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How do regulated and voluntary carbon-offset schemes compare?Esteve Corberaab; Manuel Estradab; Katrina Brownab

a School of Development Studies and Tyndall Centre for Climate Change Research, University of EastAnglia, Norwich, United Kingdom b Overseas Development Group, University of East Anglia,Norwich, United Kingdom

To cite this Article Corbera, Esteve , Estrada, Manuel and Brown, Katrina(2009) 'How do regulated and voluntary carbon-offset schemes compare?', Journal of Integrative Environmental Sciences, 6: 1, 25 — 50To link to this Article: DOI: 10.1080/15693430802703958URL: http://dx.doi.org/10.1080/15693430802703958

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How do regulated and voluntary carbon-offset schemes compare?

Esteve Corberaa,b*, Manuel Estradab and Katrina Browna,b

aSchool of Development Studies and Tyndall Centre for Climate Change Research, University ofEast Anglia, Norwich, NR4 7TJ, United Kingdom; bOverseas Development Group, University ofEast Anglia, Norwich, NR4 7TJ, United Kingdom

(Received 19 March 2008; final version received 18 December 2008)

The Kyoto Protocol’s Clean Development Mechanism (CDM) has become a keyinstrument for climate change mitigation. Parties with emission targets are usingit to buy greenhouse gas (GHG) emission reductions for compliance against theProtocol’s emission reduction targets. In parallel, the purchase of emissionreductions through a voluntary carbon market has become a mainstream practiceacross business and individuals who, although not having any regulatorymandate, aim to offset their emissions. This voluntary market relies on mitigationprojects which may or may not follow the standards of the CDM. This reviewcompares these two instruments and traces similarities and differences in terms ofproject types, offset quality and contribution to sustainable development. It isshown that both mechanisms support a wide range of mitigation options andtechnologies, and differ considerably in the contribution of forestry and industrialgas offsets to their markets. There is not enough empirical data to assess theactual additionality and quality of produced offsets and their contribution tonational and local sustainable development also requires further empiricalassessment. Large scale mitigation options provide a substantial percentage ofGHG reductions in both markets, with methane-based mitigation and fuelswitching dominating over renewable investments such as solar and tidal. Africaremains the least benefited continent in both schemes. The review supportsproposals towards reforming the CDM so that the least developed countries canalso participate in a transition towards a decarbonised global society. Voluntarymarkets, in turn, are likely to remain driven by investors’ willingness to supportprojects which are in line with poor countries’ demands and priorities.

Keywords: climate change; Kyoto Protocol; clean development mechanism;carbon markets; carbon offsets; sustainable development

1. Introduction

The Clean Development Mechanism (CDM) and voluntary carbon offset schemesshare a number of similarities and continually influence each other. The number ofprojects generating emission reductions under these two instruments has increasedover the years, whereas there have been heated academic and press debates abouttheir actual contribution to climate mitigation and their likely perpetuation ofhistorical injustices in the distribution of ‘pollution rights’ across developed anddeveloping countries (Minns 2007). The CDM and voluntary offset schemes have

*Corresponding author. Email: [email protected]

Journal of Integrative Environmental Sciences

Vol. 6, No. 1, March 2009, 25–50

ISSN 1943-815X print/ISSN 1943-8168 online

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DOI: 10.1080/15693430802703958

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their conceptual origins on the pilot phase of Activities Implemented Jointly (AIJ),established by the First Conference of the Parties (COP-1) to the United NationsFramework Convention on Climate Change (UNFCCC) in 1995, through whichcollaborative emission reduction projects were established to increase the flow ofresources dedicated to climate mitigation activities and technological innovation indeveloping countries, with no emission reduction credit-issuing involved.

On the basis of the AIJ phase, the Kyoto Protocol defined the CDM as a marketmechanism aimed at facilitating compliance with emissions reduction objectives byreducing the overall mitigation cost while promoting sustainable development (SD)in developing countries. The Protocol also established the Joint Implementation (JI)mechanism to pursue the same objectives through projects in European economies intransition and in countries with emission targets. CDM projects shall generatecertified emission reductions (CERs) additional to any that would occur in theabsence of the project and provide real, measurable and long-term mitigationbenefits.

Although the first official CDM project was registered in 2004, the first voluntarycarbon-offset project was carried out in 1989, when a US electricity facility investedvoluntarily in an agro-forestry project in Guatemala. The project paid farmers toplant 50 million trees, which would sequester carbon dioxide and offset thegreenhouse gas (GHG) emissions arising from the generation of electricity, therebyimproving the company’s image (Corbera and Benet 2007). Offset schemes gainedpopularity a few years later, when the UNFCCC AIJ pilot phase was launched and atotal of 157 projects in the energy and land-use sectors were implemented indeveloping countries and European economies in transition between 1995 and 2002(UNFCCC 2002). Unlike the CDM, voluntary offset schemes are not compliantinstruments, but a means for individuals and entities to reduce emissions over andabove mitigation goals set by regulations. In most cases, investment in voluntaryoffsets responds to the interest of the public in becoming more environmentallyresponsible and the interest of corporations to increase their environmental profileand demonstrate leadership (Hamilton et al. 2007, 2008a,b).

Scholars have started to examine both CDM and voluntary offset markets fromdifferent perspectives. Ellis et al. (2007) argue that there are implicit trade-offsbetween CDM project types, their size and their SD contribution, with largeindustrial projects offering few employment opportunities and additional benefits forlocal populations. They also show that those countries receiving large foreign directinvestment flows are also attracting a higher number of CDM projects. Along theselines, other studies also suggest that the CDM projects’ uneven distribution acrosscountries and the prioritisation of emission reduction activities, which do notnecessarily have wider environmental benefits or a strong social component, such asHFC decomposition, fuel switching or methane mitigation projects show that themechanism is not contributing to global equitable development (Lohmann 2006;Wara 2007). There seem to be evident trade-offs between the achievement of low-costemissions abatement and the realisation of SD benefits (Brown et al. 2004; Olsen2007).

