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Carbon offsetting trends

survey 2008
Contributors
Lisa Ashford
Jill Barker
Claire Davey
Neal Dikeman
Josh Harris
Rachel Mountain
Niall Thorburn
Matthew Wheeland

Acknowledgements

This report is a compilation of responses from over 65


large and multinational organisations, covering a wide
variety of geographies and industry sectors. It would not
have been possible to pull this report together and detail
such interesting trends and findings had it not been for the
time and effort of these people in diligently completing the
online questionnaire. This report was also made possible
due to the energy and support of a number of organisations
including: CleanTech.org, The Climate Group, 2 Degrees,
Porter Novelli and Westgate Communications.
ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

About EcoSecurities and ClimateBiz


EcoSecurities ClimateBiz
EcoSecurities has spent the last 10 years ClimateBiz is the leading business resource for
focusing on the area of climate change and climate management. ClimateBiz informs CFOs,
mitigation activities and is now one of the leading CIOs, supply-chain, operations and other executives
organisations in the business of sourcing, developing on the key business issues in climate and carbon.
and trading emission reductions. Our emission The website and its free fortnightly newsletter
reduction portfolio is one of the largest in the industry ClimateBiz News offer news, best practices and
covering a wide range of emission reduction resources in such areas as carbon measurement,
standards (Gold, CDM, VCS etc), technology types reduction and trading; renewable energy; and
and geographical locations. In addition we also carbon offsets.
provide clients with consultancy support services,
helping them understand and deal with an www.climatebiz.com is a website of Greener
increasingly carbon constrained world, World Media, the leading media and information
specifically this includes; services company focused exclusively on the
greening of mainstream business. Greener World
• Assessing current and future carbon footprint; Media websites include GreenBiz.com,
GreenerBuildings.com, ClimateBiz.com,
• Defining a GHG management strategy, whether
GreenerComputing.com, and GreenerDesign.com.
based on CSR objectives, carbon market
Greener World Media also produces the annual
opportunities, or carbon risk management;
State of Green Business report and other
• Reducing emissions internally; and research, as well as Greener By Design and
other conferences.
• Offsetting a portion of the emissions that cannot
be reduced at source, or becoming carbon neutral
through a combination of reductions and offsets.

EcoSecurities Group plc is listed on the London


Stock Exchange AIM (ticker ECO). Additional
information is available at www.ecosecurities.com.
Executive summary
The voluntary carbon markets continue to welcome new participants on both the
supply and demand sides. Companies that previously committed to become carbon
neutral appear to be continuing with their offset initiatives in 2008. In Europe, the
emergence of the Gold Standard and Voluntary Carbon Standard (VCS) as the market
leading standards is a notable development. The former is facing some minor supply
issues which have in our view pushed up its issued price whilst the latter is working
with several parties to establish central registries by year end for transfer of
ownership and guaranteed retirement.

The primary markets on the development side are very active with new projects
coming on line around the world to meet an increase in real demand for VERs and
the expected increase in corporate’s looking to balance their unavoidable emissions.
In the US, the rapid expansion in demand appears to favour US-located emission
reductions, and this same force is shaping the types of offsets most in demand.
Forestry remains a standalone sector, which has a real mix in sentiment from buyers.
You either love it or you hate it. Whether the projects are reforestation or avoided
deforestation, they appear to have mixed feedback in part owing to the lingering
questions about effectiveness, immediacy and risk in investing in said projects.
Conversely, the types of projects most favoured by this survey’s respondents are
well-known projects which have an immediate impact, projects of the ‘charismatic
carbon” variety: energy efficiency and wind power. Landfill and agricultural methane
collection projects also scored highly in this study.

Reputation is pushing demand not only in types of offset projects in which


companies most want to invest, but also in whom they purchase offsets from.
When seeking out carbon brokers or retailers, experience and reputation were
the top-rated factors, while project types, locations and price rounded out the
top five requirements for offset projects.

