The voluntary carbon market has grown at an astonishing rate over the past few years. Since 2006 we have witnessed an enormous surge in the carbon offset market. Many companies and institutions have even become familiar with not only how carbon offset programs work, but how these programs can net them a hefty gain both financially and for their public reputation and brand. But how are carbon offset programs like the Voluntary Carbon Standard (VCS) useful as a greenhouse gas (GHG) reduction tool?
The stated objective of voluntary carbon offset programs like the VCS is to standardize and add credibility to offset emissions from certain projects. For example, the VCS is involved with programs aimed at evaluating clean-energy projects in developing countries that are used to offset industrialized nations’ emissions of GHGs under the Kyoto Protocol’s Clean Development Mechanism. Nevertheless, we need to look at programs like the VCS in detail and evaluate just how effective they are at adding value to offset projects.
The VCS program has often been criticized for being too lacklustre in its requirements. It has even been argued that below-par offset projects may register under the VCS to make a quick buck. One of the harshest critics of the VCS program to date has been the WWF, who launched their coveted “Gold Standard” offset program prior to the development of the VCS. The WWF claims that the VCS cannot verify if credits are in fact real and if they are of benefit to the host country, thus exposing buyers using the VCS program to significant risk if the credits are revoked at a later date. The WWF also points out that the VCS program places a considerable amount of trust in the goodwill of project developers due to their role in determining the amount of GHG reductions from a project. They point out that the problem with relying almost exclusively on the fidelity of project developers is that there is often a conflict of interest, given that the developer’s success usually depends on the sale of these credits.
Another hot topic of debate surrounding the VCS program is how it calculates “additionality” (an offset project’s emissions reductions compared to a “business-as-usual” baseline). The VCS offers three additionality tests: a project must face technological, financial or institutional barriers; it must generate fewer emissions than comparable “business-as-usual” projects; or it must fall under a pre-approved list of projects determined by the system, a seemingly broad range of tests. However, what the VCS approach in calculating additionality does allow for, is the implementation of carbon trading in many countries in Asia, Africa and Latin America where capacity and expertise in applying Clean Development Mechanism accreditation is lacking;
Taking into consideration these criticisms, there remain some unique benefits in the VCS program. The VCS program makes special considerations for smaller projects to help encourage local and small-scale voluntary emissions reductions. This means that going through the VCS program can be considerably less costly and more beneficial for smaller projects, especially considering the cost of a attaining the”Gold Standard” certification fora CDM project starts at $10,000. The VCS program also has a single database to track the credits and ensure their authenticity and guarantees that the cash used to purchase the credits goes back into the project, both of which help solidify the VCS as a credible program.
There is no doubt that the jury is still out on exactly how effective the program is. One important point to consider is that the VCS is based on the International Standards Organization (ISO) GHG methodology, and given the widespread acceptance of ISO as the prevailing standard within the industry, the VCS approach is likely to gain in popularity. One useful alternative to the VCS in Canada may be the GLOBE Carbon Registry, which will become available in July of 2008 and will be managed by the GLOBE Foundation of Canada. The GLOBE Carbon Registry will ensure carbon credit integrity by issuing a unique serial number to each posted credit thus preventing double counting, allowing chain of custody control from creation to retirement, and recording transactions of carbon offsets that conform to internationally recognized GHG quantification standards. The GLOBE Registry will also note which party verified the offsets and to what standard.