making the voluntary carbon market work for the poor

making thevoluntarycarbon marketwork for the poorcurrent and future roles

Alice ChappleJuly 2008

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Making the voluntary carbon market work for the poora

The UK’s Department for International Developmentcommissioned this report from Forum for the Future in orderto explore how the voluntary carbon market works for thepoor and how its effectiveness might be improved. Forum forthe Future interviewed 33 experts in this field, includingproject developers on the ground, offset providers, companiesbuying offsets, policy-makers and NGOs. The Forum teamalso undertook some supplementary desk research.

Forum for the Future

Forum for the Future - the sustainable development charity -works in partnership with leading organisations in businessand the public sector. Our vision is of business andcommunities thriving in a future that is environmentallysustainable and socially just. We believe that a sustainablefuture can be achieved, that it is the only way business andcommunities will prosper, but that we need bold action nowto make it happen. We play our part by inspiring andchallenging organisations with positive visions of asustainable future; finding innovative, practical ways to helprealise those visions; training leaders to bring about change;and sharing success through our communications.

www.forumforthefuture.org.uk

Registered office: Overseas House, 19-23 Ironmonger Row, London, EC1V 3QN

Registered charity number: 1040519. Company limited by guarantee: 2959712

Date of publication: July 2008

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contentsExecutive summary 4

1 Introduction 6

2 What is the voluntary carbon market? 7

3 Can the voluntary carbon market deliver fundamental change? 8

4 What would ‘carbon markets that work for the poor’ look like? 12

5 What makes schemes attractive to buyers? 11

6 What has the greatest impact on carbon emissions? 15

7 What delivers the greatest benefit for developing countries? 16

8 What are the best examples of pro-poor voluntary offset schemes? 19

9 What about offsets around avoided deforestation? 21

10 What is the role of verification and reporting? 23

11 Is there scope to include adaptation in offsets? 27

12 What are the barriers to carbon markets working for the poor? 29

13 How can companies be engaged more effectively? 31

14 What are the key roles for donors? 33

15 What are the possible futures for the voluntary carbon market? 34

16 Recommendations 36

Making the voluntary carbon market work for the poor

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As carbon offsetting has become popular, we haveseen the rapid growth of the ‘voluntary carbonmarket’. The projects that produce the credits to sellin this market are often in developing countries. Theycan support a range of activities relevant to poorcommunities – for example, small-scale energy,energy efficiency and forestry – and there is asignificant opportunity to harness this market fordevelopment. There are, however, barriers. Theseinclude the small scale of many pro-poor projects, theabsence of approved methodologies in some areas,the media denigrating the role of the voluntary marketand scaring off buyers, a lack of clear property rights,including carbon rights, and unequal negotiatingpower. This report looks at current best practice andexplores how to remove these barriers to help makethe voluntary carbon market work both for thepurchasers of carbon credits and for the poor.

background

The voluntary carbon market is growing rapidly,primarily because of an increasing number of companiescommitting to becoming ‘carbon neutral’ and thereforeseeking to offset their carbon emissions. The internationalvoluntary carbon market was worth $258 million in 20071,up from $58.5 million in 2006, a fourfold increase in justone year.

The types of project funded by the voluntary carbonmarket are very diverse2, with the main categories in2007 being renewable energy, afforestation andreforestation, energy efficiency projects and avoideddeforestation. The remainder was made up of projectsbased around agricultural soil, livestock, landfill, coalminemethane and other activities.

The voluntary carbon market has generated a greatdeal of controversy. Many observers consider it to be adistraction from the task of reducing worldwideemissions, perpetuating business-as-usual by enablingpeople to salve their conscience as they continue topursue their high-carbon life-styles. For those who takethis view, the voluntary carbon market cannot under any

circumstances work for the poor because thefundamental need is to reduce emissions so that the poor in developing countries are less exposed toclimate change.

And there are practical difficulties in ensuring that thecost of delivering carbon reductions is affordable and notweighed down by excessive expenditure and overheads.In particular, there is a trade-off between obtainingverification and assurance on the robustness of thecarbon credit in carbon terms, and keeping the overheadcosts of the project down to a level which is payable bythe smallest (which tend often to be the most community-oriented and pro-poor) schemes.

But there is evidence that the voluntary carbon marketcan contribute to pro-poor outcomes. Recent yearshave seen the rollout of successful pro-poor schemes andrecent months have seen the development of robuststandards, which provide a methodological framework foraddressing the most difficult issues. A pro-poor voluntarycarbon market goes beyond the need to deliver carbonemissions reductions. It can also enhance the income,health and quality of life of the poor in some way, whetherby reducing their energy costs (for example throughcooking stoves), reducing pollution or protecting their wayof life (for example through avoided deforestation). Insome types of scheme, it requires project developers tostructure the deal to recognise the rights of local peopleto land, to carbon and to other ecosystems services. Afocus on pro-poor projects can enhance the overallpotential for carbon reduction if it helps to generatestrong links between buyers and the schemes.

Reducing emissions from deforestation anddegradation has its own unique set of challenges,but this is an area where the compliance market will not have an approved methodology for some time andwhere robust and sensitive projects in the voluntarycarbon market can be particularly valuable. Small-scalerenewable energy and energy efficiency projects alsobenefit from the voluntary carbon market, as the regulated market can only work with large projects.

executive summary

There is potential for many more poor communities tobenefit if there is greater uptake of voluntary carbontrading schemes, provided they are designed at the leastwith a principle of ‘do no harm’. Increased take-up couldhappen if companies (which make up 90% of thevoluntary carbon market) have assurance about thequality of the offset from a carbon perspective but also –and as importantly – can engage staff and customers inthe ‘story’ of the offset.

Currently there are many barriers at many levels tocarbon markets working for the poor, including thesmall scale of many pro-poor projects, the absence of approved methodologies that speed accreditation of schemes, poor communications of the positive impacts of voluntary schemes, a lack of clear propertyrights, and unequal negotiating power.

recommendations

Companies should take action to support the pro-poorvoluntary market, with each company’s approachdepending on its own objectives for engagement.Companies should participate in dialogue around howbest practice carbon management strategies may evolve,so that they are moving beyond current definitions of‘carbon neutrality’. Companies could take on more of theearly-stage risks in a carbon credit project and providefinancial or business expertise. They could provide helpfor the development of new methodologies or partner withNGOs to engage more effectively with local communities.Or they could develop ways of incorporating carboncredits into their products and services. Companiesshould communicate their success stories.

Donors should take further steps to improve thefunctioning of the voluntary carbon market by helpingto develop methodologies, procuring credits from pro-poor projects, supporting the training of facilitators (tosupport project developers, increase their knowledge ofthe market and help them to negotiate with offsetproviders), providing funding for the verification and

validation of projects, assisting with a pilot ‘bundling’ or pooling scheme to get scale, and fundingimprovements in basic investment infrastructure.

Individuals should re-evaluate their position onvoluntary offsetting, recognising that the voluntarycarbon market does not address the fundamentalchallenges, but that viewed alongside carbon reductionand not as an alternative to it, it has a role to play in thenecessary transition.

what next?

The ideal scenario for the voluntary carbon market ofthe near future will entail -

• A market that has become more explicitly differentiated,enabling customers to select the type of offset theywant to purchase

• Companies buying customised carbon credits thatresonate with people associated with their business

• Robust standards, providing assurance for the bulk ofthe market and supplemented by carefully managedschemes to offer additional benefits, available to buyersat a premium

• Up-front costs of developing pro-poor projects beingseeded by companies and individuals, who will gainassurance from a greater degree of information sharingand support from NGOs

• Trained facilitators assisting in ensuring progresstowards formal verification and advising the projectdevelopers of relevant market prices

• Companies gaining real benefit from innovativeapproaches in terms of brand, product developmentand new markets.

Several initiatives are currently contributing to themomentum that is required. The voluntary carbon market can deliver pro-poor benefits at scale but only if the support it receives from companies and individualscontinues to grow at a rapid pace, and the kind of actions outlined in this report are taken.


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Forum for the Future was commissioned by the UK’sDepartment for International Development to:

• provide an overview of how the voluntary carbon market currently works for the poor

• identify what barriers exist to it working more effectively

• make recommendations on how this might be achieved.

The Forum team undertook interviews with 33 people whoare engaged in various ways with the voluntary carbonmarket, whether as project developers, carbon offsetprovides, offset buyers, policy-makers or thought leaders.The names of those interviewed are listed at the end ofthis report. The team also carried out somesupplementary secondary research.

The focus of this report is on the voluntary carbon market.The role of the regulated carbon markets – in particular

the Clean Development Mechanism (CDM) - in deliveringpro-poor outcomes has been discussed in other reports3 and is not a primary focus of this report. However, there are some areas of overlap. In particular,carbon credits certified under the CDM can be sold on the voluntary market.

This report captures a wide range of views on the way thevoluntary carbon market can or cannot be harnessed tosupport pro-poor outcomes. There is no absoluteconsensus at this time because some of the differentpositions currently cannot be reconciled. Instead, thereport seeks to present the variety of views and chart acourse through them. Forum would like to thank all of theinterview participants for their insights.

In line with much of the commentary about these markets,we use the terms ‘carbon markets’ and ‘carbon trading’throughout the report as a shorthand way of describingthe market for greenhouse gas reductions in general andtrading in the associated credits.

introduction

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Carbon markets are a space where buyers and sellerscome together to trade a commodity – greenhousegas reductions. Some of these buyers and sellers aremandated to do so by schemes set up throughinternational agreements, for example under theKyoto Protocol and the EU Emissions TradingScheme. These mandatory schemes, referred to asthe regulated or compliance market, are an attempt todrive reduction in the emissions of greenhouse gasesthrough ‘cap and trade’ arrangements that limit theemissions allowed, and require ‘carbon credits’ to bepurchased to cancel out any excess.

Currently, only a small number of sectors and only a fewcountries are covered by mandatory cap and tradeschemes. There are therefore many companies that arenot (yet) required by legislation to reduce emissions orbuy credits, but that consider it appropriate to do sovoluntarily. These companies can participate in thevoluntary carbon market. Individuals can also participatein the voluntary carbon market to buy credits against thecarbon dioxide they emit in driving, flying, and heatingand lighting their homes.