Interestingly, despite the growth in project development the market has witnessed
increases in primary market prices. On the other hand, global economic difficulties
do seem to be pushing secondary market prices downwards, thus squeezing the
difference between primary and secondary pricing. This perhaps reflects the reduced
risk of developing projects as the markets grow and also an increased confidence
among larger organisations in originating their own offset projects in the primary
markets, a result that surprised us from our survey responses.
ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

Capturing the data: Methodology


The purpose for this survey is to aggregate primary research from potential
buyers of verified emission reductions. The main objectives were:

• To understand what organisations are doing to actively reduce their


corporate emissions
• To determine what the current corporate attitudes are towards carbon
offsetting
• To determine what factors affect an organisation’s purchasing decisions,
with regards to carbon offsets

This report was based on data collected from 65 large and multinational
organisations. The responses were collected via an online questionnaire
posted on www.greenbiz.com, www.climatebiz.com, www.cleantech.org,
www.ecosecurities.com, www.2degreesnetwork.com between the 23rd July 2008 –
22nd August 2008. In addition EcoSecurities also directly emailed more than 300
contacts from their own in house database in order to ensure the response sample
was geographically and sectorially diverse. It should be noted that due to the nature
of the websites used for distribution and the contact details within our in house
database, the respondents may have been heavily weighted towards companies
already interested in green issues. For each question, the opportunity was given to
participants to nominate alternative answers or further comment in order to add
further weight and validity to the overall results. All survey specific information was
confidential and for the basis of this report, all responses have been aggregated.

Data presented throughout this report is based purely on information volunteered


by marketplace participants. No data was extrapolated, and no quality criteria checks
were carried out on respondents prior to questionnaire responses being submitted
and the subsequent responses being included in this report.
Survey results – Introduction
“For the first time we have a report that showcases the views of
companies that have the largest impact on offset quality – the buyers.”
Josh Harris, Head, Carbon Markets – China, The Climate Group

Voluntary carbon markets are stated to be booming around the globe, growing
nearly 350 percent in value between 2006 and 2007, according to one recent
study.1 Driven in large part by business and policy makers in the U.S.A., where
voluntary markets are the only game in town, the market for ‘over the counter’
offsets is developing and shows no signs of abating, even as the RGGI cap-and-
trade initiative comes online in early 2009.

Earlier studies have looked at activity in voluntary markets, notably the invaluable
‘State of the Voluntary Carbon Markets’ reports created by the Ecosystem
Marketplace and Carbon Finance in 2006 and 2007. Those reports and others
detail the activity occurring in the production and retail spheres of the carbon
markets, but no report has yet explored how the end business consumer is
approaching, shaping and making use of voluntary markets.

As activity in the voluntary markets grow, we are seeing noticeable shifts in the
types of offset credits in demand, where companies are investing their offset dollars
and why, and who is driving the adoption of offsets on a business-by-business
basis. The market is clearly becoming better regulated, at least in part through
project developers and carbon retailers efforts to create best practise procedures
and also though the UK governments long awaited best practise guidelines for
carbon offset providers. Demand for different types of offsets shift based on factors
ranging from availability to price to public perception, and as a result business
customers of the voluntary offset markets play a major role in shaping the future
of carbon trading.

As a first look into the purchasing behaviour of carbon offset customers, this study
gives offset providers and business leaders alike a way to see where companies are
already investing their carbon dollars, and to gauge the direction of the voluntary
carbon markets.

