Dr. Sascha Lafeld, Managing Director of 3C Group, will be presenting his views on "Taking credits to market" at Voluntary Carbon Markets in New York as well as presenting an interactive workshop on "Managing your Carbon Footprint".

Here he provides a preview.

What do you and your organization do in the Carbon Markets sector?

3C is an integrated Carbon Asset Management company involved in the entire value chain of carbon credits. 3C originates and procures carbon credits from climate protection projects around the world. 3C is globally one of the biggest sellers of carbon credits for the voluntary carbon market and provides comprehensive climate neutral services. 3C also advises a range of funds investing in the new asset class of carbon credits generated under the Kyoto Protocol and provides consultancy services to companies subject to the EU Emissions Trading Scheme.  

What do you consider to be the most interesting developments and biggest challenges in the American voluntary carbon market at this time?

Of course one of the most interesting developments in during this election year will be the future of a compliance market and its impact on the voluntary markets. We are closely listening to the candidates’ views on a national emissions trading system and are actively engaging in the policy discussions through the Business Council for Sustainable Energy. Linking the US trading schemes with other international efforts such as the European Union Emissions Trading scheme is also very interesting as a successfully implemented link would provide stability and increase liquidity in both markets.

What are the challenges facing standardization of the market?

The main challenge is to bridge the gap between quality control and room for innovation. What is great about the voluntary market is its potential to drive innovation, use cutting-edge carbon reduction technologies and incorporate further environmental benefits. The UN process is slower to react to new developments and its tighter regulations increase transaction costs. Its advantage though is that precisely there regulations keep a high minimum quality standard. The key question the standardization debate must answer is how to ensure that the voluntary market continues to support cutting-edge carbon reduction methods while guaranteeing the high quality of projects that are real, additional, and sustainable at a fraction of the transaction costs in the compliance market.

If regulated emission reductions become mandatory in the US, what does the future hold for the voluntary market?

The voluntary market is here to stay, and as we can see in Europe with the EU ETS, a mandatory scheme does not abolish the need for voluntary offsets. A mandatory scheme would reasonable include only carbon intensive industries, such as utilities or chemical plants, but not for example financial institutions, which are highly involved in voluntary efforts to reduce their carbon footprint. Also, the voluntary market provides more opportunities for small projects that would not be feasible under the Kyoto mechanisms due to higher transaction costs. The voluntary market’s role will be complimentary to the compliance market in that it makes carbon footprint reduction more affordable through lower transaction costs and supports innovative low-carbon solutions with additional environmental and social benefits.

What are the barriers to project developers looking to generate offsets?

The largest barrier is an evaluation of risk factors. As there are fewer regulations in the voluntary market, there are also fewer guidelines concerning methodologies or implementation strategies. A project developer for example needs to consider methodology risks, transaction cost risks, delivery risks, market risks and risks involved in the validation by third-party standardization institutes. Without a careful evaluation of these risks, it is almost impossible to gauge a project’s profitability or feasibility.

What safeguards are required to ensure sustainable growth?

The three most important factors in the voluntary market are quality, transparency, and credibility. Credits must come from projects that are third-party verified, additional and make real contributions to carbon reduction. The market and the credit accounting systems must be transparent to ensure that the retiring process is clean and no double counting occurs. Finally, the system needs to be credible to the industry as well as the end-consumers because social acceptance is crucial to a healthy voluntary market system.

ENDS