In turn, voluntary offset markets have been criticised for being unlikely to deliversubstantive GHG emission reductions and deviate attention from changing lifestylesand energy consumption patterns in developed countries (Revkin 2007). It has alsobeen noted that voluntary offset markets have enabled a number of private, non-state actors to accumulate profits through a more horizontal and networked evolving

26 E. Corbera et al.


system of governance, which contrast with the CDMs state and policy-regulatedapproach (Bumpus and Liverman 2008). Advocates of voluntary offsets argue thatthese may achieve significant social and environmental benefits, such as pro-pooremployment benefits and improved health and education in comparison with theCDM, and projects may hold a different geographical distribution, with higherparticipation from African countries (Hamilton et al. 2007). Tyler (2007) alsosuggests that the voluntary offset market is the only access many high SD carbonprojects currently have to carbon finance. She recognises that increased marketstandardisation and regulation is necessary for its integrity and longevity and thatany measures to support high SD emission reduction projects should be welcomed.In this essay, we contrast both CDM and voluntary offsets in order to trace theirdifferences and similarities and complement the growing literature examining therole of carbon offsets in reducing GHG emissions and promoting SD. We challengethe assumed proposition that voluntary offsets are ‘a source of ‘‘innovation’’ for thecredits and projects operating outside the compliance market’, are located ‘indifferent countries from where most of the compliance market projects are based, inparticular in Africa’ and ‘projects have more ‘value-added’ characteristics than thosefound in the compliance market, such as additional environmental or sustainabilitybenefits’, holds true (HoC Environmental Audit Committee 2007: p. 16). In thissense, it has been shown how project developers and traders of voluntary offsets haveconstructed a marketing narrative where consumers are persuaded that carbonoffsets are a type of sustainable and ethical product, which embeds a number ofadditional benefits to carbon reductions such as poverty alleviation, reduced indoorpollution and preserving biodiversity (Lovell et al. in press).

In doing such a comparative exercise, the paper sheds light on a number ofquestions: how have the CDM and voluntary offset markets evolved over time andwhat are their demand drivers? Do they support different emissions reductionprojects and sectors? Do the CDM and voluntary markets provide the same qualityof offsets? Which type of additional benefits their projects provide? And finally, areprojects distributed differently across the world’s regions? These questions areanswered through the analysis of available data, reports and research articles onthese two instruments. The review indeed highlights that the CDM and voluntaryoffset markets may not be as different as they are often supposed to be. Their maindifference lies in market volumes and the relative number of small-scale projectscontributing to the market. Project typologies do not differ substantially and bothmarkets are characterised by an uneven distribution of projects worldwide, withAfrica being the least benefited region, contrary to the assumptions made by carbonbrokers and consumers (HoC Environmental Audit Committee 2007). Desk-basedresearch assessing projects’ impact on local and national SD suggests that theiroutcomes vary widely, with some technologies such as energy efficiency, biomass andsome renewables being more likely to promote additional benefits.

2. How do regulated and voluntary carbon-offset schemes compare?

2.1. Markets evolution and demand drivers

According to the World Bank, from 2002 to 2007, about 1471 MtCO2e from primaryCDM project activities were transacted1. A majority of primary transactions forproject-based credits in 2007 (about 87%) came from CDM activities that reduced551 MtCO2e, valued at US$7426 million, representing a slight increase from 2006

Journal of Integrative Environmental Sciences 27


volumes (537 MtCO2e). This figure, in turn, represented nearly twice as much as thevolume of emission reductions traded under the CDM in 2005 (374 million tCO2e).The secondary CDM market traded 25 and 240 MtCO2e in 2006 and 2007,respectively. The average price for primary CERs during 2007 was US$13.60, a 24and 52% increase relative to 2006 and 2005. Higher prices of approximately US$17.8rewarded projects which had already been registered, had been developed by highlyexperienced sponsors and had high expected issuance yields. Unlike Phase IEuropean Union Allowances (EUAs) traded under the European Union EmissionsTrading Scheme (EU ETS), CER prices were stable over 2006 and increased in 2007,partly due to the market power of China, which maintained an informal pricingpolicy by raising the minimum price floor in the US$10–12 range in 2006, and theincreased competition of 2007 in the market, respectively (World Bank 2006, 2007,2008). As of November 2008, 1190 CDM projects have been registered, 277 are in theregistration process and 2684 projects are at validation stages (UNEP/RISOE 2008).The CDM market is projected to deliver 2838 million CERs before the end of 2012.

The voluntary carbon market is divided into two main segments: the voluntary,but legally binding, Chicago Climate Exchange (CCX) and the broader, non-binding, over the counter (OTC) offset market. The CCX and the OTC are not easilycomparable as their structure and procedures are fundamentally different. The CCXis a cap-and-trade system in which both emission allowances and project-basedoffsets are traded under the form of CFI contracts, each of which equivalent to 100tonnes of CO2e. Participants include high GHG emitters, businesses, organisationsand individuals from the United States (US), Canada, Brazil and Mexico, althoughoffset projects can take place anywhere in the world. In the OTC market, wherecredits are generically known as Verified Emission Reductions (VERs), transactionsare made on a deal-by-deal basis and information on the amount of emissionreductions transacted can only be obtained through project developers, brokers andinvestors, thus making data compilation a costly and time-consuming process(Hamilton et al. 2008b). Since 2002, the voluntary market has experienced annualups and downs, but since 2006 the growth of the market has been unprecedented.According to Hamilton et al. (ibid.), 42.1 and 22.9 MtCO2e were transacted on theOTC market and the CCX in 2007, respectively. Relative to 2006 volumes, thisrepresents a tripling of transactions for the OTC market and twice the volume for theCCX. These data also reflect that the CCX supposed a significant development forthe voluntary market; in 2007, trading under such an instrument already representeda 32% share of the overall voluntary carbon market2. In 2007, a VERs average pricewas US$6.1, although their value varied widely across project typologies andcontracts. For the same year, CFI contracts were worth, on average, half the OTCfigure (US$3.15/tCO2e), with prices falling within a narrower range of US$4.20-1.62/tCO2e (ibid.).

The number of emission reduction volumes traded through regulated andvoluntary markets has thus increased over time, with an exponential growth for thecase of VERs and CFIs transactions, which still represent an insignificant volumecompared with CERs transactions up to 2012 (2.2%). However, it is worth notingthat the CCX has experienced a substantial reduction in the contribution of project-based offsets to traded volumes in the exchange, moving from over 13 MtCO2e ofoffset credits in 2006 down to 0.8 MtCO2e in January to November 2008. The overallupward trends in the CDM and voluntary markets over the last 5 years can beattributed, on the one hand, to investors’ commitments under the Kyoto Protocol



and, on the other hand, to increased public awareness on climate change, and theinterest of a growing number of companies to meet social and environmentalstandards (Hoffman 2006; Hamilton et al. 2008a). An analysis of the mostcapitalised one-hundred UK companies in the London Stock Exchange marketshows that ‘carbon offsetting has become hugely popular among the FTSE 100group in the last 2 years’ (Okereke 2007: p. 479). Beyond CDM and voluntaryoffsetting, it seems that operating in a carbon-constrained world is increasingly seenas an opportunity to gain competitive advantage, adapt to rising energy prices,respond to consumer’s concerns, or even profit from emissions trading and the saleof CDM offsets (Schultz and Williamson 2005).