1 Ecosystem Marketplace survey of carbon trends 2008


ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

The voluntary carbon market – The basics


The voluntary carbon market has been around 4. Demand from stakeholders
for many years in different forms. Companies Shareholders may want to see carbon reducing
wanting to make voluntary commitments to reduce efforts/offsetting or employees who are motivated
their impact on the environment pre-date the Kyoto by working for a socially responsible company
Protocol, but it is only since the introduction of a influence organisations choosing carbon neutrality
large scale regulatory scheme that the market has or similar;
been formally adopted, and is now a market with
different drivers and many different stakeholders. 5. Compliance
Many companies active in the voluntary carbon There are some companies who in future may
market already have mandatory carbon reduction be part of the EU Emissions Trading Scheme who
targets and may purchase offsets as part of their have caps on their emissions. These companies
carbon management strategy but their ambition for could be entitled to reduce their overall emissions
doing so is borne out of many different reasons by procuring offsets, and therefore may choose
as outlined below; to act in the voluntary market to learn more before
being under a compliance regime. Also many
1. To save money/ reduce operating costs buyers (particularly in the US) purchase offsets as
By voluntarily calculating and assigning a cost to a hedge against future compliance risk, for example,
carbon emissions, companies can begin to prepare they are expecting that the offsets they buy will be
for the inevitability of an economy in which carbon recognised under a future compliance scheme and
dioxide and other greenhouse gases are regulated can therefore be used to meet a compliance target
and taxed. This is an important step towards or sold to another compliance party;
managing carbon emissions efficiently and identifying
potential for reductions and cost savings. A very 6. Green marketing/ boosting green and
effective way of reducing emissions is by being socially responsible credentials
more energy efficient. A positive by-product of Developing carbon neutral products or services
this is that you also reduce your energy bill which can help companies to reach new customers who
saves money, particularly in the context of high increasingly care about the environmental impact
energy /oil prices; of products and services that they buy. Going
carbon neutral can send a powerful message to
2. Corporate Social Responsibility (CSR) consumers, competitors and the public that you
Carbon management and offsetting is often a share their concern over climate change, are taking
complementary aspect of a wider CSR strategy, steps today to neutralise your emissions and that by
especially if the projects which are invested in reflect buying from, investing in or promoting your business
the locations of a company’s operations and give the public at large can help combat climate change;
something back to the surrounding communities;
7. Reputational and commercial risk
3. Leading by example More and more, companies that do nothing with
Companies wishing to influence and drive emissions regards to climate change are publicly criticised
reductions amongst peers faster than the current and investors have also started taking into account
pace of legislation often take a stand and publicise companies environmental footprints when valuing
their carbon management and offsetting scheme; stock. Therefore for some companies, it is too much
of a risk not to be taking steps to address climate
change due to both the commercial consequences
as well as the risk of negative public opinion.
Carbon offsets – The basics
Offsetting describes the practice of removing or avoiding the release of carbon
dioxide emissions into the atmosphere by funding carbon projects that lead to
the destruction of greenhouse gas emissions, the prevention of their release into
the atmosphere or the sequestration of carbon dioxide. Clean Air-Cool Planet and
Forum for the Future believe that high-quality offsets do result in genuine emission
reductions, and recognise that they will play an important role in all carbon
neutrality strategies2. Companies offsetting their emissions generally do so as
a complementary activity to both creating a carbon footprint and implementing
direct emissions reduction activities.

In practice carbon offsets are generated as the result of a greenhouse gas emission
reduction project delivering measurable reductions in emissions through a variety
of technologies, including renewable energy, waste gas to energy and forestry.
The projects create emission reductions by for example displacing more fossil fuel
intensive activities or by reducing the direct release of GHG into the atmosphere.

Reducing emissions at source may require long-term development, significant


capital investment, and/or behavioural change, all of which take time e.g. a company
may want to upgrade all of its buildings to become more energy efficient, but it may
not have the capital to do so all at once. Offsetting, on the other hand, provides the
short-term environmental benefits some companies seek, and is an excellent way
of balancing the carbon footprint that currently cannot be reduced by internal
abatement measures alone.

2 Getting to Zero: Defining corporate carbon neutrality. Clean Air Cool Planet and Forum for the Future.
ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

01 Response by sector
We received 65 responses from leading organisations covering a diverse number
of sectors. The majority of respondents operate on a global basis and the sectors
covered range from IT and Manufacturing through to FMCG and Automotive. The
largest individual group of respondents could arguably be from sectors that have
a customer facing business and thus are more engaged with these questions on
a day-to-day basis. For one of the first surveys of its kind it was extremely pleasing
to see the depth and breadth of responses from organisations.
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02 Carbon management strategies
Over 77% of respondents either had deployed a carbon management strategy
or were in the process of developing one. This shows that the penny has well and
truly dropped in terms of companies recognising that implementing a carbon
management strategy can deliver real benefits and cost reductions.

