Report shows booming voluntary offset market
The voluntary offsetting market is a murky place. New Carbon Finance and Ecosystem Marketplace have just published their second annual overview report (pdf). It is based on a survey of project developers and other actors in the carbon market, and shows huge growth driven particularly by European demand.
Huge range of prices driven by non climate change considerations
Perhaps the most striking finding in the report is the enormous range of prices paid for voluntary offsets. Different types of project command different prices, ranging around $2.5 / tCO2e (for industrial gas or geological sequestration) up to $50 for Gold Standard (a very selective quality regime) renewable energy offsets.
Carbon markets are based on the premise that avoiding a tonne of CO2e is worth the same in climate change mitigation terms, no matter where or how the reduction is made. Voluntary offsets should therefore have commodity-style prices.
Part of the reason why voluntary offsets don’t behave like commodities is that some customers are interested in ‘co-benefits’. Co-benefits are positive social outcomes for local communities that are delivered in addition to emission reductions. Projects that involve the destruction of potent greenhouse gas by-products from industrial processes have few co-benefits and the report shows they are becoming less popular.
Voluntary offsets cannot prove their additionality. Even the most robust quality regimes give no assurance of the baseline (what would have happened without the funding provided by offsets). Project developers and salespeople therefore use co-benefits, which may be worthy but are irrelevant in terms of emission reductions, to show that the offsets are not a waste of money.
Few projects in Africa
The report shows that a very small and shrinking proportion of voluntary offsets originate in Africa. This is considered worrying, because many people feel that offsetting should support international development.
It’s quite natural that few project-based offsets are derived from Africa. There is only limited opportunity to finance emission reductions in a continent where there are low levels of industrialisation and grid electricity.