China: the Rural Southwest small hydro project, the Guangdong Lankou small hydro project and the Shandong Changdao wind project, reportedly chosen in part for their social and environmental benefits. This is the third time new offsets have been purchased for the programme, which has offset 80,000 tCO2 since its launch in 2007.

Read more from HydroWorld.com
Read more from Cathay Pacific
Read more from Climate Action

Land Rover, send offsets right over

In an inventory of “green” vehicles, Land Rover may not be the brand that comes to mind (unless you count carving up undeveloped mountainous terrain and spring beds). But the company’s image may be about to take a u-turn. According to Greenbang, the automaker is investing approximately $1.3 billion in environmental solutions and technologies. They will be partnering with Climate Care to offset emissions from manufacturing assembly operations, and are developing plans to further reduce emissions from production, reduce the weight of the vehicles and improve efficiency. Land Rover already has a program to offset both the emissions from manufacturing and the first 40,000 miles driven for vehicles sold in the UK.

Read the Environmental Leader article

Climate North America

The R-20 will pump you up

Governors from the US state of California, the Brazilian state of Acre, and the Mexican state of Chiapas recently made public their mutual low-carbon ambitions, creating a working group designed to help Acre and Chiapas generate REDD credits that can be recognized by California’s Air Resources Board (ARB) and sold as offsets to industrial emitters in California once AB32’s cap-and-trade program is in place. This sub-national REDD agreement is part of a deal signed on Tuesday at the third annual Governors’ Global Climate Summit (GGCS 3), which ushered in a new acronym: the “R-20.” A global coalition of subnational governments, private-sector and NGO members, the R-20’s timely emergence on the eve of Cancun signals willingness among some sub-national entities to move on climate change despite negotiators’ setbacks.

Read more from Ecosystem Marketplace
Read more from Carbon Positive
Read more from Reuters

EPA to “almost certainly” mess with Texas

Once again, Texas is bucking compliance under the Clean Air Act, this time in spite of the fact that new federal rules give wide leeway to states to implement the greenhouse gas emissions program. With Texas officials refusing to implement the program, the EPA will likely issue the permits itself come January 2, 2011. Claiming that the EPA’s authority to regulate GHGs under the endangerment finding is unlawful, chairman of the Texas Commission on Environmental Quality Bryan W. Shaw says, “What was illegal and a bad idea yesterday is illegal and a bad idea today.” Texas and several other states have filed related lawsuits against the EPA, but the other states are nonetheless taking steps to begin the permitting process.

Read the Dallas Morning News article

BACT to uncertainty

In a press conference detailing the EPA’s release of it’s long-awaited Greenhouse Gas Permitting Guidance, EPA Assistant Administrator Gina McCarthy spoke the truth when she said the Guidance is “nothing groundbreaking.” It is news, though, for those who’ve been waiting to find out if the Guidance would recognize carbon offsets as a Best Available Control Technology (BACT). The answer? Actually, the Guidance doesn’t say anything about offsets, leaving room for the EPA to address the use of carbon offsets to achieve GHG performance standards which are expected to be established in future rule-making. The Guidance did confirm that biomass and biofuels can be considered BACT, subject to the permitting authority’s “accounting of benefits.”

Read more from Bloomberg
Read more from Power-Gen Worldwide
Read more from Mondaq

Congress threatens the wrong kind of climate action

Although the Obama administration’s attempts at EPA regulation of GHG emissions may be hampered by business and industry groups, the greatest threat may come from lawmakers. Republicans, who will control the House of Representatives in January, are likely to attempt to add language to spending bills that would delay or prevent funding for EPA climate regulation. “Congress doesn’t give the EPA nearly as much deference as the courts do, and there are about to be a lot more Republicans and unenthusiastic Democrats,” said Michael Gerrard, director of the Center for Climate Change Law at Columbia Law School, speaking to Reuters. This uncertainty may prevent the Obama administration from taking a leadership role at the upcoming climate talks in Cancun.

Read the Reuters article

Global Policy Update

Well, who didn’t see that coming?

