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The cost to register an offset |
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Posted on October 14, 2008 @ 09:46:00 AM by Paul Meagher
At one time, I believed that the carbon offset market would be a good opportunity for smaller North American forestry offsetters to make some extra money providing a valuable ecosystem service (i.e., carbon scrubbing and sequestration). I still believe that the carbon credit market needs to be viable for forestry landowner entrepreneurs, however, we need to be realistic about the costs and hoops required to register a legitimate offset in North America. The two biggest hoops to jump in my opinon are:
- Historically it has cost between 50,000 and 200,000 to complete the process required to register an offset. Lawyers will be required to help prepare the legal aspects of the offset document, verification of the offset will cost time and money, and the registration process itself will cost money (an official registry for your offset transactions will be needed so that businesses can claim credits through the purchase of your offset).
- In the North American market, you will need to address the "Additionality" consideration. You can't expect to register your land as a carbon credit if you are just going to do "business as usual" with that land. The credit is for you to do something "additional" such as planting seedlings, urban greening, protecting a wetland, and conserving habitat to name a few aspects that might be considered "additional". If you are going to plant seedlings and improve the ecosystem, then the cost to registering the project might balloon up to 200,000 if you are financing some of these costs in the start-up phase of the project.
One way to make the offset market work for smaller offset providers is to join forces with other offset providers so that you can register a larger offset and share costs and revenues. If you can put together a large enough offset with an investment proposal that addresses verification, registration, and additionality then your proposed offset would likely generate interest among investors on this network to provide seed capital.
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Carbon credit market update |
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Posted on October 9, 2008 @ 08:55:00 AM by Paul Meagher
Zoë Chafe and Hilary French, in "Improving Carbon Markets", offer this succinct description of the current carbon market:
In sum, carbon trading can be described as either allowance-based (under a cap-and-trade scheme) or project-based, and it can be part of a compliance market (such as the EU-ETS) or a voluntary transaction. ~ p. 93
When implementing a cap-and-trade scheme there are two critical considerations:
- What industries will be capped?
- Will the emission permits be given to these industries based upon current levels of emissions (with deminishing permits over time), or should the permits be auctioned off to the emitting industries? In the European Union they have been largely been granted based upon historical emission levels, whereas the Regional Greenhouse Gas Initiative, which represents Northeast and MidAtlantic U.S. states, are opting for 100 percent auctions.
It would be a mistake to characterize the carbon market as being "mature" at this point as there are market dynamics for the UE Emission Contracts that makes the stock market plunge of the recent weeks look like a walk in the park. I'm referring to the precipitous drop in EU Emission Contract prices from a peak of $34 in May 2007 to $0 by early 2008. This incident is now referred to as "December 2007 contracts". Although the big drop happened in December it had been in free-fall since May 2007 with a huge initial drop, small rebound for a few months, then free-fall again. One of the events that is offerred to explain this drop is the announcement that more permits were allocated through the EU National Allocation Plan.
Nevertheless, the carbon market will grow rapidly in the next few years as the EU goes into the 2008-2012 phase of their Koyoto committment. This is when the pedal needs to hit the metal in terms of reducing CO2 emissions. The EU-ETS is the biggest carbon trading market in 2008 and will likely continue to be as a result of their committment to the mechanisms of the Koyoto protocol.
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Making sense of carbon offsets |
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Posted on September 11, 2008 @ 08:00:00 AM by Paul Meagher
The World Wildlife Federation released a useful report in March 2008 called Making Sense of the Voluntary Carbon Market:
A Comparison of Carbon Offset Standards (PDF Link). A useful summary graphic from that report is the one that classifies the different types of offset standards:
The report does alot of useful legwork in comparing the standards and is a useful reference document for making sense of the inhabitants of carbon offset land.
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Offsetting on a grand scale |
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Posted on September 9, 2008 @ 08:00:00 AM by Paul Meagher
In the Sept 8, 2008 BBC article, "Why the West should put money in the trees", Guyana's President Bharrat Jagdeo has begun to outline a very large offset offer:
This is why in 2006, I suggested that the UK and Guyana could work together to identify bold rainforest solutions that could be used as models for the world.
For our part, we are willing to place almost our entire rainforest - which is larger than England - under internationally verified supervision if the right economic incentives are created.
This does not mean sacrificing sovereignty over our forest or restricting the development aspirations of our people. It simply means allowing globally recognised supervision to verify that activities within the forest are sustainable.
Guyana's President Bharrat Jagdeo will add further detail to this offer at the United Nations Climate Change Conference in Poznań, Poland running from Dec 1 to 11, 2008. I'm looking forward to seeing what Guyana comes up with.
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Voluntary carbon markets |
[Offsets] |
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Posted on July 16, 2008 @ 06:14:00 PM by Paul Meagher
The book Voluntary Carbon Markets (2007) summarizes the current thinking on the nature of this market. I highly recommend it to offset buyers and sellers.
One of the most useful diagrams in the book is the one depicting how voluntary carbon markets currently work:
The Green Investment Network is a marketplace for offset projects that entrepreneurs can pitch directly to corporate and individual investors and/or to wholesale-retail intermediaries (also known as "aggregators").
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Elements of a voluntary agreement |
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Posted on July 14, 2008 @ 10:27:00 AM by Paul Meagher
In "The Economics of Environmental Agreements" †, Edoardo Croci cites the Commission of European Communities (now the European Commission) publication, Communication on Environmental Agreements, 1996, as arguing that Voluntary Agreements can be considered contacts "between individual companies and/or associations of companies, on the one hand, and public authorities, on the other hand, concluded with the aim of protecting or restoring the enviroment".
The European Commision has defined the typical elements of a Voluntary Agreement contract:
- Parties to the agreement (associations and/or individual firms).
- Subject
- Definition of terms
- Quantified objectives
- Staged approach
- Specification of obligations
- Monitoring of results
- Periodic reporting
- Access to information
- Arrangements for colleciton/evalution/verification of results
- Sanctions
- Accession of third parties
- Duration
- Revision
- Termination
- Legal nature of the agreement
- Juristiction
† Article can be found in The Handbook of Environmental Voluntary Agreements
Design, Implementation and Evaluation Issues
Series: Environment & Policy , Vol. 43
Croci, Edoardo (Ed.)
2005, XIV, 391 p., Hardcover
ISBN: 978-1-4020-3355-1
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