The future evolution of CDM and voluntary markets will be determined by thestringency of commitments under the second commitment period of the KyotoProtocol and the sectors subject to regulation in the future, as well as the extent towhich developed countries enact legislation to favour the adoption of voluntaryemission reduction activities by non-regulated entities (for example through taxincentives). Although the size of reduction commitments in the second phase of theProtocol is still unknown, it is recognised that achieving reduction objectives in therange of 25–40% below 1990 levels by 2020 by developed countries would make animportant contribution to overall global efforts required to meet the ultimateobjective of the Convention (UNFCCC 2007). This would imply the continuation ofthe CDM as it currently stands or in a reformed version, which may include othermitigation options and technologies like traditional biomass energy use (Schlama-dinger et al. 2007), avoided deforestation activities (Skutsch et al. 2007), and carboncapture and storage (de Coninck 2008). As discussed further below, these changesmay also be accompanied by a reform of the mechanism’s procedures so as toimproving the performance of some technologies, scaling-up the impact of themechanism and promoting a more even distribution of projects worldwide (Olsen andFennhan 2008a).

2.2. Project types and sectors comparison

Table 1 illustrates the contribution of different project typologies to the CDM andOTC markets for 2006 and 2007. In the CDM, nearly half of the credits to bedelivered up to 2012 will be covered by industrial gases and methane-relatedprojects (with 26.7% and 13.7% of total CERs up to 2012, respectively), as well asby hydro, wind and biomass energy projects (33.7%). These options will befollowed by supply-side energy efficiency (10.8%) and fuel switching projects(7.2%), while demand-side energy efficiency projects, renewables such as solar,tidal and geothermal, afforestation and reforestation and transport would have aninsignificant participation (UNEP/RISOE 2008). When comparing the CDM withthe OTC market, it is surprising to see that there are only substantial differencesfor the case of industrial gases, forestry and, to some extent, methane-basedmitigation, while the share of the remaining sectors is quite similar. Thecontribution of industrial gas emission reductions to the OTC market hasdecreased substantially in the last 2 years (and the same has occurred to a lessextent in the CDM) but investment in methane mitigation projects has increased.Meanwhile, investment in renewables has remained stable and has been reduced inthe case of forestry projects. In November 2008, the CCX had a total of 119 offsetprojects registered, from which over 35% were agriculture and landfill methane



mitigation projects, followed by renewable energy (12.6%) and agricultural soilcarbon offsets (11.8%) (Figure 1).

The high proportion of offsets from industrial gas projects in the OTC market in2006 can be surprising, since these projects do not match with the supposed profile of

Table 1. Comparison of project-based offset shares by project type in CDM and OTCmarkets, 2006–20071.

CDM 20062 OTC 20063 CDM 20072 OTC 20073

Market volume(MtCO2e)

537 13.4 551 42.1

Project type CERs volumeup to 2012 (%)

VERs volumetransacted (%)

CERs volumeup to 2012 (%)

VERs volumetransacted (%)

Renewable energy 23.5 33 28.5 31Biogas, hydro,wind andbiomass energy

22.5 n.a.4 27.9 n.a.4

Solar, tidal andgeothermalenergy

0.9 n.a.4 0.6 n.a.4

Renewable energycertificates

Not eligible 17 Not eligible 4

Industrial gases(HFCs, PFCs, N2O)

40 20 32.1 2

Landfill, coalbed/mineand agriculturemethane mitigation

17 3 16.2 25.6

Energy efficiencyþ fuel switching

13.6 5 18.9 18

Supply-side 0.2 n.a.4 0.8 n.a.4

Demand-side(households,industries,services)

6.7 n.a.4 10.9 n.a.4

Fuel switching 6.7 7.2 9Fugitive gas capture 4.1 0 2.4 0.3Cement 1.6 0 1.3 0Forestry 0.1 36 0.3 15Plantations 0 2 0 2Native afforestation/reforestation

0.1 31 0.3 8

Avoideddeforestation


Soil carbon Not eligible 0 Not eligible 3Geologicalsequestration


Transport 0.1 0 0.1 0Other – 3 – 3.7

1It is strictly incorrect to compare the OTC and CCX, as some of the credits issued by the CCX can be soldin the OTC market.2Data from UNEP/RISOE November 2006 and 2007 for comparative purposes.3Data from Hamilton et al. (2008b; 2007).4Hamilton et al. classify renewable projects in three categories: grid, off-grid and Renewable EnergyCertificates, which does not allow for direct comparison with CDM data.



activities in the voluntary market (i.e., with emphasis on social and environmentalbenefits). This can be explained by the exclusion to date of HFC-23 incinerationprojects in new HCFC-22 facilities in developing countries under the CDM, whichhas led project developers towards the voluntary market. However, 2007 data showsa substantial reduction in the support for this option, which is explained partly bythe reduction in potential supply but more importantly by changes in consumerpreferences (Hamilton et al. 2008b: p. 38). In parallel, the aforementioned growth inthe number of methane-based mitigation projects, both in OTC and CCX schemes,reflects the existence of a great number of US market players who are concernedabout mitigation costs and thus act more like their CDM counterparts in theregulated market, probably responding to the boom of proposals to regulate GHGemissions in that country, which include numerous state and regional-level initiatives(e.g., The Western Climate Initiative, the Regional Greenhouse Gas Initiative).

In the CDM context, up to November 2008, there are 34 afforestation andreforestation projects in the pipeline, but only one has been registered. This almostinexistent contribution of forestry projects to the CDM market responds partially tothe limitations set for these projects under the CDM rulebook (including onlyafforestation and reforestation activities), implementation complexities like addi-tionality, carbon permanence and leakage and, possibly most of all, to the decisionof the European Union of excluding forestry CERs from the EU ETS (EU ETS)(Boyd et al. 2008). In contrast, the interest in forestry projects in the voluntarymarket, particularly in its early years, can be attributed to these projects’ higherappeal in terms of public image for investors, their likely additional environmentalbenefits (e.g., landscape and biodiversity conservation), and the interest in fundingavoided deforestation projects. OTC forestry offsets originate from a wide range ofcountries and regions, including – in order of importance – the US, Canada,

Figure 1. Offset project numbers and typologies in the CCX market, November 2008.



