25 November 2014
Today's voluntary carbon market is about delivering far more than a climate change benefit – presenting enormous opportunity for corporate buyers, and challenges for project developers. Mark Nicholls reports
The voluntary carbon market has come a long way
25 November 2014
Today's voluntary carbon market is about delivering far more than a climate change benefit – presenting enormous opportunity for corporate buyers, and challenges for project developers. Mark Nicholls reports
The voluntary carbon market has come a long way in recent years. For today's corporate purchaser, the climate change impact of their investment in carbon offsets is only the start of the story. Equally as important are the co-benefits offered by emission reduction projects, whether in biodiversity protection, water availability, better health outcomes or job creation.
"Most buyers in the voluntary market are coming from a corporate responsibility starting point, and they want their offset purchases to make a meaningful contribution to their corporate social responsibility programme," says Jochen Gassner, an executive board member at First Climate, a Frankfurt-based carbon neutral and water service provider. "However, a carbon reduction is relatively intangible. The more co-benefits a project can offer, the better story you can tell around the carbon reductions."
In recent years, such co-benefits have become increasingly important aspects of voluntary carbon projects – as is attested by the popularity of clean cookstove and water purification projects, which, according to the latest survey of the market carried out by information provider Ecosystem Marketplace, accounted for 24% and 4% of the market by volume in 2013.
But the projects that offer the largest suite of co-benefits are 'REDD+' projects – projects that seek to protect threatened forests, and prevent the vast quantities of carbon they store from entering the atmosphere. Such projects now make up the single largest component of the voluntary carbon market – supplying 38% of volumes transacted last year, according to Ecosystem Marketplace.
A recent landmark study¹, carried out by researchers at Imperial College for the International Carbon Offset and Reduction Alliance, sought to put a dollar figure on the social, economic and environmental benefits that carbon offsets provide over and above their climate benefit. It analysed a sample portfolio of projects, which collectively reduced annually 32 million tonnes of carbon dioxide, and found that each offset delivered a whopping $664 of co-benefits.
A recent landmark study by Imperial College found that each carbon offset delivered a whopping $664 of co-benefits.
This figure comprises $3 in economic benefits, from job creation or sourcing local goods and services, $0.56 in social benefits, such as the provision of education, healthcare or transport services, and $52 in avoided energy costs. But the vast majority of the co-benefits – $602 per offset – was accounted for by projects that conserve natural ecosystems. Land protected or reforested for carbon sequestration also delivers services such as soil protection, water regulation and biodiversity conservation, which have been valued by The Economics of Ecosystems and Biodiversity project.
"REDD+ scores highest in terms of co-benefits due to the nature of the projects," says Gassner. Part of the reason is the sheer size of some of these projects, which protect large areas of tropical forest, with commensurate ecosystem service provision.
But another element of REDD+ projects that makes them attractive to offset buyers is that, to function effectively, they need to provide the communities that depend upon the forests with alternative livelihoods – livelihoods where the forest is worth more to them standing than felled. The result is a range of social and economic co-benefits to local communities.
The Kasigau Corridor REDD+ project, developed and managed by California-based Wildlife Works, protects 500,000 acres of dryland forest in Kenya and is widely considered to be a leading example of the type. It safeguards a critical wildlife migration corridor between the country's Tsavo East and Tsavo West National Parks, protecting highly threatened elephants along with more than 300 other animals and birds.
Kasigau generates 1.4 million tonnes of carbon offsets, or'verified emission reductions' (VERs), each year, the sales of which have seen $3.5 million channeled back to the community since 2010. Proceeds from the sale of VERs are shared with local landowners and the broader community – directly and indirectly benefitting some 100,000. Among other things, the VER proceeds have paid for high school or university fees for more than 2,500 children, and created local employment, with more than 300 permanent jobs created, including conservation rangers, forest managers, horticulturalists, agricultural advisors and teachers.
"We think the Kasigau project is outstanding," says Gassner. "Wildlife Works has figured out how to use the REDD+ mechanism to engage a community to protect its natural resources and directly benefit by doing so."
"Communities must have their broad development needs – education, health, jobs, housing, food and water, security – improved by a REDD+ project in order for them to be in favour of that project for the long term" says Mike Korchinsky, president of Wildlife Works. "If communities are going to choose to shift their lifestyle towards a green development path, they need to be provided with substantial economic benefits, training and other assistance in the ea