Perception of Voluntary Carbon Offset Markets Mixed in Recent Poll; Respondents Laud Innovation Potential But Many Doubt Reality of Emission Reductions

The global carbon analysis consultancy Point Carbon released its fifth annual survey on March 3. “Carbon 2010: Return of the Sovereign,” edited by E. Tvinnereim and K. Røine, is based on 4,767 survey responses. Respondents were either elicited by Point Carbon to respond in January and February 2010 or voluntarily participated through the organization’s website. The number of respondents this year grew 29% compared to 2009.

The largest number of respondents came from the United States (753), followed by the United Kingdom (445), India (231), Australia (224), Germany (199), Canada (187), Norway (138), China (135) and Brazil (104). Smaller numbers of respondents came from an additional 109 countries. The authors of the survey caution that the poll is not representative of general public opinion as sizable numbers of respondents are involved in emissions trading (39%), are regulated under the European Union Emissions Trading System (24%), are associated with financial institutions (13%), or are involved in the US emissions offset market (11%).

The “Carbon 2010” report covers carbon markets and policies in 2009, the future of carbon trading and policy in 2010 and beyond, and concludes with some crystal-ball gazing it labels “the return of the sovereign.” In this vision of the future a binding international climate treaty regime is superseded by a country-by-country “pledge and review” system. The complete report runs 40 pages.

Readers of this report will find much to ponder. We found responses to a set of four questions assessing voluntary carbon markets particularly interesting. Point Carbon has asked the same questions three years in a row, so trends over time among survey respondents can be discerned. Nearly 80% (3,777) of the total number of survey respondents answered these four questions.

In 2010, 51% of survey respondents agreed with the statement “The voluntary carbon market fosters innovation in emission reduction methods.” This compares to 42% who gave the same answer in 2009 and 40% who agreed in 2008.

At the same time, only 38% of survey respondents in 2010 agreed with the statement “The voluntary carbon market produces real emission reductions.” Nonetheless, this number is up from 32% in 2009 and 27% in 2008. This level of belief in the reality of voluntary carbon offsets is disturbingly low, especially when the survey population is, on average, much better informed than the general public.

One positive conclusion that can be drawn from an analysis of the answers to these two questions is that increasing numbers of respondents believe that voluntary emission reduction projects can contribute to the mitigation of climate change.

Perhaps the sizable number of respondents who withheld agreement from the second statement did so because they believe emissions trading should occur in the framework of a regulatory system, and fear that lower standards in a voluntary trading system could compromise broad support for a regulatory system. The latter conclusion appears to be buttressed by responses to a third question, with which 36% of survey respondents in 2010 agreed: “The voluntary carbon market poses a risk for the reputation of the compliance market.” Voluntary market supporters may take solace from the fact that the trend is down on the answer to this question. The percentage who agreed in 2009 was 37, and in 2008, 40.

Finally, a fourth question in this series asked for agreement with the following statement: “The voluntary carbon market is transparent.” The percentage of respondents agreeing in 2010, 2009 and 2008 were, respectively, 18, 14, and 10.

The last question may provide another clue to the tepid support for voluntary carbon markets expressed in the first two questions reported on here. Without transparency, there can be only limited trust, and without trust, only the bravest will invest. In this respect a positive sign from the Carbon 2010 survey is that the trend line is improving. However, it is difficult to conclude that voluntary carbon trading does not face an uphill battle for acceptance when only 18% of knowledgeable survey respondents agree that voluntary carbon markets are “transparent.”

Reasons exist to expect this number to grow in future years. The most popular voluntary emission reduction credits, Climate Reserve Tonnes (CRTs) and Voluntary Carbon Units (VCUs), use registry platforms that are publicly accessible and ensure that verified tons are issued serial numbers and can be traced back to the projects that generated them. In addition, greenhouse gas validation and verification bodies (VVBs) operating in the US increasingly are accredited by the American National Standards Institute to ISO 14065, an international standard that prescribes requirements for the operation of a VVB.

Nonetheless, the results of the Carbon 2010 survey are still sobering for those who believe voluntary carbon offset markets have an important role to play in reducing greenhouse gas emissions. Nothing less than adherence to the highest standards of rigor in developing, reporting and verifying voluntary greenhouse gas emission reductions is needed if the improvements in sentiment found in Carbon 2010 are to continue to grow in coming years.