Given Brazil’s accelerating pace in carbon market development, its recent international REDD collaboration is only the latest in a line of developments that pointed to its regional ambitions. Before that announcement, Brazilian exchange BM&FBOVESPA, the World Bank and FINEP announced the results of their collaborative studies into the Brazilian carbon market. Among the findings was the conclusion that a domestic or regional carbon market would require its own rules, a transparent trading platform and instruments for the spot and derivatives markets. The study also highlighted the CDM’s Programme of Activities to reduce transaction costs, scale projects and utilize multiple methodologies under a Programme. These and other inquiries were driven by the nation’s desire to develop the country’s carbon credits market in response to discussions about the post-2012 scenario.

Read more from Carbon Positive
Read more from Mondo Visione

I see REDD people

The governing bodies of three of the largest global REDD initiatives – the Forest Carbon Partnership Facility (FCPF), Forest Investment Program (FIP) and UN-REDD Programme – recently came together in their first joint meeting to discuss streamlining their support for REDD+ and to “build a community of practice amongst the doers.” The initiatives, which cover 48 forested developing countries, hope to advance a common approach to maximizing REDD+ effectiveness at the country level. The centerpiece of the Joint Meeting was the presentation of a paper “Enhancing Cooperation and Coherence among Multilateral REDD+ Institutions to Support REDD+ Activities,” which outlined steps the funds could take in the future, including unified proposal submissions, joint missions to forest nations, and adopting a shared set of standards for social and environmental safeguards.

Read the joint paper (pdf)
Read more from Ecosystem Marketplace

Indonesia keeps its futures and options open

From Norway’s $1bn pledge to support Indonesian REDD to the Southeast Asian nation’s expanding trade and low-carbon ties with China, Indonesia is doing a great job of keeping its options open… literally. The Jakarta Futures Exchange (JFX) is looking into establishing its own carbon trading futures, a key step towards the development of an Indonesian carbon trading market. With no market currently in place in Indonesia, carbon credits generated by CDM projects are sold on the European markets. “We are studying some new products which will be traded at the JFX. One of the products that we think has the potential is carbon trading,” said Roy Sembel, JFX’s director, speaking to Reuters.

Read the Reuters article

Carbon markets turning Japanese

Prompted by the widest carbon trading spreads in four months, Japan is building a new emissions market independent of the UN through bilateral agreements with other nations. “We’d like to create a scheme that can co-exist with the UN’s CDM but one that is faster and more flexible,” said Keisuke Murakami, director of global environmental affairs at Japan’s trade ministry. Japan, the world’s fifth-greatest GHG emitter, is concerned that UN credits will be worth little after 2012 if the Kyoto climate agreement is scrapped. According to a report by Nippon Keidanren, Japan’s main business lobby, companies in Japan’s main 34 industrial sectors expect to receive 340 million tCO2 in Kyoto carbon offsets for delivery between 2008 and 2012.

Read more from Bloomberg
Read more from Reuters

Greyhound energy stuck at the starting gate

Rather than racing headlong into the European carbon markets, energy and carbon trader Greyhound Energy found itself stuck in the holding cage. “We didn’t lose money. We weren’t making money. We decided to call it a day,” said Brett Stacey of CarbonDesk Group, which announced in March its purchase of a 33 per cent interest in Greyhound. Greyhound has stopped operations and is “on hold” while the market is subdued. Stacey also mentioned to Reuters that several traders are no longer with the company.

Read the Bloomberg article

Carbon Finance

Pocketbooks open in EU

On November 9, the European Commission launched the first call for proposals for its long-debated multi-billion euro fund for clean energy projects. The initiative, called NER300, will provide financial support for at least eight demonstration projects involving carbon capture and storage (CCS) and 34 others involving renewable energy technologies. “The NER300 initiative will act as a catalyst for the demonstration of new low carbon technologies on a commercial scale,” said Climate Action Commissioner Connie Hedegaard. The initiative is worth about €4.5 bn and will be funded by the sale of 300 million emission allowances in the New Entrants Reserve (NER) of the EU ETS.