Australia, Asia, Latin America, Africa and Europe (Hamilton et al. 2008b: p. 78). Incontrast, forestry credits in the CCX originate mainly from projects in the US andLatin America. The 2007 reduction in the contribution of forestry offsets to OTCmarkets is due to the fact that such deals do not enjoy the same level of support thatthey had in the early years and ex-ante deals may also be falling out of favour. Thisreflects consumers’ concerns on carbon permanence, as has been the case for theCDM, and the increasing number of mitigation options being promoted in thesemarkets (Hamilton et al. ibid.).

The future role of forestry offsets in regulated and voluntary schemes will bedictated by the actual performance of existing projects, which may help to increaseinvestor and consumers’ confidence, and by the post-2010 architecture of the climateregime, especially by the outcome of ongoing negotiations regarding the inclusion ofactivities to Reduce Emissions from Deforestation and Degradation (REDD) in theCDM or under the broader framework of the convention. The decision by COP-13to start demonstration (pilot) activities, together with the recent establishment ofinternational funds to support initiatives to reduce emissions from deforestation(e.g., the Forest Carbon Partnership Facility of the World Bank), are signalling arenewed interest in offsetting emissions through forest restoration and conservation(Estrada et al. 2008).

2.3. Offsets quality

CDM-based emission reductions need to achieve the highest possible quality toensure the integrity of the Kyoto Protocol. This has led to the creation of uniformprocedures and rules, as well as the establishment of an institutional structurewithin the CDM Executive Board – the committee in charge of supervising theCDM, which deals specifically with projects’ methodological issues. This structureis complemented with the work, capacities and know-how of private consultants,which usually develop and propose methodologies for the estimation of emissionsreductions from CDM projects, and of Designated Operational Entities (DOEs),in charge of reviewing projects during validation – including the appropriateapplication of methodologies – and of verifying and certifying emissions reduc-tions before they can generate CERs. CDM project methodologies havereached high levels of detail and stringency. Moreover, the documentation andsupervision of projects and emission reductions are also unprecedented, and theoperation of the CDM is supported by a centralised registry and a number ofpublicly accessible databases, the international transaction log and standards forDOEs accreditation. On the down side, ensuring the quality of CERs has impliedlengthy processes and high transaction costs, specifically for projects which need todesign a new methodology for their development (Michaelowa 2005; Ellis et al.2007).

Forthcoming independent verification processes by DOEs will be central toevaluate the real GHG benefits from CDM projects. Emerging evidence from earlyregistered projects suggests that not all expected CERs may represent real andmeasurable emission reductions (Sutter and Parreno 2007). In this sense, the UnitedKingdom has taken a further step by releasing a Best Code of Practice for CarbonOffsetting in February 2008, which can be voluntarily adopted by UK carbon offsetproviders to seek accreditation of the CERs they commercialise, thereby increasingconsumers’ confidence and the quality of CDM projects. Over the course of 2008,



there has been a consultation with interested parties about how to include voluntaryoffset projects and their VERs under the Code3.

Voluntary offset quality has become an issue of similar importance for buyers,who have feared criticisms on behalf of civil society (Taiyab 2006; Gillenwater 2007).Consequently, this market has experienced the emergence of a number of standards,programmes and registries to improve offset credibility, which can also be applied tothe development of CDM projects (Table 3). Many of these programmes acceptautomatically in their systems methodologies and DOEs approved by the CDM-EB,including additionality tests, and it is to be expected that new methodologies andapproved verifiers under such initiatives will have to comply with requirementssimilar to those established for the CDM. The existence of more solid standards andinstitutions in the voluntary market should increase the average quality of the offsetstraded in the coming years (Peskett et al. 2007) or, otherwise, there is a serious risk offailure due to a lack of policing and credibility (Gillenwater et al. 2007). It is still tooearly to judge whether projects registered under existing voluntary standards complywith additionality requirements and effectively reduce emissions, as some standard-based projects have only recently been implemented (Kollmuss et al. 2008).

2.4. Sustainable development benefits

2.4.1. SD assessments

In the CDM context, as defined in the Marrakesh Accords, it is the host country’sprerogative to approve projects’ contribution to national and local SD. Proceduresvary from country to country, with some DNAs adopting a generic list of economic,social and environmental criteria, and others conducting field-based project analyses,involving project developers, communities and other stakeholders (Corbera 2005;Boyd et al. 2007a). In voluntary markets, approval from project participants’governments or from the host country alone is usually not required, althoughcompliance with applicable regulations is. Some standards are stricter than many ofthe conditions established by host countries for the CDM, though they may notreflect the specific development priorities or interests of these countries.

Researchers undertaking project-based SD analyses also take into account threecategories – economic, social and environmental – and define a series of criteria andindicators to evaluate project benefits, mostly through scoring methodologies likemulti-criteria analysis (Sutter 2003; Brown et al. 2004; Cosbey et al. 2006). In somecases, criteria under each category are further differentiated between direct andindirect benefits. The former are those directly derived from project activities, andcan include enhanced air quality, improved health, reduced fossil-fuel expenditureand technology transfer, while indirect benefits can encompass poverty alleviation,improved waste management, job creation and useful by-products, among others(Gupta et al. 2008: p. 69). In sustainability assessments, it has been recommended toinvolve the majority of parties affected by the project in criteria selection andevaluation, as actors’ perspectives may differ substantially (Brown and Corbera2003). Table 3 below illustrates some examples of SD criteria employed in some ofthese studies.

The fact that most sustainability assessments are based on the examination ofproject documentation (i.e. Project Design Documents in the CDM case) and onlyoccasionally are based on empirical field research implies that, generally speaking,



Table

2.

Featuresofsomeofthemain

standardsin

thevoluntary

offsetmarket

20081.

Description

Focuson

Environmental&

SocialBenefits

Reporting&

Registration

Certification&

Logo?

Methodologies?