The voluntary carbon market therefore encompasses anytransaction involving carbon credits generated for sale tobuyers who are not mandated to buy credits, as well ascarbon credits generated to comply with the regulatorymarket but sold to voluntary buyers.

The market is growing rapidly, primarily because of anincreasing number of companies committing to becoming‘carbon neutral’ and therefore seeking to offset theircarbon emissions. A recent report by EcosystemMarketplace and New Carbon Finance4 reports onsignificant growth in the voluntary carbon market over thelast year, amounting to an ‘over-the counter’ (OTC) marketof 42.1 million tonnes of CO2 equivalent in 2007, threetimes the 2006 figure. (Combined with the Chicago

Climate Exchange, the voluntary cap and trade scheme inthe US, the total voluntary carbon market was 65mtonnes of CO2 equivalent in 2007.) The international OTCmarket was worth $258 million in 2007, up from $58.5million in 2006.

Compared to the regulated market, the voluntary marketis still small (only 2.2% of the total of 2,918 tonnes of CO2

equivalent). But its potential for growth is significant.

The types of project funded by the voluntary carbonmarket are very diverse5. In 2007, the biggest singlecategory of voluntary OTC credits was renewable energy(31%), followed by 20% for afforestation and reforestationand 16% for energy efficiency projects. Avoideddeforestation made up 5% of the total and agriculturalsoil projects 3%. The remainder was made up oflivestock, landfill, coalmine methane and other projects.Comparing these figures with the project types supportedby credits bought through the compliance markethighlights some particular areas where the voluntarymarket plays a different role. In the compliance market,39% of credits were generated by energy efficiency, 25%from renewable energy and 18% from industrial gases(compared to only 2% in the voluntary market). Coal minemethane, livestock and landfill all represent similar sharesin the CDM as the voluntary OTC market but there hasonly been one reforestation/afforestation projectregistered under CDM. Avoided deforestation andagricultural soil projects are not currently approvedmethodologies in the compliance market.

The highest volume of voluntary carbon transactions in2007 was in Asia, with 39% of the OTC market6. NorthAmerica accounted for 27% of transaction volumes andEurope and Russia accounted for 13%. Only 2% of thevoluntary carbon transactions by volume were in Africa.

what is the voluntary carbon market?

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Before any discussion of the practical ways in whichthe carbon market might deliver pro-poor outcomes,we should outline the arguments around whether it iseven appropriate to expect the voluntary carbonmarket to do so.

The arguments are encapsulated in the following table –

This argument is waged at a number of different levels,from disapproval of the whole concept of the voluntarycarbon market in principle, to questioning of the ability ofthis market ever to grow to the scale required to makeany impact, to scepticism about its potential to make anydifference to the poorest.

No

The voluntary carbon market is still very small and isunlikely to grow to the degree required to make anydifference.

The voluntary carbon market is counter-productivebecause its effect is to assuage guilt and thus reducethe pressure that individuals and companies feel toreduce their own footprint. Massive changes inconsumption patterns are required, and there is noevidence that people who engage in offsets changetheir behaviour elsewhere.

The voluntary carbon market reduces the pressure ongovernments to introduce new legislation that bringsmore sectors and companies into the regulated market.

No market can ever reach the chronically poor, sincethey just won’t have access to markets of any kindon reasonable terms.

Yes

Voluntary offset schemes provide additional fundingfor projects in developing countries. The additionalfunding can make the scheme economically viable.Although the amounts may be small now, there isscope for the market to expand significantly.

The voluntary carbon market provides people with away of increasing awareness of their own carbonfootprint, which may lead to changed behaviour. Itenables them to engage directly with the people whowill benefit from the payment for the carbon credit. It provides people with a practical and direct means of compensating those who are most affected byclimate change.

The voluntary markets create schemes on the groundthat can inform policy or illustrate howmacroeconomic interventions might play out.

The voluntary market can help to finance the provisionof sustainable technologies to the very poorest – forexample through schemes that rent out solar lanternsor deliver energy to refugee camps.

The voluntary carbon market provides an importanttesting ground for new approaches.

Can the voluntary carbon market ever deliver fundamental change?

can the voluntary carbon market deliver fundamental change? 3

No

The voluntary market risks displacing resources whichwould otherwise have been paid as a donation. Forexample, some UK forest charities have reported lowerlevels of funding because people are buying offsetsinstead of funding projects through donations /grants.

It will be much more effective to support nationalgreenhouse gas plans than to focus on individual projects

Carbon finance can only provide marginal additionalrevenue (currently estimated at around 10%) to projects,so we can’t expect it to change the world.

Why focus on carbon markets to address poverty? Thefocus should be on making wider investment pro-poor,since this will have a far greater impact.

Cap and trade needs to make voluntary carbon tradingactivities an irrelevance.

The voluntary carbon market simply provides companieswith the right to pollute. In the compliance market, theright to pollute is dictated by the ‘cap’ in place, but in thevoluntary market the right to pollute is theoreticallylimitless.

If we want to have an impact on climate change, then theinterventions need to be extremely scalable. Thebiggest impact will therefore be through industrial projectsor avoided deforestation. These have to be addressedthrough the regulated market because of the scale of the challenge.

Yes

The voluntary carbon market can provide a means tofund projects where the carbon emissions reductionis more difficult to calculate (possibly because of itbeing related to natural cycles rather than technologywith certain specifications); where there are questionsover its permanence (as in the case of forests); where it is more difficult to prove additionality; or where theyare too small to go through the verification required by CDM.

The carbon market generates additional funding frompeople who would not contribute on a charitable basis.

Voluntary carbon markets have a direct impact on thequality of life of people at a grass roots level.

The voluntary carbon market can provide the poor withaccess to much-needed improvements in energyservices.

Carbon markets are just a part of the “package” thatmay make investment in marginal pro-poor projectsmore viable.

Carbon markets have the potential to marginallyenhance returns to investors in developing countriesand encourage investment. Designed well, the flows ofcapital required to address climate change can createeven better outcomes if they reflect pro-poor priorities.

Cap and trade may over time make the voluntarycarbon market an irrelevance but in the meantime it canplay a useful role, enabling projects to happen soonerthan they otherwise would have done, and helping inthe design of activities that will at some stage beincorporated in cap and trade.

Without a carbon market, the companies effectivelyhave a right to pollute for free. The carbon market turnsa cost of climate change on future generations into acost for companies today.Carbon markets deliver a greater recognition of thecarbon that companies are responsible for.

The voluntary carbon market is not an alternative to the scalable interventions required, but a usefulsupplement that can have a worthwhile impact in the short term. And it has already enabled significantimprovement in the lives of millions of people.


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The primary purpose of the carbon markets is toreduce carbon emissions, in order to reduce the riskof dangerous climate change. Many people argue,therefore, that if they achieve what they are designedto do then carbon markets will automatically deliverfor the poor, since it is the poorest who are mostvulnerable to the effects of climate change. It followsthat it is important not to ‘overburden’ the voluntarycarbon market with pro-poor elements, since thatmight reduce its efficiency and hence the chance of itmaking a real impact on carbon emissions.

For this reason, some argue strongly that reducing therigour with which the carbon savings are calculated, inorder to achieve pro-poor outcomes, may in fact have amore detrimental impact on the long-term prospects forthe poor. Many take the view that it is appropriate tofocus on the pro-poor aspects as a secondary outcomebut not to compromise the carbon reduction potential forpro-poor benefits.

In practice, there are many ways of designing andstructuring a project – for example, in terms of the extentto which risks are shared between the various parties -that will have no effect on carbon but will enhance or

deplete the pro-poor outcomes. If carbon markets are towork for the poor, they must be developed inconsultation with the relevant communities and bealigned as far as possible with the communities’ priorities.If appropriate facilitation and expertise were madeavailable, projects could be developed from within thecommunity, so that carbon credits became an exportablecommodity. Individuals in local communities also developschemes: carbon markets that work for the poor wouldenable more local enterprise.

The poorest seldom have access to markets of any kindand they are likely to be equally excluded from certaincarbon markets unless specific actions are taken to givethem some rights. Many of the poorest people rely onaccess to land or forests where rights and ownership arenot clearly defined: carbon markets that work for the poormay therefore need in particular to engage with thespecific problems associated with land use, land usechange and forestry projects. As the price of carbon goesup, there will be increased pressure on local communitiesto give up their rights to others, or an increased likelihoodthat those rights will be ignored. This has the greatestrelevance in forest projects, where it is vitally importantthat these risks are clearly recognised and managed.

Carbon markets that work for the poor would -

• Reduce carbon emissions as efficiently as possible to limit climate change,therefore reducing vulnerability toclimate shocks

• Be developed in consultation with localcommunities, working with the grain oflocal pro-poor programmes

• Respect the rights of local communities(to land, to carbon benefits etc)

• Improve income, quality of life, healthand opportunities

• Be relevant to existing activities, oftenagriculture, forestry or other land use

• Enable greater participation in markets,with greater access to incomeopportunities, as suppliers, employees or entrepreneurs

• Be underpinned by governancemechanisms and transparencyguarantees that ensure benefits flow to the poor

what would ‘carbon markets that work for the poor’ look like? 4

Energy efficiency and renewable energy projects,however, can benefit the poor despite their lack of access to markets.

The most successful pro-poor carbon projects have thepotential to deliver real transformation in income and /or quality of life in some way – whether clean water,sanitation, energy, shelter, improved sources of income or a protected way of life. If carbon markets were to workfor the poor, carbon funding would have to be morereadily available to project developers whose projectsmeet basic needs. Renewable energy and energyefficiency projects can have great value for the poor but in some cases (for example, where the project is designedto deliver on-grid electricity) it may only have an indirectand weaker impact.

Agriculture, forestry and other land use (AFOLU)projects that can also support adaptation may be ofparticular relevance to the poor. For example, projectsthat focus on soil management practices will not only

have an impact through preventing carbon being releasedfrom the soil, but also could result in higher yields forlocal small farmers enabling them to increase their incomeand cope better with climate shocks. The focus of AFOLUprojects has to date been “above ground” and there is agreat deal of potential for “below-ground “ projectsprovided the methodologies are in place.

If poor people are to benefit fully from the voluntarycarbon market, then they need to have opportunities toparticipate actively in the schemes, through establishingtheir own enterprises, through direct employment, orthrough providing ancillary goods and services. Theseactivities will require support and training.

