'Shakeout” due on voluntary carbon standards'

The current plethora of standards for carbon credits in the voluntary market is due to shrink within the next year, as buyers seek consistency and clarity for evaluating carbon reductions, according to an expert panel at a carbon market conference yesterday.
“While it is true that there are too many standards out there right now for carbon credits in the voluntary market, the situation will be radically different a year from now,” Ricardo Bayon, director of the non-profit group Ecosystem Marketplace, told a carbon trading conference in San Fransisco.
“There are so many standards now that we expect a shakeout over the course of this year, through which a few main verifiers of emissions reductions will emerge,” Bayon said.

Other speakers agreed, predicting that the carbon credit certifiers who survive will be the ones that achieve the most stakeholder buy-in and have the largest marketers.

“It’s not just how many credits they’re dealing with and what type of carbon reduction project they actually certify, it’s also who is promoting them,” said Cameron Brooks of Renewable Choice Energy, a provider of environmental credits from wind power.

While mandatory carbon trading programmes have standardised verification procedures to ensure that emissions reductions are quantified in the same manner, the voluntary market – in which companies or individuals buy carbon credits to offset their greenhouse gas emissions independently of regulations – has seen a multitude of organisations claiming to verify credits for reduced emissions.

The different organisations use diverse accounting methods and measure carbon reductions from different baselines, such that the credibility of voluntary greenhouse gas reduction credits has been questioned.

“Firms are seeking to ensure that what they are buying is a real and verifiable reduction, or they can’t convince consumers that they are really paying extra to offset emissions,” Brooks said, adding that weeding out the three or four standards that dominate the voluntary market would take 18 to 24 months.

The US represents the largest part of the global voluntary carbon market. Ecosystems Marketplace and New Energy Finance have estimated that 23 million voluntary credits traded globally last year. The market size is expected to grow this year, and brokerage Evolution Market told Point Carbon last month it alone has brokered 15 million so-called verified emission reductions already in 2007.

Bayon predicted the shakeout in standards would result in a floor and a ceiling. “They are likely to settle on a lowest common denominator standard, a standard of quality below which you are not allowed to call it a greenhouse gas emissions reduction credit. Then there is also likely to be a recognised top tier, such as the Gold Standard.”

The Gold Standard is an NGO-endorsed quality label that certifies retailers of carbon credits, and Brooks agreed with Bayon that it is likely to make the cut. Asked what other current certification ‘brands’ would survive, Brooks cited the San Francisco-based Green-E standard, which is currently the main verifier of renewable energy credits used to comply with US states’ quotas for renewable electricity.

“They are well-established on the renewable energy side, and that reputation is transferable,” he said.

The third survivor Bayon and Brooks cited is the Voluntary Carbon Standard (VCS), established in July by a consortium of players in environmental markets including the International Emissions Trading Association, the World Business Council for Sustainable Development and the World Economic Forum.

Bayon told the conference that having fewer players determining what standards ‘count’ for voluntary emissions reductions will add structure to the market. “It will become more consistent. There will be registries for voluntary carbon credits and even speculative buying,” he said.

Washington DC
Pointcarbon