Geographical

Reach

Start

date

Registered

projects&

Verified

credits

Gold Standard

Certificationfor

offsetprojects

&carbon

credits

Yes

Website

&Own

registryin

place

Yes

CDM

methodologies

andonly

for

RE

&EE

Projects

International

1st

project

validated

2006,1st

credits

verified

2007

8projects,No

GScredits

issued

yet

TheVCS

Certificationfor

offsetprojects

&carbon

credits

No

Use

BankofNew

York

and

other

registry

TBD

Yes

Use

ofCDM

methodologies

butLULUCF

methodsto

be

defined

International

Launched

Nov.2007

Project

database

under

development

CCB Standards

Certification

program

for

land-use

offset

projects

Yes

Publicproject

documents

Yes

Only

for

LULUCF

projects

International

1st

project

Certified

in2007

6projects,No

CCBcredits

issued

yet

CCX

Internalsystem

forCCX

offset

projects&

CCX

carbon

credits

No

Registry

incorporated

withtrading

platform

No

CDM

andown

methodologies

forsome

project

types

International

2003

116projects,

50MtC

O2e

issued

PlanVivo

Standardised

system

for

community-

basedagro-

forestry

offsets

Yes

Publicproject

documents.No

registry.

Yes

Community

basedagro-

forestry

International

2000

3projects,

0.6

MtC

O2e

issued

Greenhouse

Gas

Protocol

Asetof

guidelines

for

projects&

corporate

No

Perform

ance

documents

not

available.

Registryunder

No

Specific

methodologies

forLULUCF

and

International

2001

Does

notapply

(continued)



Table

2.

(Continued).

Description

Focuson

Environmental&

SocialBenefits

Reporting&

Registration

Certification&

Logo?

Methodologies?

Geographical

Reach

Start

date

Registered

projects&

Verified

credits

GHG

accounting

development

forUS

participants

grid-connected

energyprojects

CCAR

ARegistry

Protocol

No

Reporting

protocolsused

asstandards

No

Yes,first

protocol

United

States

1st

protocol

in2005

16projects,

0.21MtC

O2e

issued

VERþ

Certification

program

for

offsetprojects,

carboncredits

&carbon

neutral

products

No

TUV

SUV

Blue

Registry

Yes

Includes

JIand

CDM

methodologies

International

2007

14projects,

47,348tC

O2e

retired

ISO

14064

Certification

program

for

emissions

reportingoffset

projects,

carboncredits

No

No

No

Yes

International

Methodology

releasedin

2006

Does

notapply

VOS

Certificationfor

offsetprojects

&carbon

credits

No

TBD

No

FollowsCDM

orJI

methodologies

International

TBD

Notyet

operational

Social

Carbon

Certificationfor

offsetprojects

&carbon

credits

Yes

Project

documents

not

available.

Registryin

place.

Yes

Initiallyfor

LULUCFbut

now

covering

other

sectors

South

America&

Portugal

1st

LULUCF

methodology

applied

in2002

2projects,No

creditsretired

yet

Source:adaptedfrom

Hamiltonet

al.2008:57.Updatedfrom

standards’website,Novem

ber

2008.1SomeofthesestandardscanalsobeadoptedbyCDM

projects.



Table 3. Examples of sustainable development (SD) criteria for carbon offset projects’assessment.

SD Category SD Criteria Possible indicatorType ofindicator Sources1

Economic Micro-economicefficiency

Internal rate of return Quantitative 1

Technology transfer Plannedimplementationof new technology,expectedmaintenance,know-howtransfer

Qualitative 1,2,3,4

Regional economy Economicperformance ofproject location

Semi-quantitative

1

Employmentgeneration(includinglong-term)

Additional man-month per GHGreduction,compared tobaseline

Quantitative 1,2,3,4,5

Improvedcompetitivenessof industry

Change relative tobaseline

Qualitative 4

Useful by-products Change relative tobaseline

Qualitative 4

Balance of payments/Foreign exchangebenefits (reductionof fuel imports,increased prospectsfor exports)

Income or savingsincrease, relativeto baseline

Semi-quantitative

2,3,5

Employment benefitsfor marginalisedsocial groups

Poverty level ofemployedstakeholders

Qualitative 3

Reduction of theburden on publicsavings madepossible by carboninvestment

$ saved, relativeto investmentwithout carbon

Quantitative 2

Creation ofinvestment andbusinessopportunities forstakeholders

New job and businessopportunities

Qualitative 5

Social Stakeholderparticipation

Extent to whichconcernedstakeholders areinvolved in projectdevelopment

Qualitative 1

Improved serviceavailability

Change inavailability ofservicescompared tobaseline

Semi-quantitative

1

(continued)



Table 3. (Continued).


Capacitydevelopment

Opportunitiesfor capacitydevelopment,compared tobaseline

Qualitative 1

Equal distribution ofproject return

Share of turnoverbenefiting peoplebelow poverty line,compared tobaseline

Quantitative 1,3

Local communityimprovement


Qualitative 1,5

Job qualityimprovement


Qualitative 4

Improved sanitationconditions


Qualitative 4

Reduced drudgeryfor women/children


Qualitative 4

Tourism benefits Change relative tobaseline

Qualitative 4

Social learning Facilitation ofeducation andinformationthrough directworkshops or otherfacilities (e.g. aSchool)

Qualitative 5

Environmental Reduced fossilenergy resources

GHG reduction,relative tobaseline

Quantitative 1,2,4

Energy supplydiversification


Qualitative 4

Improved energyaccess (to theenergy-poor)


Qualitative 3,5

Improved energyefficiency

GHG reduction,relative to baseline

Semi-quantitative

2,3,4

Improved (indoor)health conditions


Semi-quantitative

4,5

Improved wastemanagement


Qualitative 2,4

Air quality(improved byreducing airpollutants)


Semi-quantitative

1,2,3,5

Water quality(improvedthroughwastewatermanagement,reduced pollution,water savings)


Semi-quantitative

1,2,3,4,5

(continued)



we cannot talk about actual but rather expected benefits (Gupta et al. 2008). A desk-based review of 215 CDM projects under validation suggests that their mostcommon SD benefits include employment generation, improved air quality, access toenergy and, occasionally, improvement of public services (Olsen and Fenhann2008b). Seemingly, Gupta and colleagues analyse 45 CDM registered projects andcome to the positive conclusion that ‘about half of the CDM projects studied aredesigned explicitly to generate SD benefits which are not directly related to the GHGabatement component of the projects’ (ibid.: p. 84). However, these authors alsoacknowledge that the realisation of such benefits is more uncertain than the deliveryof GHG reductions. They attribute such imbalance to the nonexistence of aninternational mandate obliging project managers to meet SD criteria duringimplementation, and to the non-incorporation of SD monitoring systems in projectdesign. Another examination of agriculture-based CDM projects in India focuses onhow co-benefits accrue to different project stakeholders and highlights that thesebenefits rarely trickle down to workers and (landless) agricultural labourers. In somecases, projects ameliorate borderline cases of poverty but they are unable to tacklethe causes of structural and chronic poverty (Sirohi 2007).