It will also be critical to have in place governancemechanisms and transparency guarantees that make it more likely that benefits will flow to the poor and thatenable stakeholders to scrutinise the workings of aparticular project.


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5The majority of buyers in the market in 2007 (as in2006) were businesses. About two thirds of the creditsbought by businesses were to offset emissionsimmediately , while a third were for investmentpurposes for resale or use in the future. Individualsmade up 5% of the buyers, with NGOs comprising13% and governments less than 1%.

The carbon offset providers and corporate representativeswho we interviewed identified several importantcharacteristics that make schemes attractive to buyers.As in any market place, there is a wide range of buyertypes and it is sometimes difficult to unpick theirmotivations. Broadly speaking, they can be characterisedas follows –

Type of buyer

Companies looking simply to match their carbon emissions

Companies with a desire to use their carbon offsetstrategy to enhance their brand, meet CSRcommitments or inspire staff

Companies or individuals buying carbon credit forinvestment purposes

Individuals who want to offset their carbon emissionsbut are not interested in the type or quality of projectsunderlying the credit.

Individuals who want to see and understand theconnection between their own payment for a carboncredit and actual projects on the ground

Credits need to

• be concrete

• be verifiable

• be cheap

• be non-controversial

• enable ‘quick win’ / ad hoc purchases

• cover all of the basic minima in terms of concrete andverifiable emissions reductions

• deliver a simple and compelling story, especially grassroots impacts

• have a connection with the company’s own activities

• show value for money, although some benefits will not be easily quantifiable

• show value for money

• be low risk

• be commoditised and simple

• offer confidence that the carbon will be offset (andpossibly also that the carbon credits will be withdrawnfrom the market)

• provide assurance that they have reasonable value for money

• provide interesting and engaging stories

• include independent endorsement of benefits accruing from the project

what makes schemes attractive to buyers?

It is clear that one type of purchaser will be more likely topurchase offsets if they can be fully comfortable with therigour applied to the carbon calculation, while another willbe much more motivated by smaller, community-basedschemes, which could be over-burdened by a veryrigorous approach to verified carbon calculation. The key question is therefore whether a successful voluntarycarbon market can accommodate both of these types of purchaser.

For offset providers, an important element of successfulschemes is that they maintain the credibility of themarket. Trust in the voluntary market will decline, leadingto lower take-up, if schemes:

• do not deliver the carbon reductions specified;

• charge a price unrelated to the price of carbon withoutinforming customers of what they are paying for; or

• do not withdraw the credits from the market once theyhave been purchased as offsets.

Companies tend to want to see some form of externalverification if they are using offsets to enable them todeclare a particular target such as ‘carbon neutrality’. Thisgives them, and their stakeholders, assurance that thecarbon emissions are being offset appropriately. It adds tothe cost of the project but it is interesting to note thatthere appears to be no premium in the market-place for acredit which has met a third party standard. This impliesthat it is being absorbed to some extent by the projectdeveloper. The issue of verification is explored in moredetail in section 11 below.

Even the companies who want to engage staff andcustomers are currently comfortable with projects thatdeliver a quick win rather than ones that require a longercommitment over time to deliver real results. It is relativelyrare (but with notable exceptions) to find companiesworking with project developers to put projects together,or sharing the up-front risk so that if carbon credits do notcome on-stream for any reason the sunk costs are notborne by the community alone. It is clearly costly todevelop projects and to share risk, and most companies

view carbon offset purchases as an annual expense,incurred opportunistically or based on guaranteed offtakefrom an established project, rather than something to beinvested in delivering returns over time. Many companiestend to perceive that the risks involved in making a long-term commitment to develop a carbon offset project aretoo great. This might be because there is a risk that theexpected quantities of carbon will not be delivered forsome reason. It might be because companies areconcerned about developing projects that, because theyare testing out new methodologies or ways of working,may end up failing and damage the company’s reputationin the process. It may also be because the company isnot willing or able to spend time developing the necessaryrelationships with local communities and NGOs.Fundamentally, because this is a voluntary activity, mostcompanies want to be able to disengage quickly andeasily if they no longer see benefits accruing.

Projects with direct impacts on current livelihoods,especially if they have a strong story, have a greatappeal. This might mean that a project that might have agreater catalytic effect over time may remain unfunded.Carbon offset schemes that can enable developingcountries to fund developments of appropriate cleantechnology do not seem to be particularly interesting formost corporate buyers, unless there is a direct personallink between the technology and the community. So, forexample, stoves appear to be a more attractive project formany companies than wind farms. Forestry projects usedto be considered good candidates for carbon offsets butconcerns over land rights (as well as other issues such asthe problems of permanence, leakage and monitoring)have caused reputational concerns for buyers. Someoffset purchasers prefer to link up with projects that havea close personal link for staff or customers, and hencetheir selection will depend on their network of branches,offices, manufacturing operations or their customer base.

While the majority of voluntary carbon offsets arepurchased by companies, the role of the individual buyingcarbon credits to offset his or her domestic carbonfootprint, or the carbon emitted in a particular flight, isalso important. Evidence on what an individual wants


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from his / her carbon trading transaction is mixed,probably reflecting a wide range of motivations andexpectations. The experience of some offset providerssuggests that individuals buying offsets have very limitedinterest in the nature and quality of projects beingprovided. In their analysis, individuals simply want tomake a “big picture” decision about offsetting and decidewhether to offset or not, but do not in most cases seek to

differentiate between the types of project offered. Nor doindividuals appear to be influenced much by an emphasison additionality or independent verification. Other studiespoint to a high level of engagement between individualsand their carbon trading transactions, and a desire tounderstand how their money is being spent: here, thefocus appears to be on project delivery rather thanadditionality or independent verification.

The model adopted by the NGO ConvergingWorld is not organised in the same way as a standard carbon offset scheme. It has at its heart the concept of Contractionand Convergence developed by the GlobalCommons Institute. This concepthighlights the need simultaneously to offer developing countries the means of developing in a less carbon-intensiveway and to reduce the carbon-intensivelifestyles we already enjoy in theindustrialised world. Standard carbonoffset programmes do not directly address this second critical challenge.

The innovative model works in thefollowing way -

• Individuals and companies makedonations to fund wind turbines in India(they do not ‘purchase’ carbon credits)

• Through gearing, the donations arematched by additional cash fromcommercial lenders

• The wind turbines serve the grid,replacing fossil-fuel energy generation

• A share of the profits from the windturbines is allocated to communitydevelopment projects in 414 villages

• Funding from the carbon creditsgenerated by the wind turbines is usedfor projects that change behaviour andlead to lower-carbon lifestyles(‘contraction’) in the developed world.

CONVERGING WORLD – AN INNOVATIVE MODEL

What has the greatest impact on carbon emissions?

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6Clearly the objective of an offset scheme is to matchthe amount of carbon emissions somewhere in theworld with an equivalent reduction somewhere else. Inthat sense, a question about what offset scheme hasthe greatest impact might appear redundant.

Large industrial schemes give the best value for money:the projects like those in China delivering reductions inhydrochlorofluorocarbons (HCFCs) achieve the resultsthat are simultaneously the most cost-effective and themost verifiable. However, there is evidence to show thatmany buyers do not view their carbon offset strategy inthis way and are prepared to pay more for a project thatthey regard as ‘high quality’. In addition, there isincreasing concern that many large projects beingdeveloped are simply not additional (as they would havetaken place even without the credits) or worse, encourageperverse incentives such as increasing the production ofgreenhouse gases in order to benefit from creditsavailable for destroying them.

Avoided deforestation has been put forward as anextremely cost-effective solution, but it may fall down onadditionality, permanence and verifiability (explored insection 10 below). It also is not necessarily low-costbecause it is may be extremely complex to design andmanage a project in partnership with a local communitywhere land rights and carbon rights are not clear andwhere there needs to be a substantial amount ofconsultation. The undoubted need for consultation andcommunity engagement needs to be balanced sensitivelyand appropriately with the urgency of interventions onclimate change.

However, it is the case that some offset schemes have agreater catalytic effect than others, and this impact cancome about in a number of different ways.

• Through changing behaviours. Participation in acarbon offsetting scheme, either by a company or by anindividual, may result in a change of behaviour from that individual or from staff within a company in theirpersonal and/or professional activities. Where thishappens (and there are currently divergent views fromdifferent stakeholders on whether such behaviourchange does take place in practice) then the carbonoffset scheme will have a positive impact above andbeyond the simple matching.

• Through generating an increased appetite for offsetsin the market. The more people that take part in avoluntary scheme, the greater the scope for carbonemissions reductions. Therefore, many of thecharacteristics outlined in section 6 above will alsodeliver the greatest carbon emissions reductions.Central to this is engagement with the buyers andtapping into their enthusiasm to act.

• Through the development and application of newtechnologies. Certain offset schemes enable newtechnologies to be rolled out, with a wider impact on sustainability.

The greatest impact on carbon emissionscould come from –

• delivering the highest quality in terms ofmeasurable, permanent, additional andverifiable emission reductions.

• identifying what delivers carbonreductions at the lowest cost

• the catalytic effect of the offset scheme,enabling it to have an impact beyond itssimple matching of emissions elsewhere.

7What delivers the greatest benefit for developing countries?

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It is generally accepted that the impacts of climatechange will be – and are already being – feltdisproportionately in developing countries. This ispartly because extreme weather events – floods,droughts, cyclones and so on - are more likely tooccur in many of these regions. It is also because agreater proportion of people are dependent on theland for survival and so weather events have a greaterimpact. And, to compound this, the infrastructure toprevent weather events having an impact (whetherphysical infrastructure such as sea walls or virtualinfrastructure such as access to finance) is muchweaker in developing countries. Poverty makes peoplevulnerable.

It follows, therefore, that developing countries will be keybeneficiaries of any successful attempts to reduce globalcarbon emissions. If the funding comes from thedeveloped world, then there will be more money availableand a greater potential benefit.

Starting with this overarching principle, one could arguethat the schemes that deliver the greatest benefit fordeveloping countries are simply the ones that deliver thegreatest carbon reduction. However, this does notadequately take into account other key characteristics ofschemes that deliver the greatest benefit for developingcountries in general, and the poor in particular. Nor does itreflect the unavoidable climate effects to be faced thiscentury and hence the need to finance for adaptation.

