The voluntary market allows businesses, institutions and individuals to offset their GHG emissions by paying for abatement elsewhere. Voluntary offsets are outside the formal arrangements under the Kyoto Protocol, and as such the reductions in GHG achieved are not entered in a country's carbon accounts and thus do not assist an originating country in meeting its emissions target. Nevertheless, the voluntary market is cheap to administer, depending on the rigor of verification and location, and as a whole the market is growing.
A review of policies towards voluntary forestry offsets is included in this chapter because most offsets are originated by developed countries even though about half the projects are executed in developing countries. These projects allow small investors to contribute to projects in Asia, Africa and South America, marketed as providing carbon sequestration plus social and economic benefits to local communities. Such offsets projects may reduce deforestation as well as establishing new plantations. The contribution to biodiversity enhancement of forestry offset projects in developing countries can be said to be modest, however, unless they are certified under the Climate Community and Biodiversity Alliance. (Chapter 4 evaluates the biodiversity benefits of forestry offset projects.)
In the case of forestry offset projects mounted in developed countries there is no guarantee that the social and biodiversity co-benefits claimed for forestry projects are any more than window-dressing, given that forestry monocultures generally lower costs and deliver more sequestered carbon per hectare than mixed species plantings.
In Chapter 3 the negative trends in the volume of forestry offsets per se were linked to the fact that a large proportion of the market lacked rigor. Where forestry offsets are not verified by a third party, real possibilities exist for the double-counting of the sequestration benefits and exaggeration of the offsets achieved. The finalization of comprehensive rules for forestry in the Voluntary Carbon Standard, which is already the most favored standard in the market, suggests that buyers could be drawn back to forestry. But an issue that still needs to be resolved is the increase in transparency in the market with respect to timing of the forestry offset being sold, as emphasized in Chapter 3.
Subsequent to the Bali Climate Change Conference there has been a surge of interest in the development of avoided deforestation projects (REDD). Where the voluntary market is likely to flourish is in the development of financial and technical instruments for delivering REDD in developing countries. Notwithstanding the difficulty of verifying that the forest would be lost without the project and that deforestation would not be shifted elsewhere, REDD has the advantage over plantation projects of delivering immediate emission abatement and potentially large biodiversity co-benefits. The development of standards for REDD, the involvement of the World Bank in piloting such projects, together with the interest shown by major financiers, augurs well for the growth in this segment of the voluntary market. Chapter 8 concludes that a funds-based approach to REDD, which could include investors large and small, would be more likely to succeed in the near future than a regulated market-based approach to REDD.
The conclusion is that there will always be a market for voluntary carbon offsets that suit the needs of companies and industries, not to mention households that are not covered by mandatory schemes in reducing their carbon footprint. Buyers are also able to satisfy their desires for supplementary benefits, such as biodiversity conservation and sustainable development. The introduction of standards by the market that have the prospect of being widely adopted promises increased buyer confidence that the reduction in greenhouse emissions will actually occur. It would appear that the best policy is to allow the voluntary market to continue to self-regulate and thus increasingly to protect the investments of buyers and enhance the reputation of sellers.
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