© Futurepast: Inc., 2010

Application of Principles Improves Greenhouse Gas Inventory and Project Accounting

International standards published in 2006 define principles for greenhouse gas (GHG) accounting. Five principles are provided in ISO 14064 Part 1, Greenhouse gases – Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals:
• Relevance
Select the GHG sources, GHG sinks, GHG reservoirs, data and methodologies appropriate to the needs of the intended user.
• Completeness
Include all relevant GHG emissions and removals.
• Consistency
Enable meaningful comparisons in GHG-related information.
• Accuracy
Reduce bias and uncertainties as far as is practical.
• Transparency
Disclose sufficient and appropriate GHG-related information to allow intended users to make decisions with reasonable confidence.

These five characteristics of GHG accounting are principles, rather than requirements, because they are aspirational in nature. In some cases trade-offs are either explicitly stated or strongly implied. The first principle of relevance is explained by reference to a process of selection. It is expected, therefore, that an inventory manager will make choices concerning the identification of sources, sinks and reservoirs, data sources, and quantification methodologies in establishing the inventory. Even when a choice does not compromise the principle of completeness, it may imply some arbitrary decision making. An example could be selecting an appropriate degree of aggregation for individual sources. Relevance, therefore, guides the inventory manager in pursuing the next principle, completeness.

In theory, organizations should strive for 100% completeness in reporting. In practice, some sources will be reported at higher or lower levels of detail, and some may even be missed, especially when an inventory is first established. The relevance principle is not intended to permit organizations to underreport their emissions, but rather to acknowledge that 100% completeness is not likely to be achieved. For example, organizations may have trees on their properties. It is rare among organizations, except those with large numbers of trees under professional management, to account for the changes in carbon stocks in their inventories.

Consistency refers to the manner in which GHG emissions information is stated, both in terms of data aggregation and consolidation practices within an organization’s inventory for a single reporting period, and with respect to the application of accounting methodologies from one reporting period to the next. This principle may on occasion be at odds with the accuracy principle, which exhorts inventory managers to reduce bias and uncertainties. Why would such a tension arise? In the case where an inventory manager decided to revise the organization’s accounting methods in a subsequent year for quality improvement purposes, the emissions accounting would no longer be consistent with prior year reporting. Inventory managers may in reality make such choices, but they should not do so casually, and the facts of any significant accounting methods changes should be fully disclosed. In some cases, restatements of prior year emission accounts may be called for. Another application of the principle of consistency is the adjustment of an organization’s base year. Triggered by acquisitions and divestitures, base year adjustment ensures the consistency of reports from one reporting period to the next.

The principle of accuracy seems self evident. Organizations should neither underreport nor overreport their GHG emissions. ISO 14064-1 introduces the concept of “practicality” in this principle, however, because in reality it is no more possible to be 100% accurate than it is to be 100% complete in reporting emissions. The principle of accuracy is tempered by the concept of materiality, which recognizes that coming close to the “true number” is good enough. Common reasons for not achieving 100% accuracy may arise due to limitations of measurement devices or to the application of intermittent measurement instead of continuous measurement. Or it may be due to the use of emissions factors, which are based upon the averaging of values.

The last principle, transparency, challenges organizations to gather and report GHG information in sufficient detail so that intended users can properly evaluate it. This is not normally an issue when an inventory manager gathers information and reports it internally. Questions typically only arise when an organization has to decide how much detail to include in publicly disclosed reports. This involves choices, and the exercise of judgment. Other business considerations may come into play, such as not wanting to report information in such detail as to disclose appropriately confidential business information.

The principles of quantifying and reporting greenhouse gas emissions at the organization level were designed as guideposts for inventory managers, not straitjackets. The use of common sense in their application is recommended. In cases where it appears necessary to compromise a principle, the reasons for the divergence should be explained.

In addition to the five principles described above, a sixth principle, conservativeness, applies to greenhouse gas projects. This principle is found in ISO 14064 Part 2, Greenhouse gases – Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements, and is presented in the following terms:

• Conservativeness
Use conservative assumptions, values and procedures to ensure that GHG emission reductions or removal enhancements are not over-estimated.

Conservativeness is appropriate for project accounting because verified emission reductions must have environmental integrity to sustain environmental markets. The principle is most often applied where uncertainty has been identified in project accounting methodologies. By applying the principle of conservativeness, confidence is increased for those who may purchase GHG emission reductions or removal enhancements.

© 2010 Futurepast: Inc.