Does your organisation have a carbon management strategy?

23%

43%
I Yes
I Under development
I No

34%

It is very encouraging to see such a large proportion of organisations already


addressing and dealing with the transition to a low carbon economy. It is also
encouraging to see that 48 responses (74% of total sample) had already
implemented internal emission reduction activities;

Has your organisation already implemented internal emission reduction activities?

No 8

Not yet 9

Yes 48
I Number of responses

0 10 20 30 40 50
ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

The top 3 most effective emission reduction activities were seen to be:

• Energy efficiency measures


• Employee behaviour change campaigns
• Improving transport logistics

Surprisingly, only a handful of responses (8.7%) stated that they had switched to
renewable energy. Perhaps this highlights the lack of choice of competitive renewable
tariffs from electricity suppliers or the difficulties facing companies (leased premises,
planning etc) with micro-generation.

What have been the most simple and effective internal emission reduction activities?

22.8%

33.9%
I Energy efficiency
I Recycling
I Employee behaviour change campaign
8.7% I Renewable energy
I Improving transport logistics

25.2% 17.3%
Results showed that over circa 59% of organisations’ environmental objectives were
set at Board/Senior Management level though it is clear that responsibility for the
carbon footprint of a company can fall into a broad range of departments.

On the one hand, identifying a decision maker or unit for carbon management
decisions does not appear to follow any traditional rules and is difficult to plot.
On the other, senior management seem to be taking the lion’s share (40%) of
responsibility, perhaps pushing the climate change agenda into the boardroom.

It is interesting to note that very few organisations (7%) seemed to have listed CSR
as being responsible for setting environmental objectives – this may indicate that only
the larger organisations have a dedicated CSR function.

Perhaps responsibility lies across the organisation, 25% of respondents listed


employee behavioural change campaigns as the most successful means of reducing
emissions within the organisation.

The fact that only 7% of respondents listed Marketing as being involved in defining
environmental objectives would suggest that for the companies involved in the
survey their carbon management strategies are not so driven by image/branding.
This suggests that scepticism about companies conducting ‘green washing’ in
the media may be disproportionate with the reality.

Who is involved in defining your organisation’s environmental objectives?

Board 19%

Senior management 40%

Marketing 7%

HR 2%

CSR 7%

Procurement 4%

Operations 15%

Sustainability/Environment team 6%

All 3%

0% 5% 10% 15% 20% 25% 30% 35% 40%


ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

03 Carbon offsetting
An encouraging 88% of responding companies are either offsetting/looking to
offset or would consider offsetting in the future. In contrast, only 4% of the sample
surveyed would never offset. If 74% have already implemented internal emission
reduction activities, the fact that 56% of companies already offset or will consider
offsetting in the next 1-2 years suggests that offsetting is valued as a complementary
part of an organisation’s overall carbon management strategy. However, a small
minority of respondents (8%) claimed to be unsure how to proceed with regards to
carbon offsetting. This supports consumer research which shows that there is still
some confusion with regards to offsetting and what positive results it really brings.
This is a challenge to the industry and government to ensure that there is up to
date relevant information available to explain the key issues.

The fact that companies are planning ahead with regards to their offsetting is a
good thing. 25% of companies are planning to offset in the next 1-2 years. If they
are already considering this, then it gives them time to get up to speed with market
best practise with regards to standards for example or speak to a number of offset
suppliers to make sure they achieve the best possible result for their carbon offsetting
programme. This might mean that they can match projects to geographies where they
have operations or focus on finding key projects that represent the companies brand.

What do you believe is your company's attitude towards carbon offsetting?