In voluntary markets, Hamilton and colleagues suggest that forestry projects andthose in the field of renewable energy and energy efficiency registered under astandard (e.g. the Gold Standard) are likely to deliver more co-benefits than othermitigation options. They also argue that CCX offsets are unlikely to contributesubstantially to SD, as their co-benefits are irrelevant as long as the credit meets theCCX eligibility criteria and can be used for compliance (ibid.: p. 40). However, thereis not enough evidence presented to back up their views. Emerging literature on theimpact of OTC offset projects has been mostly focused on forestry initiatives andreveals mixed results. Corbera et al. (2007) show that participation in carbon forestryactivities is by no means ‘neutral’ but mediated by political allegiances and landendowments, and that the distribution of additional benefits like information, forestmanagement training and direct economic incentives can leave behind the mostmarginalised households. In their review of 12 forestry offset projects in Africa, bothCDM and voluntary-based, Jindal et al. (2008) show that some projects do not offersubstantial benefits to local communities and undermine local people’s access to

Table 3. (Continued).


Land resources(improved throughthe use of organicmanure andcompost; includeimprovedbiodiversityconservation andforest resources)


Semi-quantitative

1,3,4,5

1Sources: 1, Sutter 2003; 2, Thorne and Raubenheimer 2003; 3, Cosbey et al. 2006; 4, Gupta et al. 2008; 5,Olsen and Fenhann 2008.



natural resources. Therefore, improving the outcomes of carbon-based forestryactivities may require a better targeting of planting sites and contexts, a detailedexplanation to local participants of their rights and duties when entering a carboncontract, investing in projects managers’ and government governance capacities,taking into account complex land tenure systems, and reducing transaction coststhrough, for example, linking into existing rural development programmes orbundling projects (Boyd et al. 2007c; Corbera and Brown 2008; Jindal et al. 2008).

Finally, regarding technology transfer through regulated and voluntary offsetmarkets, widely understood as a set of processes covering the flows of know-how,experience and equipment (IPCC 2000), most evidence focuses on the CDM andprovides contradictory insights. Youngman et al. (2007), for instance, reveal thatonly half of CDM registered and under validation projects involve the transfer oftechnology hardware from outside the host country. This is due to the highertransaction costs on a per-tonne abated basis of lower and non-emitting energytechnologies, which cannot create sufficient volumes of CERs to be economicallyviable unless emission commitment periods are extended into the future and carbonprices increase. These barriers are further complicated by lack of technical capacityin host countries to deploy and commercialise new technologies (see also Pearson2007; Ellis et al. 2007). In contrast, Schneider and colleagues note that ‘the CDMcontributes to technology transfer in terms of both equipment and know-how, and itdemonstrates that it is currently the strongest mechanism for technology transferunder the UNFCCC’ (2008: p. 2936). Nevertheless, both papers coincide insuggesting that such transfer would increase by putting a higher price on carbonthrough more stringent emission caps and reducing transaction costs to theminimum favouring sectoral and programmatic approaches.

A more recent study by van der Gaast, Begg and Flamos (2009) discusses thepotential for CDM technology transfer in the specific context of five developingcountries, namely China, Chile, Kenya, Israel and Thailand. They show that it is notworth generalising about what types of technologies should be prioritised throughthe CDM, as required (and desired) technologies in each of these countries will varyaccording to the structure of energy systems and development priorities, amongother factors. For example, while in China the transfer of clean coal technology isseen as crucial for their SD, mini-hydro and household energy-efficiency options areamong the most preferred in Kenya. The authors thus argue that technology transferthrough carbon markets must be promoted in parallel to increasing awareness ofnew technological options in host countries, challenging cost perceptions (i.e. theperception that new technologies are always more expensive than what it is currentlyavailable), historic experiences and confronting market powers. A preliminary stepin this direction is, indeed, the development of programmatic CDM and the up-scaling of innovative demonstration projects, which should be further encouraged byinvestors and project developers.

2.4.2. Scale and project types as SD drivers

Even if it is difficult to generalise about the likely impacts of carbon offsetting due tothe diversity of project options, procedures and operational contexts, researchershave noted that projects scale and typology may influence sustainability outcomes toa great extent. For example, it is generally accepted that small-scale projects mayperform better in socio-economic terms than larger ones, especially if the latter do



not have the mandate or are not designed to support on-site or external developmentinitiatives, for example through CERs taxation and funding of additional activities4

(Cosbey et al. 2006; Olsen 2007). Project typologies, in turn, will deliver distinctiveSD profiles (Begg et al. 2003; Cosbey et al. 2006; Sutter and Parreno 2007; Olsen andFenhann 2008b). Overall, there is consensus that energy efficiency projects andsmall-scale hydro, biogas, biomass and solar technologies will provide moreadditional benefits than larger projects in these and other categories, such asindustrial gases or fuel switching. These benefits include an enhanced provision ofenergy services, short and long-term employment, and reduced resource degradationand pollution.

Taking into account these considerations, it is possible to draw a comparisonbetween the likely contribution of regulated and voluntary markets to SD. In theCDM context, small-scale projects5 dominate over larger ones, but deliver less than20% of CER volumes. They principally include investments in hydro, biomassenergy, wind and biogas projects while large and very large projects account for 28%of total project numbers, provide 80% of all credits, and include the mitigation ofindustrial gases, landfill and agricultural methane, and wind power generation (Boydet al. 2007a; ENTTRANS 2008; Hamilton et al. 2008b) (Figure 3). As shown inTable 4, these relative differences between project sizes have remained stable since2005. In the CCX and OTC markets in 2006 and 2007, it may be surprising thatapproximately 50% of all credits came from large and very large projects (Table 5).Micro and small projects in the OTC market represent a higher share in projectnumbers than under the CDM – 46% versus 22%, for 2006 data – and they alsodeliver 14% of total offset volumes. For the CDM, this percentage is only around1%.

Data thus indicate that the number of small-scale projects and their contributionto credit volumes in voluntary carbon markets is higher than in the CDM but themuch larger number of CDM small-scale projects implies that this mechanism mayhave a larger and potentially more positive impact on SD in global terms. Data alsoshow that carbon offset markets are acting as vehicles to provide capital for thedevelopment of projects which would not otherwise enter commercial or CDMmarkets due to their high transaction costs, like small-scale biomass and forestryprojects in the field of biodiversity conservation (Hamilton et al. 2008b).Nevertheless, certain renewable technologies (e.g., solar, tidal), transport-relatedactivities, and very small projects have played so far an insignificant role in offsetmarkets due to insurmountable transaction costs and the wide portfolio of eligiblemitigation options (Pearson 2007).