One specific area of concern is that projects are veryoften developed simply in response to the carbonreduction agenda without an understanding of local

needs. This can lead to projects having negative impacts for local communities - for example, the effectsof large hydropower on vulnerable communities has been well-documented.

The compliance market’s Clean Development Mechanism(CDM), created under the Kyoto Protocol, enables thecompanies whose emissions are limited by law to buyreductions in carbon emissions rather than make thosereductions themselves. The emissions reductions have totake place in the developing world. This mechanism wasestablished to try to ensure that developing countriescould ‘leap-frog’ technologies and avoid the need todevelop in the ‘dirty’ way undertaken in the North sincethe industrial revolution. However, to date the connectionbetween this initiative and development is very weak andmost of the projects undertaken within the CDM have sofar had little to do with development. The most that canbe said of the process is that, when properlyimplemented, it has tried to ensure that CDM projects ‘do no harm’.

There is arguably greater potential for the voluntarycarbon market to reconcile ‘clean’ and ‘development’.Firstly, there is greater scope for smaller projects.Secondly, the types of projects that can be funded undervoluntary schemes can cover a wider range oftechnologies, including land use and forest-relatedprojects that are not currently eligible for CDM funding.

Many of the barriers for the poor in benefiting fully fromthe carbon market arise for the same reasons that applyto lack of access to all sorts of different markets. Thislack of access to markets arises because of lack of

Projects providing the greatest benefit fordeveloping countries might -

• deliver the greatest impact on carbonemissions

• enhance and embed the rights of localpeople, improve their quality of life

• deliver concrete results in relation to the

Millennium Development Goals

• be explicitly aligned with the country’sdevelopment priorities

• share risk between community and offsetprovider / final buyer

• contribute to enhancement of skills

7information, lack of negotiating power, lack of financefor set-up costs, lack of knowledge, experience ornetworks in taking market opportunities, insecure landtenure and lack of property rights. In schemes involvingland or natural capital (such as forests, clean air, cleanwater, soil and so on), clear regulation underpinning landrights and carbon rights will be a fundamental feature ofcarbon markets working for the poor. Where individualschemes can help to define carbon rights on a specificproject and enshrine them in the structure of the project,and even encourage governments at the regional ornational level to embed these rights in legislation, this haspotential for enormous benefit (and also for substantialabuse of power, so great care is required).

For some schemes, such as cooking stoves, biogas orsmall-scale solar projects, the question of carbon rights isnot as relevant and these have enormous potential totransform lives without requiring any reference to carbonrights. The challenge here is that, because most of theactivities of poor people are outside markets (for example,gathering wood for fuel or subsistence agriculture), it canbe difficult to compare the cost of a new technologyagainst the existing system, and to assess additionality.

As a way of considering how poverty alleviation could beenhanced through carbon trading, it is worth assessinghow projects deliver results in relation to the MillenniumDevelopment Goals. So, for example, does a projectgenerate income for the poor (MDG 1) through increasingcrop yields, reducing time spent collecting firewood,improving access to light and heat which might enablenew sources of livelihood? To what extent does a projectcontribute to improved health (MDGs 4 and 5) – forexample, through reducing indoor air pollution, preventingpeople (especially children) from carrying heavy loads,reducing the security risks associated with travelling forfuel (especially in conflict areas)? To what extent does aproject increase children’s ability to obtain education(MDG 2) - for example because less time is required forfetching wood or because new sources of energy enablelonger periods of study time in the home? Does itcontribute to environmental sustainability (MDG 7) – forexample by contributing to reduced soil erosion or byproviding an alternative fuel to firewood?

Carbon projects can have spin-off benefits for poorpeople in developing countries in a wide range of differentways – through creating employment, developing newskills, providing new sources of energy, reducing soilerosion, presenting opportunities for enterprise andprotecting livelihoods (for example through avoideddeforestation). Many of these elements appeal to thebuyers of carbon credits on the voluntary market and theyare prepared to pay a premium. And many of the buyers(particularly companies) want to have some comfort thatpro-poor benefits will accrue, that the offset provider willnot make excessive profits, and that the company’sreputation will not be tarnished by association with aproject that turns out to have a negative impact.

For this reason, many people are calling for more NGOsto develop their own projects that will meet their ownstandards for being pro-poor, or to provide some form of endorsement for other projects that have beenestablished. From the NGO perspective, there are somerisks here and many are exploring how best to getinvolved. The box overleaf illustrates how Practical Actionhas embarked on three separate pilot projects withClimate Care, CarbonAided and Carbon Clear over theperiod since 2004. The NGOs are well positioned toestablish whether a particular project has positive socialimpacts. They can also work through sensitive issues onthe ground – for example, when the best stove for a localcommunity is not one that reduces carbon emissionsenough to satisfy the donor. And they are well-placed to judge whether there is additionality – that is, whetherthe project would have happened without carbon credits income.

There are a number of more specific, practical ways inwhich schemes can deliver the greatest benefit todeveloping countries. One of these is in the structure ofthe deal between local community, project developer,carbon offset provider and buyer. At present, the risk ofdeveloping a project tends to lie with the localcommunities and project developer: they provide theupfront costs of construction, installation and otherpreparation, while the buyer (often a large company)provides payment for the carbon credits as they aregenerated over time. Not only does this result in the risk


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falling on the local community but also the offset provideris often in a position of greater power and knowledge,and can negotiate a price for the offsets which is muchlower than the price at which the offset company can thensell them on to the company lined up to buy them. Moreprojects would be developed, and communities would beless vulnerable, if buyers were prepared to share the riskaround delivery of the carbon credits.

It is also possible that buyers could provide finance up-front for purchase of credits over time, but localfinancial institutions could perhaps play this role more appropriately. An associated benefit might be astrengthening of these local financial institutions,potentially leading to wider availability of finance for other activities.

Schemes that contribute to the enhancement of skills in the local community are also extremely important.

Therefore a project where local people are involved in construction and maintenance of new systems canhave a very positive effect. This may require additionalup-front commitment of resources on the ground to allow for appropriate training, but it could reduce projectcosts in the longer term as it reduces the need forexternal supervision.

A key question is whether buyers in the market are willing and able to differentiate between the pioneeringtypes of project with inherent risks, and the moresolid, standardised projects. Tighter regulations aroundvoluntary standards, requiring greater uniformity, threaten to stifle the development of very small projects that may have imperfect methodologies butpotential for real impact. There is a real danger that this will have a negative effect on the contribution that voluntary carbon projects can make to the pro-poor agenda.

AN NGO EXPLORING HOW TOCOLLABORATE WITH OTHERS IN THECARBON OFFSET MARKET

Practical Action, an NGO involved inpromoting a range of appropriatetechnologies across the world, has beenapproached by several organisations fromthe voluntary carbon sector wanting topartner with them to offset carbonemissions. Since 2004, Practical Action has been running pilot programmes toexplore the issues.

(1) In 2004-5, Climate Care funded aPractical Action project to disseminate2,500 efficient cook-stoves in rural areasof Bangladesh.

(2) Practical Action has also just finalisedan agreement with Carbon Aided. Underthis agreement, Carbon Aided willnegotiate Practical Action’s carboncredits for a range of projects: a bundleof 40 micro hydro schemes in Peru;

substitution of wood fuel for rice husksin a bundle of 28 small brick makingenterprises, also in Peru; a bundle of750 family biogas systems in Sri Lanka;and 5,000 efficient cook-stoves inBangladesh. Under this agreement,Carbon Aided will negotiate on behalf of Practical Action and will charge a fee based on a percentage on the credits sold.

(3) Practical Action signed a project withCarbon Clear in November 2007 todisseminate LPG stoves and cylindersfor cooking to 5,000 families in Darfur.It is a 3-year project and includes acredit scheme, training activities, thepromotion of better standards on thecommercialisation of LPG in Sudan andthe strengthening of local organisationsto ensure sustainability.

Source: The experience of Practical Action with CO2 offsetting in

funding development activities for poor communities – Dr Todoro

Sanchez, Practical Action; Boiling Point issue no 54, 2007

What are the best examples of pro-poor voluntary offset schemes?8

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Several of the people interviewed commented on thecurrent shortage of high quality pro-poor voluntaryoffset schemes. Where people did identify projectsthat combine carbon reduction and sustainable

development benefit, the types of project mentionedmost often were efficient cooking stoves, biogasprojects, solar energy and forestry projects.

Efficient cooking stoves – for exampleClimate Care in Mexico

Efficient cooking stoves can reduce woodconsumption by as much as 50% and havesignificant health benefits, reducing the smokyfumes that come from burning wood. There is anadditional benefit of reducing the need to travellong distances for firewood, which saves time andmay prevent someone having to make tripsthrough areas of conflict.

Biogas – for example, SKS Sangha in India

A biogas plant consists of a brick-lined pit whereanimal waste and organic matter can ferment andproduces biogas that can then be used in lampsand burnt in stoves. The slurry produced by theplants can also be used as a fertiliser that can besold on by the villagers. SKS Sangha has installedover 43,000 of these biogas plants, with eachsaving around 4 tonnes a year of CO2 and around3.5 tonnes a year of fuel-wood. The plants costapproximately $250 and pay for themselves in 2-4years. Further benefits include the elimination ofunpleasant smells as previously animal waste wasput into concrete ponds and left to rot.

Solar energy – for example, Carbon NeutralCompany and Selco in India

Selco designs and sells solar lighting systems tounelectrified rural households in Karnataka, India.

The project replaces the kerosene lamps withsolar photovoltaic panels, a battery and energy-efficient lights. Selco partners with Carbon Neutralwhich sells the credit, and with micro-financeorganisations which subsidise the project to makeit more affordable for local people. The projecthopes to cut emissions by 34,500 tonnes by2010. Apart from the health benefits, the schemeprovides opportunities for additional incomegeneration (for example basket weaving ortailoring) and also enables children to study.

Forestry – for example, Plan Vivo’s ScolelTe in Mexico

Beginning in 1998, Scolel Te was the first forestryproject of its kind using the Plan Vivo system thatenables small-scale farmers to access globalcarbon markets. Farmers choose which forestrysystems they want to implement and the projectthen registers the amount of carbon that will beoffset by these sustainable forestry activities andfacilitates the sale. More than half the carbonincome goes directly to the farmers. The project ismanaged by a local NGO that also offers thefarmers training and advice on forestry,agroforestry, erosion control and communitydevelopment. It is estimated that this project haspotential for the sale of 100,000 tonnes of carbonoffsets per year.