4%
8%

31%
I We already offset all /part of our
unavoidable emissions
I We are looking to offset our emissions
within the next 1-2 years
I We would consider offsetting at some
32% point in the future
I We have not decided/ unsure how to do it
I We would never consider offsetting

25%
04 Offset providers
From the range of options provided in the survey, EcoSecurities, The Carbon Neutral
Company and JP Morgan Climate Care were ranked as being the most widely known:

The responses should, however, be taken in the context that EcoSecurities conducted
the research and that the Chicago Climate Exchange CCX was not included as an
‘offsetting company.’

Top 10 recognised offset suppliers

EcoSecurities 17.2

The Carbon Neutral Company 14.3

Climate Care 12.2

Cantor CO2e 7.6

Terrapass 5.9

Green Mountain Energy 5.9

Camco International 5.5

Carbon Clear 5.1

First Climate 4.2

My Climate 3.8

0% 5% 10% 15% 20%


Percentage of responses

A significant number of respondents named a large number of other carbon offset


providers which provides confirmation that a lot of companies that supply VERs are
operating in the market and as a consequence of this, the market seems to be very
competitive, possibly due in some part to the low barriers to entry involved in setting
up as a carbon retailer.
ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

05 Desirability of project location


It was surprising to see that the most desirable location for emission reduction projects
is in North America. This can probably be explained by the desire among US buyers to
purchase offsets from domestic projects. After North America, South America, India and
Africa were preferred when looking at highly preferable and preferable results combined.

The regions which received the most ‘not preferable’ ratings were Australasia, the
Middle East and Western Europe. However, Western Europe did receive quite a high
number of ‘highly preferable’ ratings which may show that some buyers in Europe
do want to support local or domestic projects.

Though the Kyoto Treaty participants generally accepted the principal that the location
of an emission reduction does not affect its benefit, the responses received suggest
that there are psychological preferences amongst VER buyers. This may well be due
to the fact that the type of global corporates that answered the survey, are likely to have
international operations potentially in Asia or South America this can often drive demand
for projects in specific locations.

It is not clear why the Middle East was ranked least preferable from the options. It may
be because relatively few, if any voluntary only projects have been developed in the
Middle East and so buyers have not necessarily seen projects from this location. Also in
terms of pre registration VERs, projects tend to be oil and gas related sectors so may
not fit into buyers preferred project types.

Preference by geographical region

North America

Africa

Western Europe

South America

India I Highly preferable


I Preferable
I Not preferable
South East Asia I N/A

China

Middle East

Australasia

Central and Eastern Europe

0% 10% 20% 30% 40% 50%


Highly preferable/ preferable combined results

North America 72.7

South America 71.7

India 65.4

Africa 62.8

South East Asia 60.4

China 60.8

Central and Eastern Europe 55.1

Western Europe 51.0

Middle East 43.5

Australasia 46.7

0% 10% 20% 30% 40% 50% 60% 70% 80%


Highly preferable /preferable combined results as a percentage

Not preferable

Australasia 40.0

Middle East 39.1

Western Europe 35.8

Central and Eastern Europe 28.6

South East Asia 26.4

China 25.5

Africa 21.6

India 21.2

North America 18.2

South America 15.1

0% 5% 10% 15% 20% 25% 30% 35% 40%


Not preferable as a percentage
ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

06 Desirability of project type (methodology)


Energy efficiency projects are by far the most ‘highly desirable’ and achieve
the highest overall desirability when combining ‘highly desirable’ and ‘desirable’
responses. Perhaps it is due to their abatement of direct emissions as opposed to
the indirect nature of renewable projects (e.g. displacement of fossil fuel powered
grid energy) that makes energy efficiency as a technology more desirable than
wind and renewable biomass.

Large scale hydroelectricity was rated relatively ‘undesirable’ by 60% of responses.

