Voluntary Action to Reduce GHG Emission

The problem with reporting, reducing and offsetting carbon is that we need proof that it has been done. We also need to appreciate the terminology of carbon management so that we can differentiate between ‘offsetting’ and ‘reducing’. Companies which are turning their efforts to deal with climate change into selling points could be at risk of misleading customers. Robert Dornau writes about the need for standards and how they are essential to establishing trust with all stakeholders in the voluntary emissions market.

Climate Change has moved to the top of the political and business agenda. Boardroom decisions take greenhouse gas (GHG) emissions associated with investments into account, even if their measurement and reduction are not yet mandatory requirements. The motivation to do so has different drivers: protection of early action to reduce GHGs for companies that face mandatory regulation in the future; corporate responsibility (linked to consumer pressure); expected market advantages through the provision of emission neutral product and service offerings (linked to consumer demand); and, to an increasing degree, pressure from governments/buyers that want to know the emissions embedded in the products and the supply chain of the products they source.

The common denominator behind all drivers is that measurement of GHGs and their reduction creates value for the company doing so. In tradeable markets, this value creation is obvious; the value created for the company from voluntary reporting is less tangible. However, in both cases, it has become clear that the company, its shareholders and the public want to know that any emission reporting is accurate, reliable and consistent with global standards.

The need to bring confidence to market participants
A consumer survey of 2,734 people in the US and UK during 20071, undertaken by AccountAbility and Consumers International, found that ‘Sixty percent of respondents in the US and UK want companies to provide more product-based information at the point of sale, and half would rather do business with companies that are working to reduce their contribution to global warming. But consumers do not trust information from businesses on climate change. Government, business, the media and celebrities all feature low in the trust list too. Two-thirds of respondents said that business needs to take global warming more seriously (combined 66.4%: US 63.2%, UK 69.5%). Seventy percent of respondents in the US and UK said that climate change claims should be proven by independent parties.

This consumer awareness was not always there, but seems to have been triggered by a number of articles which appeared in the spring of 2007. The public became aware that not everybody in the carbon market is in it purely for doing good, but some – the so-called carbon cowboys – were in it purely for making money, taking environmental integrity less seriously. When journalists traced the emission reductions sold as offset certificates to their source, they found that the money paid for them only encouraged climate protection that would have happened regardless of the buying and selling of certificates.

Companies and organisations that voluntarily offset their emissions using emission reductions from the voluntary market are now wary that the damage they can do to their brand from buying reductions that are not real, can be a lot greater than the money saved on skipping third party verification.

Credible global standards for the reporting, monitoring and verification of GHG emissions are in demand to provide integrity to a market that deals with a very peculiar product.

ISO 14064 – a global solution?
The International Standards Organisation (ISO) standard 140642 provides guidance on the quantification, monitoring and reporting of GHG emissions. Parts one and two of the  standard define a clear approach to GHG measuring and monitoring, at the organisational and project levels respectively. Part three of the standard provides guidance on the validation and verification of GHG assertions. ISO 14064 was developed with the aim of being applicable across all the existing schemes, from the EU Emissions Trading Scheme (EU ETS) to the Clean Development Mechanism (CDM) under Kyoto. The application of ISO 14064 relies in many instances on detail provided by the underlying GHG programme/regulation or the individual company’s approaches.

One example is the quantification methodologies for the calculation or measurement of GHG emissions. These include the setting/calculation of, for example, net calorific value of fuel, emission factors, oxidation factors and density conversion factors. If no underlying scheme exists, the emitting installation has to develop its own methodology in accordance with the standard. It is the role of the validator/verifier to ensure that the GHG assertions made are complete, accurate, consistent and without material discrepancies. If no detailed guidance is provided by a GHG programme in the form of a monitoring methodology, it is unlikely that comparable companies will take the exact same approach. Obviously, this may result in differences across companies offering comparable products/services.

Voluntary Carbon Standard supplementing ISO 14064
Until recently, voluntary emissions from reduction projects were not able to be reconciled with an ISO standard; the Voluntary Carbon Standard (VCS)3, launched on 19 November 2007, closed this gap. As Alan Bryden, ISO Secretary-General states, ‘The VCS provides the first offset standard that specifically incorporates exacting principles from ISO 14064 series and ISO 14065.’

The combination of ISO 14064 and VCS is closing the opportunities for carbon cowboys. The VCS programme will provide transparency and credibility to the voluntary carbon market and create a trusted and fungible voluntary GHG emission reduction/removal credit: the Voluntary Carbon Unit (VCU). The first step in achieving this was via the thorough stakeholder consultation process the VCS programme was subjected to. Hundreds of stakeholder comments were collected over a two-year period and taken into account in the development of the VCS programme. The VCS principles were developed by a steering committee of 18 global members4. Those principles were then developed into the VCS programme using ‘ISO language’ that allowed for unambiguous interpretation, providing clear guidance to project developers and verifiers. The bar for the accreditation of third-party verifiers is set high, using the CDM and the corresponding ISO standard (ISO 14065) as a benchmark.

Methodologies for baselines and monitoring applicable under the VCS can be from accepted GHG programmes (currently CDM and Joint Implementation [JI]) or be developed for the VCS and approved under a double approval process. The double approval process aims to allow for a quicker, more transparent, but no less diligent, approach to methodology  approval. A first assessment is performed by a validator/verifier appointed by the project developer, and a second assessment is performed by a validator/verifier appointed by the VCS Association. Only if both entities approve the methodology will it be accepted by the VCS board as a VCS-approved methodology. The project developer can then take an active role in defining and approving the methodology in the assessment process with both entities. The costs for the double approval process will have to be borne by the project developer.

A VCS registry will provide a secure, custodial service for all VCUs, offering assurance against double counting and providing transparency to the public – stakeholders will be able to search for the unique VCU numbers and verify whether this VCU has been cancelled or not.

The VCS will be a carbon standard. It will provide the required assurance for investors, buyers and other users that the emission reductions they are purchasing are real, additional and permanent. The VCS does not require projects to prove sustainable development  advantages above the applicable legal requirements. It was the understanding of the steering committee that standards exist which can be applied as add-ons to the VCS to check for those additional qualities of a project. Such addons are the Gold Standard for general projects and the standards of the Forest Stewardship Council (FSC) or the Climate, Community and Biodiversity Alliance (CCBA) for forest projects.

Standards for carbon footprinting of products and services
A number of standards/approaches are currently under development to credibly and consistently assess the overall amount of GHG emissions associated with a product; this includes all emissions along the supply chain, as well as those embedded in preliminary/primary products. Examples are the standard under development by the UK Carbon Trust and The British Standards Institution (BSI) ‘Specification for the measurement of the embodied greenhouse gas emissions in products and services’ or the European Platform for Life Cycle Assessments ‘Carbon Footprint – what it is and how to measure it’.

Most of these approaches rely on existing ISO standards for the assessment of impact of a product along its lifecycle (ISO 14040, ISO 14044 ). However, this does not seem sufficient to address the complications associated with the measurement, monitoring and cost efficient verification of associated GHG emissions. The World Business Council for Sustainable Development (WBCSD), the World Resources Institute (WRI) and the ISO are currently working on standards for the assessment of embedded/supply chain emissions that hopefully provide enough guidance to assure that resulting emissions reporting is really comparable across all reporting entities. If consumers start making decisions based on carbon footprint labels on products, it should be in the interest of companies applying the label that carbon emissions are measured equally across competing companies.

This story was first published in www.carbon-business.com.