Insight in the Voluntary Market; Segments and Standards

VERs are products that are ultimately purchased to compensate for realised emissions on a voluntary basis. Currently, these projects can belong to one of two groups:

Over the previous 2.5 years, the Climex Exchange has seen the liquidity of 1st EU ETS period EUAs improving, steadily. Additionally, we also conducted several auctions for CDM Projects which will generate CERs. Both EUAs and CERs are products which companies ultimately buy to meet their compliance with the EU ETS or Kyoto Regulations.

On 18 October 2007, the first auction for projects which deliver Voluntary Emission Reductions (VERs) was conducted on the Climex Exchange. It goes without saying that these products are different by nature and therefore attract market participants for a different reason. VERs are products that are ultimately purchased to compensate for realised emissions on a voluntary basis. Currently, these projects can belong to one of two groups:
1. VERs: Voluntary or Verified Emission Reductions
These are Non-Kyoto compliant emission reductions, originating from identifiable projects that meet defined technical criteria or standards;
Current standards include: Gold Standard (GS), Voluntary Carbon Standard (VCS), ISO 14046, VER+, etc.
2. VCUs: Voluntary Carbon Units
These are Reduction units drawn from a blended pool of projects without a link to the project it originated from. These units have been created as a separate ‘carbon currency’ and are not fungible with other standards.

In general, the buyers will be triggered by voluntary compensation initiatives. This compensation possibility applies to both businesses and private individuals. These 2 groups have the following drivers to procure VERs or VCUs:

In ‘Business-to-business markets’, businesses purchase VERs for professional use, with a desire to achieve the following:
- To improve their Corporate Social Responsibility programmes: to meet internal, voluntary carbon management targets
- To prepare themselves during a Pre-compliance period for potential future regulations
- To aggregate VERs for distribution in the b-to-c market
In ‘Business-to-consumer markets’,
- To improve Brand sympathy and customer loyalty and create positive product differentiation by providing compensation together with their main products or services to consumers;
- To realise incremental revenue or incremental income from the sale of VERs or VCUs in combination with their products or services.

In the near future, you may expect more Auctions for VER Projects on the Climex Exchange. The next VER Auction is scheduled for 25 January 2008. We hope that, after reading this article, you will be able to assess better whether participating in these Auctions will be interesting for your company or yourself!