2.4.3. Projects distribution and global equity

The examination of offset projects’ geographical distribution beyond theircharacteristics and boundaries draws important insights on equity issues, whichare also central to global SD. Since its origins, the CDM has had an inherent biastowards large developing countries, an aspect which has not changed considerablyover the years (Ellis et al. 2007; Boyd et al. 2007a). China, India, Brazil and Mexico,currently host 75.8% of all projects, which in turn will deliver 78.4% of CERs up to2012; African countries represent only 2% and 3.5%, respectively (ENTTRANS2008: p. 8) (Figure 3). This uneven distribution also characterises the OTC market,where 39% of total VERs sold in 2007 came from projects in Asia, predominantly



from China and India. Projects in the US supplied 27% of VERs, and Europeancountries and Russia a 13%. Africa and Latin America supplied only 2 and 7%,respectively. These data indicate a reduction in the total share of VERs coming fromUS and Latin American projects, which represented 43 and 20% of the market in2006. They also reflect a growth in the contribution of China and India, similar toCDM trends, and a reduction in the contribution from African countries, whichrepresented a 6% in 2006. On the other hand, as shown in Figure 4, CCX offsetprojects are predominantly located in the US (62%), and India (17%). Overall,there seems to be a trend towards investment in Asian countries, a growth in Europeand Australia and a reduction in the relative offset volumes from Africa, whichsuggests that, as in the CDM and the OTC markets, this continent remains the leastbenefited.

Projects’ uneven distribution in regulated and voluntary offset schemes is due tothe prioritisation of low-cost mitigation at the expense of global equity considera-tions and a variety of structural conditions from developing countries and marketsthemselves (Brown et al. 2004; Ellis et al. 2007). First, most mitigation activities arelocated in countries where large-scale mitigation potential at relatively low costs isfound and where well-functioning CDM structures and procedures exist, such as anefficient DNA and high levels of expertise among project developers. In addition,these countries are also heavily populated, increasingly industrialised and intensivein energy use, which increases the opportunities for offset projects to be developed(Cosbey et al. 2006: p. 26). Second, the less benefited countries are generally thosewhere there is a high risk of project failure, or where project design and transactioncosts are prohibitively high, often as a result of their structural conditions, includingunstable political regimes, unfavourable policy frameworks with, for example,nonexistent feed-in tariff regimes, unclear ownership structures for CERs andsubsidies to fossil fuels, among others (Ellis and Kamel 2007). In this sense,

Figure 2. Small-scale project types in the CDM pipeline*, November 2008.



Table

4.

Projectsandtransactionvolumes

byprojectssize

intheCDM

1.

2006

2007

2008

Project

size

Number

of

projects2

Percentage

relativeto

number

of

projects(%

)

CERsshare

upto

2012(%

)Projects

Percentage

relativeto

number

of

projects(%

)

CERsshare

upto

2012(%

)Projects

Percentage

relativeto

number

ofprojects(%

)

CERsshare

upto

2012

(%)

Micro

(lessthan

5ktC

O2e/year)

63

4.3

0.1

127

4.6

0.1

168

40.1

Small(5

to14.99

KtC

O2e/year)

266

18

1.2

356

12.8

1515

12.4

1

Medium

(15to

99

ktC

O2e/year)

774

52.4

14.2

1485

53.4

16.3

2293

55.2

18

Large(100to

499

ktC

O2e/year)

293

19.9

22.6

685

24.6

30.9

997

24

32.7

Verylarge(over

500

ktC

O2e/year)

80

5.4

61.9

128

4.6

51.7

178

4.3

48.2

TOTAL

1476

100

100

2781

100

100

4151

100

100

1Data

from

UNEP/R

ISOE

Novem

ber

2006,2007and2008forcomparativepurposes.

2Includes

registered,atvalidationandunder

review

projects,butexcludes

withdrawnandrejected

projects.



Table

5.

Projectsandtransactionvolumes

byprojectssize

inthevoluntary

markets1.

2006

2007

Project

size

Number

of

projects2

Percentagerelative

tonumber

of

projects(%

)

Percentageof

VERs/CFIs

transacted

(%)

Number

of

projects

Percentagerelative

tonumber

of

projects(%

)

Percentageof

VERs/CFIs

transacted

(%)

Micro

(lessthan5ktC

O2e/year)

19

28.4

4Notavailable

–4

Small(5

to14.99KtC

O2e/year)

12

17.9

10

Notavailable

–8

Medium

(15to

99ktC

O2e/year)

14

20.9

22

Notavailable

–38

Large(100to

499ktC

O2e/year)

12

17.9

22

Notavailable

–17

Verylarge(over

500ktC

O2e/year)

710.4

34

Notavailable

–32

Mixed

34.5

8Notavailable

–1

TOTAL

67

100

100

––

100

1Data

from

Hamiltonet

al.(2008b;2007).

2Projectssurveyed

andnotallofthose

existingin

themarkets.



investment in carbon offsets rewards mostly those countries with highest ForeignDirect Investment Confidence indexes (i.e. China, India, Brazil, Mexico andIndonesia), with the exception of Malaysia (Jung 2006: p. 2179). Third and finally,

Figure 4. Offset projects’ location in the CCX market, November 2008.

Figure 3. CDM projects’ location, November 2008.



there are other aspects influencing carbon offsets’ uneven distribution, which arerelated to the mandate and investment criteria of market players such as carbonfunds and project developers (Ellis and Kamel 2007). Some carbon funds, like theWorld Bank’s Community Development and Biocarbon Funds, prioritise CDM-compliant and voluntary investment in poorest countries of Africa, Latin Americaand Asia. In contrast, some project developers prefer achieving the highest level ofCERs return in the first year or during the course of the project, while others focusonly in one single technology, thus restricting the countries and locations where suchtechnology can be more easily and cost-effectively deployed (ibid. 34–35).

3. Conclusions

3.1. CDM and voluntary offsets are growing exponentially

This review has shown that the CDM and voluntary offset market schemes havegrown exponentially over the last 2 years. Although CDM growth can be explainedby the mechanism’s maturity and the proximity to the end of the Kyoto Protocol’sfirst compliance period, the current growth of the voluntary market reflects theoverlap of at least three different situations. First, an increase in ‘traditional’voluntary market projects due to an enhanced public awareness on climate changeand other social and environmental issues, particularly in Europe and the US;second, the entrance to the voluntary market of projects currently not allowed in theCDM (e.g. afforestation and reforestation in areas not eligible under the CDM,HFC-23 reduction in new plants) and, third, a ‘compliance attitude’ by UScompanies in response to the imminent legislation on climate change and theuncertainty about the position of this country in the international regime post-2012.