As a collection of project types, renewable energy projects (biomass, wind and


small-scale hydro) were viewed as being very desirable which is consistent with
the pricing results in question 10. The results are broadly similar with those from
Ecosystems’ State of the Voluntary Markets 2008. This report also noted the Gold
Standard only advocate energy efficiency and renewable projects however, there
may be some confusion here as although the Gold Standard only accept renewable
energy and energy efficiency, they do include various biogas project activities3 which
in the survey were listed separately. In practise it may be that large scale industrial
energy efficiency projects may be less desirable than small scale demand side
energy efficiency projects which are both difficult to implement and few in number.

Attitudes towards forestry and avoided deforestation projects remain divided with
a broadly equal number of people saying such projects are desirable as undesirable.
Historically offsetting was mainly done with tree planting schemes and a few of these
schemes were poorly managed and openly criticised by the media, but the pendulum
is swinging back the other way. There are now several well respected organisations
and NGO’s who run credible tree planting schemes that provides real uplift to the
local communities as well as delivering verified emission reductions. Buyers are
often attracted to the dual benefits of social and environmental sustainability but it
is still a buyer beware market and corporates should conduct due diligence on the
organisation and the scheme. As the CDM market has failed to support forestry
projects on a large scale due to the complications of methodology, ideally the
voluntary market is well placed to support such projects. The Voluntary Carbon
Standard innovative approach to addressing permanence combined with the Climate
Community and Biodiversity Standard for testing social and environmental benefits
are gaining market acceptance from buyers. In addition, since the conference of
parties in Bali, the importance of avoided deforestation in mitigating climate change
was highlighted and a number of corporates are beginning to become more familiar
with the concept of this project type. It is possible that all these reasons cause such
a split in attitudes. It will be interesting to see the results in further studies to see if
this will shift towards parties believing that these projects are more desirable.
The development of avoided deforestation projects under the Voluntary Carbon
Standard and growing support for avoided deforestation from advocates such
as Prince Charles in the UK should crystallise this demand however, currently
avoided deforestation is the second least preferable project type.

3 Gold Standard toolkit v.2 July 2008. Annex 3 Guidance on projects type eligibility.
Desirability of project types

Wind

Small scale hydroelectricity


(less than 20MW)

Large scale hydroelectricity

Renewable biomass

Agricultural methane capture

Landfill gas capture I Highly desirable


and utilisation I Desirable
I Not desirable
Energy efficiency I N/A

Industrial gas destruction

Small scale local projects e.g.


cooking stoves, light bulb

Forestry

Avoided deforestation

Other

0% 10% 20% 30% 40% 50% 60% 70%


ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

Highly desirable/ desirable combined results

Energy efficiency 96.7

Wind 95.2

Renewable biomass 82.0

Agricultural methane capture 81.7

Landfill gas capture and utilisation 80.4

Small scale hydroelectricity (less than 20MW) 80.3

Small scale local projects e.g. cooking stoves, light bulb 75.4

Forestry 63.5

Avoided deforestation 63.5

Industrial gas destruction 59.4

Large scale hydroelectricity 36.2

0% 20% 40% 60% 80% 100%


Highly desirable /desirable combined results as a percentage

Not desirable

Large scale hydroelectricity 60.3

Avoided deforestation 34.9

Industrial gas destruction 33.9

Forestry 33.3

Small scale local projects e.g. cooking stoves, light bulb 23.0

Landfill gas capture and utilisation 16.4

Small scale hydroelectricity (less than 20MW) 16.4

Agricultural methane capture 15.0

Renewable biomass 14.8

Wind 3.2

Energy efficiency 1.6

0% 10% 20% 30% 40% 50% 60% 70%


Not desirable as a percentage
07 Carbon offsetting standards
Although the Gold Standard received the most ‘highly desirable’ ratings, when you
combine these responses with the ‘desirable’ field, the Voluntary Carbon Standard
(VCS) is marginally more popular.