Read the press release
Read more from Nature

Africa: project-ions for green investments

As headlines of Kenya’s anticipated climate exchange splashed across the mainstream media, it may have been easy to miss another intriguing news item from the African Carbon Asset Development Facility (ACAD). The ACAD announced at the Second African Bankers’ Carbon Finance and Investment Forum that it will finance seven new projects, which will include energy from waste, hydro and wind power projects among others. The forum aimed to help African bankers learn more about carbon finance and spur investment in green development projects. It also highlighted the need for public private partnerships in order to drive Africa’s green economy to its full potential. According to the UNEP Risoe Center, of the $84 billion invested in 684 emerging market emissions reductions projects in 2009, African countries shared only 2% of the total.

Read the press release
Read more from Climate-L.org

Forest carbon finance easy as ABC

Brazil’s development bank recently announced a $588 million fund to reduce agricultural emissions. BNDES’ ABC program will provide low-interest loans for farmers and cooperatives to implement projects that integrate forests into farmland, establish and maintain plantations on abandoned land and restore legally protected forest reserves. BNDES has come under fire recently for financing activities that promote deforestation, including failing to abide by internal safeguards when lending to the cattle industry. However, the bank also administers the Amazon fund, used to fund conservation and sustainable development initiatives, and last year established more rigorous lending criteria for ranchers and farmers. The program is part of Brazil’s larger effort to reduce emissions from deforestation under its climate change policy.

Read the Mongabay article

Science & Technology

Carbonflow’s SaaS-y venture funding

San Francisco based software supplier Carbonflow has closed a Series B round of venture funding led by OVP Venture Partners. The round, which also included @Ventures and Clean Pacific Ventures, totaled $4.2 million, which will be directed towards expanding the company’s global sales presence and speeding up the release of its software products and services. Carbonflow provides Software-as-a-Service (SaaS) used for managing carbon reduction projects under the CDM, regional, state and voluntary programs. It previously raised $3.7 million in Series A financing and, according to Carbon Finance, is likely to raise at least one more round of venture capital.

Read more from WIREDvc
Read more from Carbon Finance (subscription required)

Bion-ic carbon

Last week, Bion Environmental Technologies launched their innovative dairy nutrient management facility at Kreider Farms, Pennsylvania. The manure treatment plant is expected to generate 130,000 nitrogen credits and 16,250 phosphorus credits through a nutrient credit certification plan. The verified credits will be sold to offset discharges of regulated nitrogen sources, such as municipal wastewater treatment plants in the Susquehanna River watershed. The phase one project will also reduce GHG emissions and may generate up to 60,000 carbon credits. Phase two of the project will involve the development of a cellulosic biomass renewable energy facility using the farm’s four poultry operations, and should keep 4 million pounds of nitrogen from the local environment.

Read the American Agriculturalist article

The ultimate heat island getaway

Innovators are taking the idea of an “urban oasis” to a whole new level. The latest in urban living is a futuristic concept that could only have come from Japan – and envisions us living on mini island “cells” floating around in the Pacific Ocean. The idea, by technology firm Shimizu, is called the Green Float concept, and would involve kilometer-wide cells complete with forests, farms and a central “City in the Sky”. The cells would be self-sufficient, carbon neutral and waste-free, floating freely near the equator or grouped into modules. The developers claim that living in this way would cut carbon emissions by 40%, and are hoping to develop the first cells by 2025. If the idea seems far-fetched, it’s worth noting that it comes from the same company that once proposed encircling the moon with a ring of solar collectors.

Read the Daily Mail article

CCS: you win some, you lose some

From recently intensified coverage of global carbon capture and storage efforts, it’s hard to discern whether support for the technology (and the technology itself) is moving forward, backward or inert. Innovative ventures like Kyoto Protocol architect Graciela Chichilnsky’s Global Thermostat claims to effectively remove 5lb of CO2 per kWh of electricity, unlike coal-fired power stations that currently (in the US) emit 2lb of CO2 for every kWh of electricity created. Qatar Petroleum has similarly taken a leap of faith in their methodology that could enable CCS in geological formations – and are encouraging the UN to amend CDM rules to allow CCS to generate offsets. Meanwhile, energy company Fortum is abandoning the €500mn Finncap project in Finland, while the Dutch government has cancelled plans to store CO2 under the town of Barendrecht.

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