To ask the Secretary of State for Environment, Food and Rural Affairs what the regulatory framework is for those companies that offer carbon-offsetting services; and if he will make a statement. (145903)

The carbon market is a growing and diverse marketplace. In practice, there are two different markets currently in operation—the voluntary market and the regulated market. The regulated market covers emission reductions generated under the Kyoto mechanisms, such as Certified Emission Reductions (CERs) and EU Allowances (EUAs). The voluntary market covers all emission reductions generated outside of the regulated regime—collectively known as Verified Emission Reductions (VERs). There is currently no regulatory framework governing the voluntary market.

DEFRA has published a consultation paper on establishing a voluntary Code of Best Practice for the provision of carbon offsetting to UK customers. The purpose of establishing such a Code is to ensure consumer confidence in this emerging market. Such confidence will also be an important factor in the market’s continued growth. The consultation has now been completed and responses are being assessed. The intention is to have the Code operating in late 2007.

The Code proposes that the most suitable carbon credits for offsetting are those from the regulated market because they are robust and verifiable.

To ask the Secretary of State for Environment, Food and Rural Affairs what assessment he has made of the environmental effectiveness of the services offered by carbon-offsetting companies. (145904)

Carbon offsetting is not a cure for climate change, but it can to help raise awareness and reduce the impact of our actions. The biggest priority is to reduce our emissions wherever possible. However, where this cannot be achieved, offsetting can help by creating the equivalent carbon dioxide saving elsewhere.

There are currently two markets in operation which generate emission reductions for carbon offsetting. The regulated market encompasses emission reductions generated under the Kyoto mechanisms, while the voluntary market covers those which operate outside the Kyoto regime. There is currently no regulatory framework governing the voluntary market.

In order to provide more confidence, DEFRA has published a consultation paper on establishing a voluntary Code of Best Practice for the provision of carbon offsetting to UK customers. The aim is to have the Code operating in late 2007.

The Code proposes that the most suitable carbon credits for offsetting are those from the regulated market because they are robust and verifiable. These credits include Certified Emission Reductions (CERs), EU Allowances (EUAs) and Emission Reduction Units (ERUs). However, it is possible to offset voluntarily, that is without a formal compliance obligation, and use regulated credits to achieve this. Government currently uses CERs within its own voluntary internal carbon offsetting schemes.