BEST EXAMPLES OF PRO-POOR VOLUNTARY OFFSET SCHEMES (as cited in interviews)


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A recent review of ten winners of the Ashden Awards forSustainable Energy7 looked at the performance of smallschemes for low carbon energy access for poor people in delivering both carbon emissions reductions and realbenefits to the lives of people in developing countries.The ten winners included projects using improved stoves,biogas systems, solar home electrical systems, lanterns,

water pumps, and better-built homes. The review showedthat it is possible to scale up small projects to have amaterial impact both on carbon and on livelihoods. Ithighlighted the importance of carbon finance in enablingdelivery of these projects to low-income households,although for some schemes it did note the difficulties ofreaching the very poorest on a commercially viable basis.

What about offsets aroundavoided deforestation? 9

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Can appropriate offsets can be developed aroundavoided deforestation?

The table on this page and overleaf sets out some ofthe key arguments -

No

Leakage If a particular area of forest is protected, then deforestation will simply take place at the same rate elsewhere.

Lack of permanence Avoiding deforestation reducesthe carbon emissions that would have occurred if thetrees were destroyed, but (unlike for example replacing aunit of electricity generated from fossil fuels with a unitgenerated from renewable sources) there is no guaranteethat the trees will remain protected, so that carbon couldstill be released.

Additionality If systems (for example regulations orprotected areas) would be put in place to preventdeforestation whether or not there are carbon credits,then no credit accrues. This creates particular problemswhere projects are developed in countries that havealready put strong conservation measures in place. It alsocreates perverse incentives around rapid deforestation inadvance of the implementation of formal schemes.

Complexity of rights Respecting the rights of forest-based people is a critical feature of an avoideddeforestation project, especially the allocation of carbonrights. Large-scale profitable opportunities arising fromavoided deforestation may result in pressure ongovernments or others to transfer rights away from localcommunities.

Yes

Additional environmental benefits In addition to the carbon benefit, there are environmental benefits suchas protecting biodiversity, soil fixing, and watershedprotection, as well as social and economic benefits.

Constant and flexible resource The problem of alack of permanence in specific forests can be overcomein projects through various techniques such as the use ofbuffer reserves of non-tradable carbon credits to coverunforeseen losses in carbon stocks.

Cost The investment required for avoided deforestationcould be much less than is needed for renewable energytechnologies and is a more immediately attainable way toreduce carbon emissions, making time for technologiesto come on-stream. However, the cost and thecomplexity of avoided deforestation projects are oftenunderestimated.

Generating an economic value for forests ThroughAvoided Deforestation (AD) projects, the value of carbon(and potentially also the other social and environmentalbenefits of forests) can begin to be monetised, enablingan outcome where the forests are worth more standingthan they are chopped down.

Avoided deforestation has a potentially significant role toplay in both protecting livelihoods and in combatingclimate change. There are particular concerns that,because of its importance and the value that the marketplaces on forests, conflicts will be exacerbated over whoowns the right to the benefits that emerge, whether thisbe carbon, biodiversity or other ecosystem services.

The combination of the critical importance of forests incombating climate change, the complexities around theadditional social and environmental impacts, and theincreasing reluctance of voluntary carbon credit buyers tobuy forestry offsets (largely because of the difficulties ofensuring that avoided deforestation projects deliverspecified carbon reductions) has highlighted theimportance of putting in place robust standards that canbe applied to forestry carbon credits. In the compliancemarket, discussions are being held about the possibilitiesof including Reduced Emissions from Deforestation andDegradation (REDD) as an approved methodology underthe Clean Development Mechanism, but the negotiations

around this will take some time and no projects will beapproved until at least 2012. In the meantime, a massiveamount of work has been done to try to developappropriate standards for use in generating forestrycarbon credits for sale in the voluntary market.

The Voluntary Carbon Standard (VCS) guidance forAgriculture, Forestry and Other Land Use (AFOLU)projects, issued in November 2007, seeks to addressmany of the concerns outlined above. Defined solutionsfor addressing permanence, leakage, additionality,measurement and monitoring, which have emerged in the last few years, have been incorporated in the VCSAFOLU guidelines. This is discussed in greater detail insection 11 below.

In February 2008, the Climate, Community andBiodiversity Alliance announced the first REDD project tobe credited under its standard, the Ulu Masen Forest inAceh, Indonesia.


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Reduced incentives for governments to actCommunity forest projects, supported by NGOs, havereduced the impetus on governments to take morecomprehensive action.

Barrier to development Inappropriately specified landuse may lock the community into a pattern of subsistenceagriculture, impeding development for future generations.

Offsets cannot meet the scale of the challengeThey are simply a distraction.

Exploring practical solutions The voluntary carbonmarket tends to take a practical approach to resolvingproblems and these solutions can then be applied in thebureaucratic formal sector.

Maintenance of cultural rights and livelihoodsDepending on how the AD project is framed, it can leadto protection and/ or enhancement of the rights of thepeople who depend on forests (estimated at 1.2 billionpeople worldwide).

We need to start to respond to the challenge nowThe speed of deforestation requires interventions asquickly as possible and voluntary carbon markets canplay a part.

No Yes

What is the role of verification and reporting? 10

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In their State of the Voluntary Carbon Markets 2008report, New Carbon Finance and EcosystemMarketplace describe 2007 as the “Year of theStandard”. In the wake of criticism about the “WildWest” nature of the voluntary carbon market and aproliferation of new entrants, carbon offsetcompanies, organisations, NGOs and governmentsstrode in to make some rules. There are two,somewhat separate areas of verification and reporting– on the robustness of the carbon reduction itself andon the additional community, biodiversity and otherenvironmental benefits.

Some standards are simply applied and self-verified byoffset providers. In 2007, 50% of the transactionsconducted involved credits verified to an independentthird party standard8. These standards included theVoluntary Carbon Standard (VCS), CDM compliance, theChicago Climate Exchange standard, VER+ and the GoldStandard. In 2008, these were joined by the ClimateCommunity and Biodiversity standard. WWF carried out acomparative review of these standards in 20089. Manycommentators take the view that the number of standardswill now reduce, probably leaving the VCS and a coupleof ‘premium’ standards that offer the buyer additionalsocial or environmental benefits.

Independent verification has been referred to elsewhere inthis report as an important element to give assurance tothe buyer and to maintain the credibility of the market.The high cost of verification has also been mentioned asa factor in creating a possible trade-off betweenverifiability and pro-poor benefit. This is compounded bythe fact that the capacity for verification is vey limited insome areas, necessitating additional cost in sourcingverifiers from other parts of the world. Verifiers brought infrom outside a country are not only more expensive butalso less likely to be able to give a view on theadditionality of a project, since they may be unfamiliarwith existing local practices.

There are at least two important aspects on which there isuniversal agreement that assurance is required:

verification that a particular project is actuallyhappening and transparency about the expectedoutcomes and any degree of risk. But, given that basic assurance, there could potentially be considerable leeway in terms of how much more detailed verification of carbon, social and environmental benefits will be required.

As in any market, buyers are looking at least for basicquality, and need to understand what they are getting for their money, including assurance on the robustness of the carbon offsets. But, as identified in section 6, some buyers want something more. The market for pro-poor carbon can be compared with the market for fair trade products, where consumers voluntarily buyspecific products, often at a premium, to support pro-poor outcomes. Most fair trade companies evolved from charitable ventures but fair trade has now becomebig business, with fair trade coffee, for example, nowtaking a significant share of the market in the UK. In these markets, consumers are able to take someassurance from labelling – for example by the Fair Trade Foundation – but there have been no regulatoryinterventions to require certain standards. Indeed, someargue that if the burden of verification had been as heavyon these markets as is now threatened for the voluntarycarbon market, then it is unlikely that the fair trademovement would have been able to grow as fast and as effectively, and it would not have been able to learnthrough experience.

However, the carbon credit market arguably requires moreattention because one particular weakness in the systemcreates a distortion. Unlike in most markets, it is in theinterest of both the buyer and the seller to maximise thenumber of credits. This will both maximise the income tothe seller and keep the cost as low as possible for thebuyer. With a growing number of for-profit players in thecarbon market (in 2007, 90% of all voluntary transactionswere supplied by for-profit entities, up from 60% in200610), this is clearly an area of concern. Not-for-profitorganisations also have reasons to over-state carbonreductions if that leads to greater funding for projects on


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the ground. As the supply chain for credits becomes morecomplex, the roles of different players will evolve, as illustrated by the example of Practical Action workingwith Climate Care, Carbon Aided and Carbon Clear (see Box on page 18).

It is therefore not surprising that reputable sellers andbuyers tend to want verification of some form. Researchindicates that a credit meeting a third party standard oncarbon reduction does not tend to command a premiumprice in the market-place and is beginning simply torepresent the norm. This means that the cost ofverification has to be absorbed by the project developer.

And since it is often the case that verifiers will only getpaid if the project is validated, there is a clear incentivefor verifiers to approve projects even if they don’tmeet basic criteria. The scope for corruption and fraudin this respect is fairly wide. While there are benefits inhaving local validators – in terms of cost, and in terms oftheir knowledge of local laws and of additionality in thelocal context – some people advocate payments beingmade outside the country to reduce the scope forcorruption. If verifiers / validators were paid through anindependent pot of money, or paid by the buyers as partof the package price, then some of these distortionswould be removed.

• The Clean Development Mechanism has adetailed set of rules around projectdesign, methodology (includingadditionality, permanence, leakage,verification, transparency and double-counting) and stakeholder consultation.This standard includes all types ofprojects except Reduced Emissions fromDeforestation and Degradation.

• VER+ and the Voluntary Offset Standardare based on the idea that the voluntarymarket should follow CDM closely,including in terms of the rigorousmonitoring and verification. Thesestandards cover the same types ofproject as CDM, except large hydro.

• The Gold Standard, focusing on energyefficiency and renewable energy andsupported by NGOs including WWF, hasadditional requirements of projects toensure that they have a positive impacton the poor and on the widerenvironment. At the same time, itexpects full rigour on project design andmethodology. Projects under the Gold

Standard may take time to develop but ensure clear sustainabledevelopment benefits.

