Global Sustainable Development through Voluntary Carbon Offset Market

By Rajha Gopalan
August 2008

The Author is CEO at Renco Technologies in Chennai, India. His company provides Green Energy Consulting Services, Carbon Transaction Advisory Services, Technology Transfer, and is arranging Equity & Project Finance.

The Challenges of Sustainable Development

The beginning of the 21st century is witnessing an unparallel growth in the developing world (viz. China, India & Brazil) and as a consequence both the environment and the quality of life is taking a heavy toll.

Many developing countries are choosing to follow the development patterns of the industrialized countries, which inevitably deplete the earth’s resources in an unprecedented manner and this has created fear in the minds of the many experts that the limit of the earth’s capacity will be reached in the next 50 years!

Hence, one needs to ponder whether the environmental issues we focus on now are early indications of the global trends or merely the manifestation of local failures in the turbulent global scenario? The reality is we cannot wait until we resolve this puzzle but what we can do is to respond to the challenges of sustainable development through social and technological innovations.

According to the World Business Council on Sustainable Development (WBCSD) based in Geneva, about 50% of the world’s income is produced by 12% of the total population, 44% does not have access to proper sanitation, 22% live on less than US$ 1.0 / day and 20 % suffer from malnutrition. By the year 2050, the human population will increase from the current 6.0 billion to 9 – 11 billion. Needless to say, the material consumption will grow substantially resulting in a terrible strain on the already stressed ecosystems.

The WBCSD has been exploring 3 scenarios to respond to the challenges to sustainable development, which would act as tools for learning about the future. One such tool is JAZZ, wherein diverse players join in ad-hoc alliances to solve social and environmental problems in the most pragmatic way through technological innovations, rapid adaptation and voluntary interconnectedness in a powerful and ever-changing global market.

In a highly competitive and interconnected world, businesses see the economic advantages of adopting “green labels” and hence embrace their consumers as partners and undertake effective measures to incorporate environmental & social values into market mechanism. The Voluntary Carbon Offset Market is a shining example of this market mechanism !

The Voluntary Carbon Offset Market

The Voluntary Carbon Offset Market functions outside the “Kyoto Compliance Market” and it enables Businesses, NGOs and Individuals to offset their emissions, either by purchasing offsets that are created in the Voluntary Market (known as VERs - Verified or Voluntary Emissions Reductions) or that are created through the Clean Development Mechanism (CDM). According to World Wildlife Fund (WWF), about 17% of the Carbon Offsets sold in the Voluntary Market in 2006 were sourced from CDM Projects!

Unlike the CDM, there are no established rules for the Voluntary Carbon offset Market but due to lack of quality control, this has led to the production of low-quality VERs, which has come under severe criticism by leading NGOs and the press. The Voluntary Carbon Market enables those in unregulated sections (such as aviation, shipping & real estate development) or Countries that have not ratified Kyoto (such as the USA) to offset their emissions.

International Experts predict that the Voluntary Carbon Offset Market could expand to 400 million tons of carbon dioxide (mtco2) equivalent by 2010, and this represents a market value of Euros 2.0 billion (based on minimum value of Euros 5.00 / quality VER) and with the Voluntary Market growing in the USA, the market size and values could indeed increase exponentially!

The Voluntary Market operates under various Standards and they are summarized below for easy reference.

Voluntary Carbon Offset Standards for VERs
Full-Fledged Carbon Offset Standards Project Design Standards Offset Standard Screens Offset Protocols Other Standard Types
CDM
VER+
CCX
Their Registries:
Gold Standard (GS)
Voluntary Carbon Standard (VCS)
Climate Community and Biodiversity Standards (CCBS) Voluntary Offset
Standard (VOS)
ISO 14064-2

WRI/WBCSD’s GHG Project Protocol
Plan Vivo
Source: World Wildlife Fund (WWF)

To conclude, it is noteworthy that buyers of Voluntary Carbon Offsets are more specific about the project type and the sustainability criteria viz. the local community involvement and adoption of green energy technologies.

Who said “Carbon Credits” are only for the Corporate and does not help the communities and promote Sustainable Development?

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