Green shoe brigade joins carbon rush

05 Jun 2007Archived News Energetics in the News

PUBLISHED: Australian Financial Review (AFR) - By Matthew Dunckley and Joanne Gray - Cheryl Bowler, Principal Consultant, Energetics Pty Ltd was asked by AFR if, by planting trees, companies are doing enough to solve the long-term problems of climate change.


Just like confession, Elementree’s website offers forgiveness for your carbon transgressions.

Tap in the litres of petrol you guzzle, the miles you fly, the electricity you use and it calculates how many trees you need to buy, at $2.50 each, to remove the carbon you emit. Yet, even though it’s sold nearly 25,000 tonnes worth of offsets, Elementree has yet to plant a single tree.

As people seek to lighten their carbon footprint, a new market in voluntary carbon offsets has arisen. Australia and New Zealand Banking Group, National Australia Bank, News Corp and IAG have pledged to become carbon neutral; other companies have promised to reduce their carbon emissions. Virgin Blue and Flight Centre allow flyers to buy carbon offsets for their journeys and Qantas is expected to announce a similar scheme soon.

As a new survey shows that 50 per cent of Australians are willing to pay an organization to offset the amount of carbon emissions their household produces, online retailers are selling carbon offsets to individuals from $8.80 to $25 a tonne. But while the Prime Minister grapples with a national carbon trading scheme, the thriving voluntary carbon market is in desperate need of credible national standards and a regulator.

The PM’s task group on emissions trading made no recommendations about the voluntary market.

Many of the offset providers generate credits from reforestation or by installing energy-efficient light bulbs in homes from western Sydney to the slums of South Africa. When US-listed company Planktos spread the news of its scheme to capture carbon by dumping iron filings into the ocean, its shares rose fivefold.

But while offset providers and brokers may be well intentioned, some are selling conscience-salving credits based on unverified, unaccredited and sometimes dubious claims about their product’s potential to sequester carbon or reduce carbon emissions.

“There’s no question that done the right way, forms of carbon sinks can be valuable but not everything being sold in terms of sequestration is legitimate,” says Noel Purcell, group general manager, stakeholder communications, at Westpac Banking Corp.

Companies spruiking “future abatement” credits are making a habit of selling tens of thousands of credits before a tree is in the ground. Even if they’re not planted badly, selected trees can die off well before their assumed 70- to 100-year carbon storage period has elapsed and there are no set rules about planting or reserves in case a forest is destroyed by a fire.

There are tree plantations whose carbon sequestering potential is disputed. Few plantations have been certified and prices vary widely, regardless of the quality of the offset.

Many tree plantation offset schemes are registered as charities, meaning donations to them are fully tax-deductible, even though the buyers receive something of value – the promise of “future abatement”.

Other tree-planting schemes are set up as not-for-profit, meaning they’re not taxed at the corporate rate.

The options for buying credits are essentially threefold. Two sit in the regulated field, with credits generated by schemes accredited under the Australian Greenhouse Office’s Greenhouse Friendly program or the NSW government’s Greenhouse Gas Abatement Scheme. A solitary forestry project has been registered by AGO, and NSW GGAS has five accredited providers offering forestry offsets, yet there are any number of tree-planting offsets available on the internet.

Then there is a plethora of so-called voluntary credits sold to the public without any real regulation. Even NSW certificates are sold in the voluntary market.

There’s nothing to stop unethical brokers selling the same credit many times over, even though under the NSW scheme an offset isn’t crystallized until it is voluntarily retired and cancelled.

The Independent Pricing and Regulatory Tribunal, which administers the GGAS scheme, “in no way endorses any particular organization offering to resell GGAS certificates as a voluntary offset”, says Chris Spangaro, general manager of the tribunal.

He says just buying a certificate “does not amount to an effective offset”. “For an offset using GGAS certificates to…become effective, the certificates should be surrendered on the scheme registry, ensuring that they cannot be subsequently resold.”

In NSW, however, while the GGAS certificates are bankable, only 4 per cent of the certificates created from forestry plantations have been retired, compared with 82 per cent created by other types of abatement or emissions reduction.

“Knowledge about offsets is pretty low. People don’t understand that trees aren’t infinite sponges of carbon dioxide,” says Cheryl Bowler, of carbon-neutral consultancy Energetics.

Companies and individuals must be encouraged to cut emissions and invest in renewable energy as absolute priorities and use offsets as a last resort, Bowler says.

“Planting a tree today isn’t solving your long-term problem.”

Even if offsets are used, the big issue, according to Purcell and other experts, is lack of accreditation. Many offset schemes simply have not been checked out by an independent third party.

Craig Roussac, general manager of sustainability at the country’s biggest office landlord, Investa Property Group, agrees offsets are an important part of the landscape but says that could be undermined by scams.

“There is a genuine risk of a scandal emerging by someone unwittingly purchasing something that does not stand up to scrutiny and then confidence is lost in the industry,” Roussac says.

There certainly have been scandals overseas. British band Coldplay was embarrassed when The Daily Telegraph newspaper revealed that a forest that band members had bought in India to offset their travel for a world tour had died.

“A credible monitoring mechanism is needed to weed out dubious projects,” a recent report from Sydney-based Total Environment Centre warns.

“The relative absence of credible governance mechanisms for voluntary offsets renders the industry vulnerable to profiteering and opportunism that could wreck the industry’s credibility.”

One issue is the rampant use of forward accounting, where carbon offsets are sold well before carbon has been sequestered by the trees, a process that takes at least 30 years.

Greenfleet, a charity that’s been running for 10 years, has planted 2.8 million trees and received tax-deductible donations from the likes of the Australian government, Thiess John Holland and Pacific Brands, raising more than $6 million in the process.

