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Climate Change: Carbon Credits

Volume 692: debated on Monday 4 June 2007

asked Her Majesty's Government:

What is their response to recent reports of people and organisations buying carbon credits that do not yield any reductions in carbon emissions; and [HL3756]

What action they are taking in response to recent reports of failings in the new markets for carbon credits and other greenhouse gases; and [HL3757]

What is their response to recent reports of an inadequacy of procedures for verification of the real value in carbon credits; and [HL3758]

What is their response to recent reports of wide variations in the price per tonne of carbon dioxide offsets; and [HL3759]

What is the official procedure for organisations wishing to set up in business selling carbon offsetting mechanisms; and how this sector is regulated. [HL3760]

The Government support offsetting as part of a hierarchy of actions, the most important being to reduce emissions. We acknowledge that carbon offsetting is not a cure for climate change, but it can help to raise awareness and to reduce the impact of our actions.

The Government support the use of offsets generated by robust and verifiable mechanisms bound by international regulation. The Government's own offsetting schemes use the clean development mechanism (CDM), which can also be accessed by consumers through a variety of providers. We have also proposed that the CDM and other regulatory market offset mechanisms form the core of Defra's voluntary code of best practice for the provision of offsetting to UK customers.

The CDM is supervised by an executive board, established by the United Nations Framework Convention on Climate Change (UNFCCC). This is responsible for full oversight and the release of certified emission reductions (CERs) to projects that have met the requirements of the CDM process. That process is multi-stage, employing stringent verification procedures to ensure the real value of the emission reductions generated.

The carbon market is an essential part of the package to tackle climate change globally and is a crucial mechanism to help to drive the investment needed to reduce emissions cost-effectively. The market is growing rapidly and faces development issues, as any emerging market does. For example, there is a need for more investment, via the carbon market, in Africa. At the second meeting of parties to the Kyoto Protocol (COP/MOP2) in Nairobi, there was a particular focus on enabling wider uptake of CDM projects—a “Nairobi framework” was agreed to facilitate investment in Africa. The UK, as the major focus of the carbon market, wants to work to connect market experts here with project developers in Africa as a contribution to this work.

COP/MOP2 also encouraged further initiatives to help to build capacity to carry out projects and agreed measures aimed, for instance, at aiding easier development of small-scale CDM projects. We are also co-operating with colleagues in other countries to consider how we might link the EU-ETS, which is currently at the heart of the carbon market, to other emerging schemes and so work towards a truly global market for carbon.

There is currently no regulation of businesses that sell carbon offsetting mechanisms. However, on 18 January, Defra launched a consultation on a voluntary code of best practice for the provision of carbon offsetting to customers. The consultation closed on 13 April 2007 and the code of best practice is expected to be operational by the end of the year.

The purpose of establishing a code is to ensure consumer confidence in an emerging market and continued growth of that market through that confidence. The code will be voluntary and offset providers can choose whether to seek accreditation for all, or some, of their offsetting products.

The code proposes that offset providers supply consumers with clear information and transparent prices. It is not for the Government to dictate prices for CO2 offsets, but there is a market price for carbon, established by the EU-ETS, which is available to the public as a point of reference.

Defra plans to support the standard by providing guidance to consumers on offsetting, which will also help consumers to make informed decisions about their actions.