• The Voluntary Carbon Standard 2007,developed by a consortium of theInternational Emissions TradingAssociation, the Climate Group and theWorld Economic Forum, incorporatesmuch of the CDM criteria but has twounderlying principles for the tools itapproves – (1) they should be as simpleas possible to facilitate their low-costapplication and (2) they should useconservative and transparentapproaches. The VCS standard coverseverything except new HFC projects.

• The Climate, Community andBiodiversity Standard, created by apartnership between leading companies,NGOs and research institutes, applies toland management projects and has aparticular emphasis on the widerimpacts on community and biodiversity.

• Plan Vivo is a standard designed forcommunity-based agro-forestry projects.

SUMMARY OF PRINCIPAL STANDARDS


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DEFRA’S MINIMUM CRITERIA FOR INDUSTRY ASSURANCE

The UK’s Department for the Environment, Food and Rural Affairsannounced a Code of Best Practice in February 2008 stating that thefollowing criteria must be met for aVoluntary Emissions Reduction to qualify for the Code:

(1) Additionality - the project would not have taken place without the carbon credit

(2) Avoiding leakage - the project has not simply displaced emissions to adifferent location

(3) Permanence - the carbon reductioncannot be reversed

(4) Verification - an independent body has checked the carbon reductionstaking place

(5) Transparency - information on theproject is freely available

(6) Timing - the credits must be issuedonly after the carbon reduction hastaken place

(7) Avoiding double counting - a system orregistry is in place to ensure that acarbon credit is applied only once, andis not used to meet a compliance targetof any kind.

Programmatic verification, where a genericmethodology is applied across a programme to provide arobust estimate of the total amount of carbon reductionsmade, reduces the cost of a project-by-project approach.The development of methodologies across a range ofdifferent carbon reduction schemes makes this morefeasible. However, at this stage many commentators feelthat the data needs to be built up further throughindividual project data before it is possible to haveconfidence in any assumptions made about theprogrammatic outputs for many types of project. Broadassumptions can be made, and as the number of projectsgrows, these will become more accurate.

At present, there are a number of areas where themethodology is insufficiently developed, makingverification and reporting very difficult. One problem area is in defining the base-line for projects – for example, for the installation of cooking stoves – because there is such a wide variety of individualactivities that need to be captured. What fuel was used beforehand? How did this vary according toseason? How did this vary according to the climate in any particular year? To what extent was usage

limited by fuel availability? What other external factors influenced the use of fuel? The complexities mean that calculations based on non-renewable biomass are not possible and so kerosene or LPG is used as a base-line for calculation of the carbon reductions.Proper studies in the field and interviews with individualusers have to be carried out to get the richness of theinformation required.

In response to concerns being expressed about the lackof control over the market, governments have begun totake action around standards and to consider regulation.The box above shows the minimum criteria laid down bythe UK Government’s Department for the Environment,Food and Rural Affairs (Defra). Defra has challenged offsetproviders, NGOs and other organisations to come up withstandards that can meet all of these criteria, in order toqualify for the Government’s stamp of approval. Manyorganisations, including Forum for the Future, respondedto Defra’s consultation in this area by expressing concernand arguing the case for some flexibility in regulation sothat there is some room for the market to innovate anddevelop. The Defra Code effectively directs buyers to thecertified market and away from the verified market. Use of


26

this Code may mean that specific barriers to pro-poormarkets (such as up-front financing of credits) are moredifficult to overcome.

For reasons already outlined in this paper, forestryprojects create particular concerns as well as particularopportunities. Many of the minimum criteria outlined inDefra’s code may be particularly difficult to prove in thecontext of forests. The Voluntary Carbon Standard (VCS)guidance on AFOLU projects, issued in 2007 after severalmonths of consultation and expert specialist input, seeksto address this. Non-permanence risk, for example, ismitigated through requiring that projects maintainadequate buffer reserves of non-tradable carbon creditsto cover unforeseen losses in carbon stocks, and thatcredits in the buffer are cancelled when carbon is lostfrom the project. The guidance also requires that thescope for leakage is properly assessed and subtracted

from the carbon credits, and puts forward best practicemeasures that can be incorporated into the design of a project. For example, best practice might involve theuse of ‘leakage management zones’, areas bordering the forest in question where increased logging activity is monitored.

But there is clearly an enormous amount of work thatneeds to be done on a project before any form of thirdparty verification can be entertained. While many buyerswill seek verified projects, there is also a massive need forfunding to support projects in these early stages. Someinitiatives such as Plan Vivo and many of the smallerschemes highlighted by the Ashden Awards forSustainable Energy are working on small-scale projectsthat desperately need up-front support if they are toobtain long-term funding and grow to their full potential.This is explored in section 13.

Is there scope to include adaptation in offsets? 11

27

The aim of the carbon market is to generate a pricefor carbon. If the market functions correctly byinfluencing supply and demand, the increasing cost ofcarbon will incentivise reductions in carbon emissions.This will mitigate the pace of climate change and willreduce the likelihood of severe weather shocks thatwill affect poor people.

We know that climate change is already having an impacton developing countries, and many climate experts andother scientists take the view that a substantial furtherincrease in global temperatures is inevitable over the next few years, because of atmospheric changes already locked into the system, let alone further increases in global emissions. It is therefore clear thatthere is a need not only for mitigation activities to reducethe rate at which we release carbon into the atmosphere,but also a pressing need for adaptation activities thatreduce the vulnerability of people to the impacts that will inevitably arise.

The question is whether it is appropriate and helpful to try to build an element of funding for adaptationactivities into a carbon offset scheme. Once again, weneed to consider the view that, if the carbon markets aregoing to be successful, we should not expect them tocarry too much baggage. To try to incorporate the needfor adaptation may dilute the message around reducingcarbon emissions to prevent dangerous climate change.Moreover, adaptation costs cannot be related to the price of carbon.

Since the cost of meeting adaptation needs is not relatedto the price of carbon, it can be argued that the costshould essentially be met by a donation. Some peopleconsider that it is inappropriate to combine offsetpayments (designed to deliver a direct result in terms ofcancelling out the emissions made) with donations. Somecorporate offset programmes, however, build an additionalpayment into their budget in recognition of ‘legacy’ issues– in other words, to allow for the fact that historicalemissions of carbon over the last 200 years are creatingthe climate change that is currently contributing to

weather shocks in developing countries. All purchases ofvoluntary carbon credits could be seen as ‘compensation’from that perspective. And all could in a sense be viewedas donations because they are voluntarily made.

On the ground, one thing is clear. All carbon offsettingprojects need to be designed with the impacts ofclimate change in mind or they will not be sustainable inthe long term. And some projects can actually contributeto adaptation at the same time as reducing carbonemissions – for example a forestry project will absorbcarbon and will at the same time play a role in protectingsoil against erosion, retaining water and so on.

The best way to increase people’s adaptability is toincrease their income. One of the ways of improvingadaptability is therefore by ensuring that as much aspossible of the money generated by carbon offsetprojects stays in the developing country concerned.This might be through AFOLU projects, through energyefficiency projects that reduce the costs of energysupplies, or through other energy schemes that free uptime for productive work. There is also some legitimateconcern about the proportion of the profit that is retainedby offset providers and project developers rather thanchannelled to the local community.

Many of the best projects in the voluntary carbon markethave a spin-off benefit in terms of greater adaptation. Forexample, treadle pumps give people greater access towater even in times of low rainfall.

Adaptation will also involve necessary expenditure onphysical infrastructure, drought-resistant crops and earlywarning systems. Some NGOs are currently working onways to incorporate these elements of adaptation intovoluntary carbon trading schemes.

And it could be that talking about the need for adaptation begins to focus the attention of consumers in the developed world on the massive implications of climate change and how we need to change ourlifestyles dramatically.


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specifics of the geography concerned. One of the challenges is to work outindicators of success, so that a project can report on how it has reducedvulnerability. For example, a small rise in the sea level could affect the livelihoodsof millions of people. Mangroves providesome natural protection. How might thesuccess of a project designed to maintainor expand mangroves in key locations be assessed?

INCORPORATING ADAPTATION INTO OFFSETS

The International Institute for theEnvironment and Development (IIED) and the NGO CARE have identified a real appetite amongst corporate buyers to engage further on the adaptationagenda. They are developing ways ofincorporating the principles of adaptationinto offsets, with a wide range of differenttypes of scheme, depending on the

12

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One key barrier is the small scale of many pro-poorprojects and the difficulty of developing them, giventhat the costs of establishment and verification aredisproportionate to the number of credits generated.

Another is the absence of key methodologies for sometypes of project that could deliver real pro-poor carbonreductions at scale, as discussed in section 10 above.Examples include methodologies for measuring thepreservation or enhancement of soil carbon or formeasuring carbon reductions from regeneration oftownships to improve housing and transport systems. Thecurrent exclusion of forestry projects from most voluntaryoffset schemes as a result of concerns over permanence,additionality and measurement is also a key barrier andcan only be addressed through restoring trust in forestryas an appropriate mechanism for reducing carbonemissions. This will require continued focus on thesuccessful ways in which forestry can be incorporated ina carbon trading scheme with both carbon and pro-poorbenefits. Both the VCS AFOLU guidelines (launched inNovember 2007) and the CCB standard are designed toaddress this concern.

The carbon price is a fundamental barrier to the roll-outof pro-poor voluntary carbon schemes. Because it iscurrently low, many schemes (such as solar waterheaters) do not have a high enough payback. However, it

is possible that, if the true costs were reflected in the finalcost of carbon, then the voluntary carbon market wouldshrink because the amount would be too high for peopleto engage. The challenge is to harness the carbon priceto make marginal technologies more viable and bringthem to a wider market.

The media has been cited as another important barrier todevelopment of the voluntary carbon market. Because ofthe general attitude to carbon offsets reflected in thepress, many individuals have decided not to engage inthe voluntary carbon market. Equally, many companieshave been scared into taking a very safe option in theircarbon offset strategy, since they do not want to be opento criticism about the lack of robustness of their carbonreductions or to have unforeseen consequences in termsof the impacts on the poor.

