A question of credibility

Carbon offsetting has ruffled the feathers of big businesses around the world. Different schemes have been mooted - some more dubious than others, says Mark Lupton

For some critics in the green movement, carbon offsetting is a little like committing a crime and paying compensation for your offence later. The victim (in this case the planet) receives little benefit while the damage is still done. The perpetrator might, however, feel better, having assuaged their green guilt. Environmental campaigner George Monbiot has gone as far as to compare them to Medieval indulgences, which allowed the rich to commit all kinds of sins so long as they paid their dues to the Church.

For those of a more pragmatic bent, carbon offsetting offers a practical way for individuals and businesses to make up for the unavoidable carbon emissions we are all responsible for. Their argument is simple: it is unrealistic to expect the elimination of all CO2 emissions. Reduce and avoid where we can, they say; offset where we can't.

"Comparing carbon offsetting to Medieval indulgences is a nice soundbite, and it's great if you're a commentator," says Chris Shearlock, environment manager at the Co-operative Group. "But if you're actually engaged in trying to reduce the environmental impact of what you do it's not particularly helpful.

"This is actually based on sound science. The trouble is some people want behavioural change and nothing else. That's just not realistic. We don't see it as a hierarchy of measures - you should be looking to avoid, reduce and offset at the same time."

Many businesses, keen from a corporate social responsibility point of view to reduce their carbon footprint, agree. And recent years have seen a growth in firms offsetting their carbon-producing activities and offering consumers products which enable them to reduce theirs.

The Co-operative Group, for example, now offers car insurance which includes the offsetting of half a tonne of carbon dioxide (the average annual amount produced by a UK car), as well as mortgages which offset one tonne of CO2 a year - 20% of a typical UK home's annual emissions.

Unfortunately for businesses which accept the idea of offsetting in principle; choosing how to offset isn't an easy matter. There's certainly no shortage of companies which are willing to take your money in return for a certificate setting out how you've offset your carbon emissions. But there has been a shortage of confidence in many of the offsetting products they are offering.

Quick to spot an opportunity, many firms sprung up with dubious credentials.

Crucially, critics claimed, the proof they were offering that your carbon emissions had been offset was not worth the paper it was written on. Other offsetting schemes failed because of a lack of staff and investment - meaning those who had paid to offset their emissions had nothing to show for their outlay.

It was this lack of consumer confidence which led the government to launch a consultation on a code of conduct for the offsetting industry in 2007. Led by Defra, it set out to develop a voluntary Code of Best Practice for offsetting products backed by a quality mark. It would provide those who wish to offset with "clear information and transparent prices" - a de facto admission this had been lacking to date. At the same time, the government was quick to stress that those wanting to reduce their impact on the climate should first and reduce their carbon emissions.

But before the consultation was under way there were already signs of unhappiness among some businesses for whom offsetting had become a key part of their corporate social responsibility. In February 2007, there were reports that some of the UK's biggest firms - including HSBC, First Choice and Virgin Atlantic - were threatening to boycott the idea. Their concerns stemmed from the government's insistence the code should only include Certified Emissions Reductions (CER) - that is offsetting credits compliant with the Kyoto protocol. Voluntary Emissions Reductions (VER) - such as tree-planting - would be left out.

The companies named as potential boycotters were concerned that by leaving VERs out, many community-based offsetting projects which delivered environmental, social and economic benefits would miss out.

And by the time the government unveiled details of the voluntary code in February this year, the row had not died down. The code set a "high standard", environment secretary Hilary Benn argued, and would only include CERs because it was important "when a consumer buys a tonne of carbon with the government's quality mark, they'll know they're buying a full tonne of carbon". However, the government has left the door open for the inclusion of VERs in the code - if the voluntary offsetting industry can show it has as strong standards as the certified industry.

"We recognise that credits from the unregulated market may be innovative and of a very high standard," said Benn. "So we're leaving the Offsetting Code open to high-quality voluntary offsetting products, providing the industry can provide a similar level of assurance about the standard of the credits."

This was not nearly enough to assuage critics such as the Co-operative which has slammed the code as disastrous for the developing world. Shearlock adds: "We are extremely dissatisfied with the code as it is currently worded: ultimately, Defra has procrastinated and then delivered pretty much the same thing as they were proposing last year."

The code is flawed, he adds, because it gives the stamp of approval to credits issued under the EU's Emissions Trading Scheme - which he says gives purchasers little confidence that they are getting what they have paid - while ignoring voluntary credits. The latter, such as those the Co-operative Group purchases through a company called Climate Care have a, "much greater level of certainty," he argues.

"We are able to do an audit on all the projects they do, we can look at all their project design documents, independent audits, and we can audit them ourselves."

He adds: "There are of course good and bad CERs just as there are good and bad VERs. There's been fraud in the credits issued under the UN's Clean Development Mechanism - credits which this code says must be good."

"We want to be sure a project we are buying into is good from a CO2 perspective but we also want it to be in the developing world and spreading economic and social benefits. We don't think our customers want to buy reductions achieved in a Polish factory as you would in the EU Emissions Trading Scheme; we think they would rather support a rainforest in Uganda or biogas digesters in India, projects which clearly do deliver economic and social benefits." Virgin, has also been critical of the code's failure to include VERs. Georgina Stevens, Virgin's corporate sustainability manager, says: "[The code] misses the point that some VER schemes provide robust emissions reductions, as well as providing tangible benefits to the local community and local environment, which few CERs are able to provide."

The code, as it stood, she added could not achieve the government's objective of inspiring greater confidence among businesses and consumers in carbon-offsetting products and companies.

Stevens says the government should have looked more closely at existing NGO-endorsed standards such as the Gold Standard and the forthcoming VCS (Voluntary Carbon Standard).

"These could have formed the standard for VERs which it [the government] has challenged the industry to come up with."

Others have been less willing to put their heads above the parapet like the Co-operative and Virgin. HSBC appears to have softened its position, saying it welcomed the code as, "an important first step in educating consumers, encouraging choice around offsetting and increasing confidence in the process".

It supported, a spokesman said, "Defra's intent to bring clarity and consistency to carbon offsetting and supports the aim to provide greater transparency and a guarantee to consumers wanting to purchase offsets". However, there are others out there who are willing to defend the exclusion of VERs, particularly those helping companies negotiate the minefield of the carbon-offsetting industry. Lionel Fretz, CEO of Carbon Capital Markets, which manages a carbon assets fund with investments in the Clean Development Mechanism, says it was right to only include certified credits from the Kyoto market.

"Only these have been through a strict process of auditing and verification to guarantee their worth," says Fretz. "Buyers of these offsets can have confidence that the emissions reductions have taken place; that the emissions reductions have not been double-counted; that the benefits of the reductions are permanent and not reversible; and that true additionality has been achieved - that is the credits would not have been created through natural processes without carbon financing.

"This is only true for those offset suppliers that adhere to the voluntary code and sell CERs. There are still a lot of companies selling non-Kyoto voluntary offsets - VERs - which don't adhere to this."

Mark Lupton is a freelance journalist

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