It has “sold” more than 900,000 tonnes of future offsets, but that’s 200,000 tonnes of carbon more than the current plantations can sequester.

The company says it’s been slowed by drought and has started planting more trees. But to stop questions about its operations, Greenfleet is now seeking the AGO stamp of approval, which requires compliance with rigorous accounting and verification processes.

“We want to become more transparent,” says Greenfleet chief executive Sara Gipton. “At the same time, our supporters are asking much more sophisticated questions than they were two years ago.”

Elementree’s commercial arm is also chasing accreditation and the AGO says offset providers are queuing up for its stamp of approval under the Greenhouse Friendly scheme that approves carbon-neutral products and services.

Elementree’s managing director and founder, Courtney Hayes, says it is standard practice in the industry to sell offsets before trees are in the ground.

He says his not-for-profit arm has ordered 100,000 eight-month-old saplings which it will plant over the coming months.

These would be monitored but not to Greenhouse Friendly standard, which Hayes says is fine because he is offering an “experience” through his “tree-planting” program, not a fully bankable carbon credit.

For Hayes a bigger issue for the industry lies in the web-based services acting as brokers.

“There are at least 13 groups who are just resellers or brokers or middlemen…they are going to certified groups, buying credits off them at $10 or $12 and putting on a margin and selling them for $20,” he says. “They are charging a margin for doing nothing more than running a website.”

It’s not just plantations that are in the spotlight. Last year, Easy Being Green gave away thousands of energy-efficient light bulbs and claimed the credits even though half were never installed.

This prompted the NSW government to change its rules for claiming carbon credits and for Easy Being Green to change its business model to help people install the bulbs it was giving away.

Corporate Australia is straddling all of these options. Westpac has decided to reduce emissions – which are down 46 per cent over 10 years – rather than relying on offsets and it now supports Easy Being Green. Reducing energy use has shaved tens of millions of dollars from expenses, says Westpac’s Purcell.

“It’s just financially attractive.” He says without permanently reducing emissions, buying offsets is just like going to confession: “You just go out and do the same thing again.” Westpac, he says, has mostly avoided purchasing offsets “because we don’t think we know enough of the smart ways to do it”.

Companies are reducing emissions because their staff and customers want them to, says Energetics’ Bowler.

“There’s a bit of ‘me too-ism’ going on,” she says. “Companies are thinking ‘my competitor is going carbon neutral, so I’d better too, even though I don’t know what it means’.” It’s often costing them a lot more than they expect, she says.

Going carbon neutral has its own challenges. Assessing a carbon footprint is complicated and can cost $150,000 for a full audit. Assessing energy, car fleet and air travel is one thing, but waste creation and paper use is often forgotten.

Rob Fowler, chief executive of Abatement Solutions Asia Pacific, warns that credits must be retired and cancelled, not resold or reused.

“When people claim they’re carbon neutral, or that they have offset their emissions, it means that once they have bought the offset they should have then gone on and retired it,” he says. “The ‘feel-good’ buyers don’t often understand that particular part of it.”

Freehills partner John Taberner worries that there are “a number of schemes in Australia of a highly dubious nature”.

“Buyers and sellers, I don’t think they are fully alert to the issue of needing to have legal substance on the credits being sold,” Taberner says. “If you think you are buying a credit that is fully fungible, you are not.”

An emissions trading scheme would focus greater attention on the quality of credits and some people would be disappointed, he says.

Carbon Neutral Australia’s marketing director, Angela Tillier, says some of the companies offering offsets through plantations are not stating where they have planted trees or how their growth is monitored.

Tillier says there is little to stop fraudsters setting up websites to spruik credits based on non-existent forests. “I don’t want to frighten people, I just want to make people aware that you do have to be careful,” she says.

Carbon Neutral Australia is not associated with the British company that sold Coldplay its ill-fated forest.

The prime ministerial task group report on emissions trading acknowledges the lack of regulation in the voluntary retail sector but focuses on the need for credibility of offsets in the potentially larger mandatory marketplace.

There is also a passing reference buried deep in an appendix to there being “no restrictions” on the sale of voluntary credits but concludes the industry is moving in the right direction through schemes such as Greenhouse Friendly.

Tillier’s organization began as a tree-planting charity and in 2002 planted 9000 seedlings. Now it is part of the global-warming boom and hopes to have planted 540,000 trees this financial year and sold about 125,000 tonnes of carbon offsets for a total of about $1.4 million.

That growth is a worldwide phenomenon. Based on figures from the International Emissions Trading Association and the World Bank, American consultancy ICF International says global trading in voluntary carbon credits was valued at $US2.3 billion ($2.8 billion) in the first nine months of 2006 out of an overall carbon market worth more than $US21.5 billion. It forecasts the market for voluntary offsets will quadruple by 2010.

Ben Muir, managing director in Australia for British-based Cleaner Climate, agrees that regulation will benefit consumers and the industry.

Muir’s company aims to generate offsets from installing millions of energy-efficient light bulbs in poor South African townships. This is a model, Muir admits, that suffered a credibility problem after a scandal involving another group, Climate Care, as there was nothing to ensure the bulbs were installed and maintained.

But Muir says his group is different. It is working with the South African government, has a respectable auditor – PriceWaterhouseCoopers – and is complying with a tough international standard for lighting projects set by the United Nations Framework Convention on Climate Change.

Its first Australian client is Flight Centre, which is now offering the offsets to consumers even though, much like Elementree, the group is yet to install a single bulb.

The first bulbs will be installed before the end of the month, which is acceptable under the industry standards, Muir says.

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