Those in the development and NGO community whotake the view that the voluntary carbon market can havedevelopment benefits have not been vocal enough aboutadvocating those benefits. The NGOs that take a strongposition that the voluntary carbon market will not becapable of delivering real change and prevents peoplemaking reductions at source have struck more of a chordwith the media and have been more successful at gettingtheir messages across. Ironically, many of the NGOs thatare vocal about the negative aspects of the voluntary

Key barriers to carbon markets workingfor the poor are –

• The small scale of many pro-poorprojects, giving rise to high set-up costsand worse value for money compared toindustrial schemes

• Absence of key methodologies – forexample, for soil carbon

• The carbon price being too low

• The media downplaying the role of thevoluntary market and scaring off buyers

• NGOs who do not see a value in the

voluntary carbon markets

• Lack of negotiating power and – for someprojects, particularly forestry – no clearproperty rights, including carbon rights

• Perceptions that poor communities havea low carbon footprint so thatopportunities for carbon reductionschemes are limited

• A lack of delivery infrastructure

• A lack of governance to ensure thatbenefits flow to the poor

What are the barriers to carbon markets working for the poor?


30

carbon market do purchase offsets for their ownunavoidable emissions. The development NGOs that areworking to develop pro-poor projects on the ground needto engage companies in a more positive dialogue aboutthe benefits, and could play a more active role inendorsing specific carbon reduction schemes.

As discussed in section 7 above, the lack of negotiatingpower for local communities and project developers is atheme that has come through strongly in our research.With the supply chain for voluntary carbon tradingbecoming increasingly complex, there is potentiallygreater scope for profits to be squeezed out at each level.Lack of clear property rights, particularly carbon rights,is another barrier to some types of pro-poor carbonmarkets, especially forestry. Without strong nationallegislation in these areas, the risks of developing a projectare high, because of the danger that the carbon credits,when generated, will accrue to someone other than theparties engaged in the project.

It is often assumed that the poorest people in poorcountries – who do not have access to electricity, uselimited transport and consume very little - do not have asignificant carbon footprint and that therefore there are

only limited opportunities for reducing their carbonemissions. This is not always the case, particularly sincethe poor’s use of charcoal and wood fuels is high. Thescope for making carbon reductions through pro-poorschemes is actually much greater than it is generallyperceived to be.

Another barrier arises through the lack of infrastructureon the ground. Poor physical infrastructure, such as roadsand communications, might prevent access to thevoluntary carbon market because of the difficulties thiscreates for establishing, monitoring and supportingprojects. Lack of access to credit may create constraintsin starting up new schemes. And weak educationalinfrastructure may reduce the opportunities available forlocal people in the voluntary carbon market – for exampleas offset providers or verifiers.

The governance of schemes may be ineffective inensuring that the benefits flow to the local communities.They may indeed be designed deliberately to ensure that income and profits flow to other players in the supply chain, without an appropriate allocation of risk,cost and benefit.

13How can companies be engaged more effectively?

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The credibility and success of voluntary offsetschemes depends on them being seen as the finalpiece of a corporate strategy to address carbonemissions. The most fundamental action that abusiness can take to support the success of thevoluntary carbon market is therefore, perversely, towork hard at energy efficiency measures (in otherwords, internal emissions reductions) that will reducethe need for voluntary offsets. The market needs togrow as a result of more companies and individualsseeking to offset what remains at the end of thereduction pipeline, rather than from companies andindividuals offsetting increasing emissions. Anongoing commitment to neutrality can help here,because offsets become an ongoing cost and anincentive is created to reduce the company’semissions baseline.

When developing their carbon offset strategy, theapproach that companies take will depend on theirobjectives. As outlined in section 6, companies’motivations will vary and therefore the type of offsetsought will vary too. But we are seeing an increasing

need for companies to explain their strategy on carbonreduction, what they mean by ‘carbon neutrality’, how it isbeing achieved, and what the impacts of this strategyhave actually been.

Some companies will want to take the line of leastresistance and simply purchase credits from the certifiedmarket. Others will want to take a more imaginativeapproach and engage in some way with the projects fromwhich they buy their credits. If they are going to continueto tell stories that inspire customers, staff and otherstakeholders, they will need to consider refining theirrelationship with the projects they support.

Companies that aspire to lead on this agenda need tobecome better at understanding the local communitiesand they should be prepared to take more risk. The boxoverleaf outlines the principal risks being taken by partiesto a carbon offsetting project. At present, projectdevelopers tend to take the upfront risk of delivery of thecarbon credits. In addition, the project developers oftendo not get the full value for credits because they are alltaken by big offset providers with strong bargaining

Companies can –

• Ensure they have in place a robuststrategy for reducing their own carbonemissions, so that offsetting is genuinelyseen as a last resort

• Participate in dialogue around how bestpractice may evolve, so that companiesare moving beyond current definitions of ‘carbon neutrality’

• Take on more of the early-stage risks in a carbon credit project

• Provide financial / business expertise

• Support local enterprise in setting up projects

• Help to extend the range of projects that

can be funded through voluntary schemesby paying for the development of newmethodologies

• Enter into partnerships with NGOs to engage more effectively with local communities

• Work with NGO partners to assess the value of the ‘co-benefits’ afforded by some offset schemes, and therebycontribute to discussions on paymentsfor ecosystems services

• Develop ways of incorporating carbon credits into their products and services

• Communicate the great stories

RISKS FOR ALL PARTIES IN THEVOLUNTARY CARBON MARKET

(1) Delivery risk – Projects may under- orover-deliver on carbon credits. Somesellers, such as the Carbon NeutralCompany, will bear this risk for theclient and provide a guarantee, buyingcredits from traders if a particularproject under-delivers.

(2) Project risk – Where a project under-performs, it can only sell the credits itproduces, resulting in loss of revenuefor the project owner.

(3) Contractual risk – Emissions PurchaseAgreements include required standards,price (sometimes linked to the market

price) and contingencies arising from future changes for example to legislation.

(4) Counter-party risk – The buyer or sellermight default. This depends in part onthe size of the organisation.

(5) Reputational risk – Failed or morallyquestionable projects can impactreputation, especially if covered by themedia.

(6) Quality risk – The carbon credits aregenerated on paper but there is a riskthat their quality is in fact poor – forexample, in terms of their additionality.

Source: Carbon Connections: Carbon Finance and SustainableDevelopment – Summary of Proceedings Mercy Corps conference,November 2000


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power. Early link-up with projects can deliver benefits forboth sides – for example, a project developer might getfinance from a bank in the developed world in return forexclusive rights to the credits. The bank might also be ina position to provide financial / business expertise tothe project developer, enabling the business to expandfurther or faster than it otherwise might.

While many project developers have tended to be NGOs, there is also scope for companies to support local enterprise in establishment and delivery of carboncredit schemes.

One model might be that companies support or initiate projects on the ground through allocation of some of their ‘CSR’ budget and then when the projectsare up and running there can be a transfer out ofcharitable or community support activities and intocarbon trading accounts.

Companies can also help to fund development ofmethodologies. This will extend the range of projectsthat can be financed through voluntary carbon schemeswhile increasing the ability of the company todemonstrate robustness on its carbon calculations.

Tying voluntary carbon trading schemes into companies’supply chains makes sense from the point of view ofcloser engagement and connection between the projectand a company’s customers and staff. However, thisfocus on countries where a company has sourcing oroperational activities inevitably leads to some placesbeing less able to attract interest for their schemes, andsome countries, particularly in Africa, losing out. In theseplaces, more effort may be needed by non-commercialactors to bring projects to a stage where they are readyfor funding.

Also companies could do more to make connectionsbetween voluntary trading schemes and the productsand services they provide. For example, an electricalappliance could be sold with a package that explains thelikely energy usage per hour / day, calculates the likelycarbon footprint emerging (giving a range of possibilitiesdepending on energy source, location and so on),provides energy efficiency guidance, and suggests to the consumer an offset scheme that the company hasdeveloped a relationship with.

Finally, companies can play an important part incommunicating the success stories.

14What are the key roles for donors?

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There is potential for donor funding to improve theway the voluntary carbon market functions, but thishas to be targeted very well. Particular areas where itmay be useful are in helping to develop themethodologies that enable communities to developtheir own projects, procuring credits from pro-poorprojects, and assisting with training facilitators whocan help project developers to develop suitableprojects and to negotiate with offset providers.Another role could be in providing support forverifiers, either through providing funding for theverification / validation of projects or throughcapacity-building.

There is a vast gap at present between the need formassive projects to deliver the carbon reductions needed(which tends to direct attention towards large-scaleindustrial projects) and the need for projects that addresspoverty (which tend to be on a small scale). One way inwhich this gap could be closed is through pooling or

bundling projects together. There is a potential role fordonors (including pioneering private sector companies) inpiloting bundling schemes of this kind.

The success of the voluntary carbon market in bringingfunds to the poorest developing countries is relatedclosely to the factors that influence the direction of anyinvestment flows. So it will be easier to generate carboncredits in a country where property rights (includingcarbon rights) are clear, where the rule of law is upheld,and where there is good governance. The role that donors and governments play in funding improvements in basic investment infrastructure is as fundamental to the carbon markets as it is to all other markets. Wherenational regulations can be strengthened to support more effective property rights, stronger forest protectionand reduced levels of corruption, these will all contributeto the potential for developing pro-poor carbon-related forestry projects.

DONORS CAN IMPROVE THEFUNCTIONING OF THE VOLUNTARYCARBON MARKET BY –

• Helping to develop methodologies

• Procuring credits from pro-poor projects

• Supporting the training of facilitators tosupport project developers and negotiatewith offset providers

• Providing funding for the verification /validation of projects

• Assisting with a pilot ‘bundling’ orpooling scheme to get scale

• Funding improvements in basicinvestment infrastructure

• Supporting entrepreneurial activity

15What are the possible futures for the voluntary carbon market?

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The growth in the voluntary carbon market over thelast year has been substantial. 42.1 million tonnes ofcarbon were traded in the “over-the-counter” marketin 2007, tripling the volumes traded in 2006. Theinternational OTC market was worth US$258 million in2007. While this is still small in relation to theregulated market (representing only 2.2%), the rate ofgrowth is nevertheless noteworthy.

But where will it go from here?