In both analyses, pre-registration CDM accreditation comes a close third. The


supplier’s own assurance standard received the least desirable/highly desirable
ratings along with the most undesirable votes. This is a good result for the voluntary
standards but does not bode well for the very small-scale projects which may have
difficulties being implemented under the more mainstream/well-known standards
(GS, VCS, VER+) due to their size and the costs. It will be interesting to see how this
develops over the coming year as the official VCS registries come on line which could
boost the popularity of VCS further in comparison to those who already have a
registry in place such as Gold Standard and VER+. CCAR is probably less popular
because the respondent sample was international. The CFI which trades on the CCX
was excluded from this question as it is exchange traded. It will be interesting to see
in the future, as the market develops, whether VCS or Gold Standard credits can
develop into tradable instruments like the CFI.

Highly desirable/ desirable combined results

Voluntary Carbon Standard (VCS) 76.2

Gold Standard 69.5

Pre-registration CDM 61.4

TUV SUD VER+ 50.9

CCAR 47.2

Supplier's own assurance standard 25.0

0% 10% 20% 30% 40% 50% 60% 70% 80%


Highly desirable /desirable combined results as a percentage
ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

08 Important selection criteria for carbon offsets


When selecting an offset supplier, respondents were most influenced by track record
in the market, brand/reputation and range of project types on offer. This corresponds
with responses that highlighted EcoSecurities, The Carbon Neutral Company and
Climate Care as the most recognisable. Each of these organisations was founded
in the 1990s. With a growing number of offset suppliers, the responses received
indicate that companies with the longest track record and widest range of projects
inspire most client confidence.

What would be most important to you when selecting a carbon offset supplier

Price

Brand/reputation

Client list

I Extremely important
Location of company I Important
I Doesn’t matter much
I Deal breaker
Location of projects I N/A

Range of project types

Experience in market

Relationship

Recommendation

CSR values

Offset vintages

0% 10% 20% 30% 40% 50% 60%


Price, although important in the overall decision making process, was deemed
to be the 5th most important criteria.

In contrast, the location and client list of the offset supplier were relatively low in
importance as selection criteria. This implies that the quality and variety of offsets
are more important than partnering with a local/domestic supplier.

Extremely important / important combined responses

Experience in market 87.7

Brand/reputation 85.5

Range of project types 81.5

Location of projects 79.1

Price 77.8

Relationship 77.8

Recommendation 77.7

CSR values 74.6

Offset vintages 59.0

Client list 54.9

Location of company 38.1

0% 20% 40% 60% 80% 100%


Extremely important /important combined responses as a percentage
ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

09 Method of procurement
Over 23% of respondents want to or already originate and develop their own
projects. This is curious given the complexity, expense and above all risk of project
development. The advantage of bypassing the carbon developer is a potentially lower
priced VER per tonne. Whilst developing your own emission reduction projects may
be feasible for larger organisations with huge energy procurement needs, this is not
necessarily the case for small to medium sized organisations.

The joint second most popular route to procure offsets is through a project
developer such as EcoSecurities or a Carbon Broker such as CO2e. Relatively
few respondents conduct tenders when buying offsets (5%). This share may grow
although the increase in transparency in the market through project databases and
websites being made public may make the purchasing process somewhat easier
than previously. 10% will rely on recommendation which underlines the importance
of suppliers’ reputation and track record.

Preferred method of offset procurement

Originate your own projects 23

Project developer 21

Carbon broker 21

Carbon retailer 14

Industry recommendation 10

Formal tender process 6

Other 5

0% 5% 10% 15% 20% 25%


10 Prices
We only received a small number of usable responses (24/65 = 36.9%) with regards
to pricing which indicates the difficulty that comes with trying to establish suitable
prices for verified emission reductions in the voluntary market. If pricing is always
dependent on project type and the circumstances of the purchase this also suggests
that pricing risk is one of the biggest issues for both emission reduction generators
and VER purchasers.

According to the survey the projects to command the highest prices were energy
efficiency and renewable energy. It is interesting to note, that these technology types
are the only two types eligible for Gold Standard accreditation.

Low prices for forestry projects seem to reflect indecision in the marketplace and
differing attitudes towards forestry offset projects. On average, industrial gas and
large hydro-electric offsets command the lowest prices from the sample.

