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Can voluntary carbon offsets pay for development?

Publication date:
Nadaa Taiyab
Type of publication:

Since the Kyoto Protocol was signed in 1997, several ‘carbon markets’ have emerged. These enable governments to trade carbon credits and meet Kyoto targets. A voluntary market has also appeared, in which organisations and individuals can offset their greenhouse gas emissions by preventing a similar amount of gases being released elsewhere.Research from the
International Institute for Environment and Development, UK, examines whether
voluntary carbon markets can provide a new source of funding for sustainable
Through the Kyoto Protocol’s
Clean Development Mechanism (CDM), developed countries can buy emissions
credits from carbon-offset projects in developing countries, provided they
contribute to that country’s sustainable development objectives. Carbon offset
projects include hydro-energy, converting methane from landfills to energy, destroying
hydro-fluorocarbons (HFCs), planting trees, wind farms, solar powered lamps in
rural communities, fuel efficient cooking stoves and small agro-forestry
schemes. Unfortunately, the high costs and complicated bureaucratic procedures
of the CDM encourage low-cost, high-volume projects, such as HFC destruction or
landfill-to-energy projects. These have few benefits for local livelihoods.
contrast, the voluntary carbon market is unregulated, as the credits are not
used to meet international targets. Consequently, the voluntary market has
potentially more scope to invest in small-scale projects with high sustainable
development benefits to local communities. These voluntary offsets are
generally sold through retailers: organisations that invest in a portfolio of
offset projects and sell slices of the resulting emissions reductions to
customers in relatively small quantities (at a higher cost).
include businesses and organisations, governments, organisers of international
events and individuals. The main motivation for
organisations and individuals is a desire to take responsibility for their
impact on the climate, or to project that image at least. Mitigating carbon
emissions has also become an important corporate social responsibility issue,
leading to an increasing number of corporations purchasing carbon offsets.
Buyers expressed several concerns about voluntary credits:
Cost is important for organisations planning to buy a large
number of credits, but most buyers are willing to pay more for higher quality
A concern for charities is being able to justify how
credits can directly or indirectly meet their own objectives, such as poverty
Without a central verification and registration organisation to enforce
standards, it is difficult for companies to assess the reliability of credits
being provided.
There is little information about the available options in the
voluntary market, especially who the sellers are and the quality of their
Nevertheless, the voluntary
market is growing rapidly. Several large companies, including HSBC, Swiss
Reinsurance and BskyB, have gone carbon neutral. Events as diverse as the G8
conference in Gleneagles and the Australian Grand Prix have purchased carbon
To further develop the
market for voluntary carbon offsets, retailers should:
create a consumer report on the carbon offset projects they offer
create a set of simple standards for the voluntary market that balances
credibility with a system that works cheaply and effectively
increase transparency over how revenues are used, to help buyers feel
confident about their contributions
raise awareness about carbon credits as a way for individuals to reduce
their emissions
develop a ‘best practice’ guide to include sustainable development in
small-scale carbon offset projects.