One scenario sees continuing or growing criticism andnegative coverage resulting in companies andindividuals turning away from the voluntary carbonmarket, and the market effectively closing down. Thisscenario will be most likely to happen if the voluntarycarbon markets are used as an excuse for taking no realaction on reductions. Even if the voluntary carbon marketis being used in a responsible way to innovate and effectreal change, this scenario could potentially still emerge ifcommunication is weak around the potential positiveaspects of the market.

In one possible scenario, the voluntary carbon market willcontinue to grow substantially, but regulation andstandards brought in ostensibly to protect buyers ofcarbon credits will have a negative impact both on thesupply of projects (because they cannot meet thestandards) and, counter-intuitively, the demand (becausebuyers lose interest in projects that can no longerdemonstrate innovation). Resources will be diverted away from pro-poor projects because projects involvingforests, soil carbon and household-level energy projectscannot be either robust enough on their carboncalculations or large enough to bear the costs ofdevelopment and verification.

In an alternative or a parallel scenario, the voluntarycarbon market will effectively be absorbed by thecompliance market as more regulation is brought in tocover a greater and greater part of economic activity.There has already been a substantial fall in the size ofprojects taken through the Clean DevelopmentMechanism, from 20,000 tonnes of carbon reduction

per project to 10,000 tonnes. This threshold may fallfurther as systems become more streamlined. However,there is likely to be continuing role for the voluntarymarkets as a testing ground for new methodologies andprocesses that will then become absorbed into thecompliance market once proven.

For those who feel that the voluntary market can have nopositive impact on behaviour, these markets will continueto create a distraction from the key task in hand,which is to radically reduce the consumption of resourcesresulting in reduction of carbon emissions across theworld, rather than offsets.

If technical solutions to combat carbon emissionsemerge, so that companies are able to make significantreductions in their carbon footprint and do not resort to offsetting, then funding for pro-poor projects could dry up.

In what might be considered the ideal scenario, thevoluntary carbon market will become more explicitlydifferentiated, enabling customers to select the type ofoffset they want to purchase. Industry players will be ableto test different approaches, which can then be broughtinto the regulated market. Robust standards (perhapsbased on guidance offered by the VCS) will provideassurance for the bulk of the market, and these will besupplemented by carefully managed schemes (such asthe Gold Standard and the Climate, Community andBiodiversity Standard) to offer additional benefits,available to buyers at a premium. Up-front costs ofdeveloping pro-poor projects both in the energy andAFOLU areas will be seeded by companies andindividuals who gain assurance from a greater degree ofinformation-sharing and support through NGOs and whoagree to buy credits down the line. Trained facilitators willbe available to assist in ensuring progress towards formalverification and to advise the project developers ofrelevant market prices.

The potential size of the voluntary carbon market isunclear and will depend on a range of factors that cannotbe estimated, including the pace of regulation and the

15rate of change in personal and corporate behaviours. Butit has the potential to provide a very important source offunding for investment to combat climate change and topave the way for the tighter markets and regulation thatwill inevitably be introduced over time.

There are several challenges in making the voluntarycarbon market work for the poor: ensuring that carboncredits are generated in a way that is compatible withwider social and environmental objectives; retaining the credibility of the market through robust standards; and capturing the imagination of individuals so that

they get involved with offsetting but also reduce their own carbon footprint.

Several initiatives are currently contributing to themomentum that is required, and there are opportunities to generate further progress, including the actionssuggested in this report. The voluntary carbon market can deliver pro-poor benefits at scale but only if thesupport it receives from companies and individualscontinues to grow at a rapid pace, and if the actionsoutlined in this report are taken.


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16recommendations

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Companies should take action to fund the pro-poorvoluntary market, with each company’s approachdepending on its own objectives for engagement.

Key potential actions for companies are -• Redouble efforts to reduce their own internal

carbon emissions • Participate more actively in dialogue around how best

practice carbon management strategies may evolve,moving beyond current definitions of ‘carbon neutrality’

• Investigate how they could take on more of the early-stage risks in a carbon credit project and providefinancial or business expertise

• Provide help for the development of new methodologiesor partner with NGOs to engage more effectively withlocal communities

• Develop ways of incorporating carbon credits into theirproducts and services

• Communicate the success stories.

Donors should take further steps to improve thefunctioning of the voluntary carbon market: forexample, they can -• Help to develop methodologies• Procure credits from pro-poor projects

• Support the training of facilitators to support projectdevelopers, to increase their knowledge of the marketand to help them to negotiate with offset providers

• Provide funding for the verification and validation of projects

• Assist with a pilot ‘bundling’ or pooling scheme to get scale

• Fund improvements in basic investment infrastructure• Better understand and communicate the current and

future role of the voluntary carbon market, recognisingits limitations but building on its strengths.

Individuals should re-evaluate their position onvoluntary offsetting and -• Recognise that the voluntary carbon market does not

address the fundamental challenges, but that, viewedalongside carbon reduction and not as an alternative toit, it has a role to play in the necessary transition to alow carbon economy.

• Engage actively with the need to change behaviour• Calculate their own carbon footprint• Find ways to reduce their own emissions and

take action• Connect up with voluntary carbon trading schemes that

meet their needs in terms of robustness and innovation.

16Kerryn Schrank BP plc

Paul Dickinson Carbon Disclosure Project

Andrew Pendleton Christian Aid

Paul Monaghan Co-operative Group

Willie McGhee BioClimate Research and Development

Richard Cooper Lloyds TSB Group plct

Mark Kenber Climate Group

Georgina Stevens Virgin Atlantic Airways

Michael Buick Climate Care

Martin Wright Forum for the Future - Green Futures (London)

Aubrey Meyer Global Commons Institute

John Pontin JT Group - Bristol

Jasmine Hyman Gold Standard

Josh Harris Voluntary Carbon Standard

Tom Morton Pioneer Carbon

Jerry Seager Carbon Neutral Company

Charles Ehrhart Care International UK

Anton Cartwright PACE

Jim Jarvie Mercy Corps

Grant Little Ecosecurities: South Africa Office

Stuart Clenaghan Carbon Capital Ltd

Geoff Sinclair Standard Bank

Leo Peskett Overseas Development Institute

Richard Tipper Edinburgh Centre for Carbon Management

Muyeye Chambwera IIED

Kevin Smith Carbon Trade Watch

Jutta Kill FERN

Ian Roderick Go Zero; Converging World

Colin Mackie Office of Climate Change (seconded to Eliasch Review Team)

Aditi Maheshwari DFID

Dick Jones Carbon Aided

Nasrine Amzour Defra

Paul Irving Defra

interviewees


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1. Forging a Frontier: State of the Voluntary Carbon Markets 2008, New Carbon Finance and Ecosystem Market-place, May 2008. This number excludes the voluntary cap and trade scheme, Climate Exchange2. Forging a Frontier: State of the Voluntary Carbon Markets 2008, New Carbon Finance and Ecosystem Market-place, May 20083. See for example “Is the CDM fulfilling its environmental and sustainable development objectives? An evaluation of the CDM and options for improvement.” Report prepared for by Oko-Institut for WWF, November 20074. Forging a Frontier: State of the Voluntary Carbon Markets 2008, New Carbon Finance and Ecosystem Market-place, May 20085. Forging a Frontier: State of the Voluntary Carbon Markets 2008, New Carbon Finance and Ecosystem Market-place, May 20086. Forging a Frontier: State of the Voluntary Carbon Markets 2008, New Carbon Finance and Ecosystem Market-place, May 20087. Scaling up low carbon energy: lessons from the Ashden Awards for sustainable energy- IIED and AshdenAwards, May 20088. Forging a Frontier: State of the Voluntary Carbon Markets 2008, New Carbon Finance and Ecosystem Market-place, May 20089. Making Sense of the Voluntary Carbon Markets: a comparison of carbon offset standards, WWF, February 200810. Forging a Frontier: State of the Voluntary Carbon Markets 2008, New Carbon Finance and Ecosystem Market-place, May 2008

references


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partnersABN AMROAdvantage West MidlandsAga Foodservice GroupAkzoNobelAlliance Boots Ltdapetito LtdArup GroupAsda Stores LtdBAA plcBalfour Beatty plcBolton Metropolitan Borough CouncilBBCBP plcBritish Cement AssociationBT plcCadburyCaerphilly County Borough Council CafedirectCalorCargill plcCarillion PlcCheltenham Borough Council CDC Group plcCity of LondonConocoPhillips (UK) LtdCo-operative GroupCornwall County Council Crest Nicholson PlcCushman & WakefieldDacorum Borough CouncilDevon County CouncilDTZ Investment ManagementDuchy OriginalsEDF EnergyEnvironment AgencyEurostar (UK) LtdFife Council

FirstGroup plcFlintshire County CouncilFriends Provident LtdGlaxoSmithKlineGSH GroupGuardian News and MediaHalcrow GroupICI plcIGDInterfaceFLOR Europe LimitedJohn Laing plcJohn Lewis PartnershipJohnson MattheyJT GroupKingfisher plcKraft Foods UK LtdLancashire County CouncilLand Rover Jaguar Cars LtdLeeds City CouncilLloyd’s Register GroupMarks & Spencer plcMCM ArchitectureMerrill LynchMiddlesborough CouncilMinoan GroupMorley Fund ManagementNationwide Building SocietyNorthumbrian Water Group plc North West Regional Development AgencyOGC.buying solutionsOZOlabsPepsiCo UKPowys County Council Pret A Manger LtdPruPIMRail Safety and Standards BoardRestormel Borough Council

Royal & SunAllianceRoyal Bank of Scotland GroupRoyal Dutch Shell plcRoyal Mail GroupRWE npowerSainsbury’s Supermarkets LtdSC Johnson LimitedScottish & Newcastle plcSerco Group PlcSevern Trent plcSkanska Integrated ProjectsSouth East England Development AgencySouth West TourismSwindon City Council Tesco plcTetley GroupTetra Pak LtdThames Water Utilities LtdTime WarnerTUI Travel plcUnilever plcVirgin Atlantic Airways LtdVisitBritainVodafone GroupWarburtonsWarwickshire County CouncilWatesWelsh Assembly GovernmentWelsh Local Government AssociationWessex Water plcWest Sussex County Council Willmott Dixon LtdWm Morrison Supermarkets plcWorcestershire County CouncilWrexham County Borough CouncilYorkshire Forward

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