The responses received establish a guideline price for issued VER by methodology,
allowing for a ranking of emission reduction methodology by price. Energy efficiency
commands the highest average price per tonne (€13.10) followed by wind (€12.60)
and renewable biomass (€11.90) in third place. This correlates with energy efficiency
taking top place in the most desirable methodology.

These prices are higher than anticipated for VERs, however due to the lack of
understanding of the question and the somewhat poor response rates, given the
overall sample size, this is somewhat unsurprising.
ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

Interestingly in the recently published ‘State of the Voluntary Markets 2008’ by


Ecosystem Marketplace and New Carbon Finance, average prices were somewhat
different to those seen in the results above. In particular prices ranged from $8.10
for VCS carbon offsets, $9.40 pre registration CDM/JI VERs and $17.40 for Gold
Standard offsets.4 This may reflect the difference between wholesale and retail
market with larger volumes being traded by peers reflected in a lower price.

The prices we see in this survey for energy efficiency, wind and renewable biomass
is around the midpoint between EcoSystems’ Gold Standard and VCS pricing. As
pricing is so specific to each project type, vintage and project attributes it may be
difficult to draw conclusions here without further analysis and more detailed questions.

Average price

Energy efficiency 13.1

Wind 12.6

Renewable Biomass 11.9

Small scale local projects 11.9

Small hydro 11.6

Methane capture 11.1

LFG 10.2

Industrial gas 7.6

Forestry 7.6

Avoided deforestation 6.8

Large Hydro 5.9

10 13 16 19 112 115
Average price

4 Forging a Frontier: State of the Voluntary Carbon Markets 2008, p. 54


11 Conclusions
The voluntary markets continue to grow dramatically, increasing in value from
US$96.7 million in 2006 to US$330.8 million in 2007.5 This growth seems to be
driven in large part by the green boom amongst US companies. Those companies
are seeking to invest in projects that are domestic, highly visible, are well known and
have an immediate impact; energy efficiency, wind power, and landfill and agricultural
methane capture projects are in highest demand. Conversely, projects that are not
favoured by the public, such as large-scale hydroelectric, are poorly understood or
have suffered from adverse publicity, such as forestry projects, are rated lower
amongst companies purchasing offsets.

Despite a somewhat negative reaction to carbon offsets amongst some media


organisations and environmental advocacy groups as a form of ‘buying indulgences’,
most of the companies involved in this survey have already begun or plan to offset
emissions they can’t avoid generating. And these companies are working to trim their
own footprints with environmental goals that have taken root in their enterprises using
varied strategies: improving energy efficiency in their operations, changing employee
behaviour, and streamlining their supply chains.

When seeking offsets, companies are basing their purchases not only on those
qualities mentioned above, but also the experience and reputation of the offset
provider. Although a handful of providers hold the lion’s share of recognition amongst
these companies, the large number of different offset providers given in response to
this survey shows the breadth of the market.

Looking forward, it remains to be seen just how much the global economic situation
will affect both the size and growth of the voluntary markets, but also the prices on
those markets. Our respondents expressed a much higher than expected interest in
developing their own offset projects, a move that has previously been considered
too expensive and potentially risky to be viable on a large scale.

As more companies (including those respondents taking part in this survey) begin to
implement their carbon management strategy, it will be interesting to see the demand
patterns become more clearly defined. The corporate buyers of emission reductions
will become savvier and the push towards quality will no doubt continue. In addition,
as more climate initiatives take shape and move towards implementation, notably the
RGGI and Western Climate Initiative programs in the US, the landscape of voluntary
offsets will continue to shift considerably. We look forward to reporting those
changes to you next year and in the years to come.

5 Ecosystem Marketplace survey of carbon trends 2008


ECOSECURITIES CARBON OFFSETTING TRENDS SURVEY 2008

Contact details
EcoSecurities ClimateBiz

UK Matthew Wheeland
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