How can individuals and businesses lower their carbon footprint through the voluntary carbon market

Carbon offsetting is a controversial topic with many supporters and opponents, but the basic system is much more complex than it sounds.

Criticism mainly originates in this complexity, as it is rather a bazaar with the various ‘mechanisms’, ‘standards’ and ‘markets’ (which can vary from continent to continent or from project to project) than a marketplace for carbon emissions. If the underlying principles are understood however, individuals and also businesses can easily use these systems for lowering their carbon footprint.

What is the voluntary carbon market and how does it work?

The carbon offset market covers two main trading areas, the ‘compliance’ and the ‘voluntary’ carbon markets.

The so-called ‘compliance market’ is the arena for compulsory offsetting by companies and governments for meeting their pre-set targets.

The ‘voluntary carbon market’ meanwhile allows firms and individuals to lower their carbon footprints, while engaging in supporting carbon offset projects all over the world.

These specific projects create ‘voluntary carbon emission reduction units’ (VERs), which are equal to one tonne of CO2 that has not been emitted. On the contrary to the compliance market, the price of these units here can vary significantly, and may be even different for the same project at various providers, due to the lack of regulations.

What are the motivations of business and individuals to participating in the voluntary carbon offsetting trade?

Companies usually enter the voluntary market with the aim to make their operations carbon neutral, which objective is often linked to their corporate Corporate Social Responsibility (CSR) programme. They then provide their assistance to projects that can decrease the worldwide carbon emissions and can promote their ‘carbon-neutrality’ and commitment through marketing activities or customer promotions, like loyalty programmes or games.

Businesses tend to buy the units either for retirement or for re-sale to third parties, including their customers.

Individuals generally become involved due to the feeling of guilt, as they want to reduce their carbon footprint, while supporting projects decreasing global carbon emissions.

How important is the voluntary carbon market?

The voluntary carbon offset market is small compared to the global emissions trading market but in 2010 it has grown by 34 per cent compared to 2009, achieving a trading volume of 131.2 MtCO2e.

Most projects are now located in North America, followed by Latin America and Asia, while purchasing parties not only include for-profit businesses but also NGOs and individuals.

Key areas are forestry and renewable energy programmes, including also wind, hydro, or biomass projects. [1]

Where are these units available?

Shopping for ‘voluntary emission reduction units’ is relatively easy. It is possible directly from project developers, brokers who aggregate several projects, while they are also available through customer promotions by companies who purchased them with the aim of re-sale.

References
[1] “Introduction to the Emissions Markets”, Barclays Capital

[2] “Back to the Future: State of the Voluntary Carbon Markets, 2011”, Ecosystem Marketplace, Bloomberg New Energy Finance, 2011

Written for Energy Saving Warehouse

 

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