3.2. CDM and voluntary offset schemes promote similar projects and technologies

The review has also highlighted that, with the exception of the forestry sector whichis by far more supported by the voluntary sector, both regulated and voluntarymarkets support a variety of mitigation options and they are dominated byrenewable energy projects (mainly hydro and wind), methane-based mitigation andfuel switching. This is an important finding, as it contravenes the idea that voluntaryoffsetting promotes pro-poor energy efficiency projects and renewable technologiesother than those present in the CDM. Regarding projects’ quality, CDM offsets aremore reliable regarding their additionality due to the mechanism’s strict proceduresand much more divergent outcomes can be expected in the voluntary sector, even ifthe increase in the number of standardised projects is a positive move in thisdirection.

3.3. Contribution to local additional benefits is context-specific and not scheme-dependent

The contribution of both schemes to SD should be assessed in the mid-term to beaccurate. There is not yet enough field-based research data to draw definitiveconclusions on technology transfer and project impacts for different sizes andtechnologies. Emerging empirical studies, particularly in the forestry sector, revealmixed results and implementation complexities, which prove that project outcomesmay be highly context-specific. However, desk-based multi-criteria analyses tend to



agree that small-scale projects, energy efficiency and renewable energy options willprovide more benefits to local populations than larger ones, promoting additionalbenefits beyond GHG mitigation, occasional employment and reduced pollution. Atthis regard, the voluntary market may seem more promising, as the number of small-scale projects and their contribution to credit volumes in voluntary markets is higherthan in the CDM. Notwithstanding, the much larger number of CDM small-scaleprojects operating worldwide suggests a larger and more likely positive impact of thismechanism in global terms.

3.4. Both CDM and voluntary offset projects are unevenly distributed and leaveAfrica behind

Finally, regarding projects’ distribution, the review has shown that Africa is the leastbenefited continent, and that the voluntary market has an important share ofprojects coming from developed countries and regions like the US, Australia andEurope. The growth of voluntary projects in Asia has reduced the proportion ofprojects developed in Africa. This uneven distribution characterising both marketscan be explained by investment risk factors and criteria, as well as institutionalstructures in host countries. These findings challenge those who think that thevoluntary market performs better than the CDM in terms of the equitabledistribution of projects worldwide.

In conclusion, regulated and voluntary schemes have yet to prove that they arevaluable instruments to fight climate change and promote national and local SDpriorities. Such a dual objective may only be realised if both markets are reformed soas to make SD more central than it has been so far. To date, the consecution ofadditional benefits has been more a product of project design and implementationarrangements than the broader institutional structures governing these markets. Forthis reason, in the CDM context, scholars have proposed a variety of interventionsto maximise the SD outcome of these schemes, like geographical quotas (Rowlands2001), the inclusion of SD checklists and standards in project design, monitoring andevaluation (Cosbey et al. 2006; Gupta et al. 2008), and the prioritisation of sometechnologies over others (Boyd et al. 2007a). They have also pledged internationalpolicy-makers, carbon funds, brokers and trading platforms like the CCX toreconsider their criteria in selecting eligible projects and recipient countries. In theOTC sector, the lack of a global regulatory body leaves in the hands of consumersand investors the responsibility to choose among project typologies, the standardsavailable and to demand well-designed and implemented projects.

Regardless of the options taken in regulated and voluntary schemes to maximiseSD outcomes, the divergent structural conditions characterising institutional, socialand energy systems across developing countries justify continuous investment incapacity-building in forthcoming years, particularly in Africa. As in-countrycapacities for CDM project development increases, so may proposals for thedevelopment of voluntary offset projects. For this reason, programmes like theCapacity Building for the Clean Development Mechanism (CD4CDM), hosted bythe United Nations Environment Programme, need to continue and be furtherstrengthened. Left to market forces alone, carbon offsetting will generally supportlow-cost mitigation options (Olsen 2007). There is thus a need to incorporate all orsome of the proposals already suggested to improving the CDMs contribution toglobal SD, even if this is difficult to negotiate due to national sovereignty concerns.



This is important because one can expect voluntary trading schemes to follow suitand evolve in the direction of the international climate change regime, as it hashappened to date. Otherwise, carbon offsetting will fail to promote a large-scaletransition towards a non-fossil-fuel based global economy, and will leave behind theneeds and priorities of the world’s urban and rural poor.

Acknowledgements

The authors would like to acknowledge the information provided by Joy Cernac fromCalifornia’s Action Registry and Alexa Morrison from the Plan Vivo Foundation. We are alsograteful to three anonymous reviewers for their insightful comments to an early draft of thispaper. This research has been funded by the Tyndall Centre’s Programme on InternationalDevelopment. Any errors or omissions remain our own responsibility.

Notes

1. The CDM market is divided in two main segments: a primary market, selling primaryCERs, and a secondary market, selling secondary or guaranteed CERs (gCERs). PrimaryCERs are generated by projects under development or implementation, and are paid upondelivery at a future date. Secondary or guaranteed CERs (gCERs) are either offered with adelivery guarantee by an entity such as a bank or fund or sold once they have been issuedto the project developer. gCERs are often more expensive and tend to be sold close to thevalue of the European Union Emission Trading Scheme allowances, which were traded atan average price of US$24 in 2007.

2. Over the period Jan-Oct 2008, the CCX has already traded 63.5 MtCO2e, whichrepresents a 244% increase from the same period in 2007 (CCX Market Report 5(10): Oct2008. www.chicagoclimatex.com

3. http://www.defra.gov.uk/environment/climatechange/uk/carbonoffset/pdf/carbon-offset-codepractice.pdf

4. The Chinese government, for example, is entitled to 30% and 65% of all CERs generatedby CDM nitrous oxide and other industrial gases (PFCs and HFCs) projects, respectively.The collected revenues are earmarked to finance climate change capacity building acrossscales of governance (Boyd et al. 2007a)

5. Small-scale CDM projects include those which reduce less than 60,000 tCO2e in emissionreductions per year, renewable energy project activities with a maximum output capacityup to an equivalent of 15 MW, or energy efficiency improvement projects reducing energyconsumption (both at supply and demand side) by up to 60 GW/h per year. In the case ofafforestation and reforestation activities, the small-scale threshold is 16,000 tCO2e ofemission reductions per year.

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