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About Carbon Credits and Carbon Market |
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Carbon Credit Corner >>
Voluntary Emission
Reduction
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 What are the key principles of VERs?
The
voluntary market has evolved a simplified process based on the CDM
project cycle, but to lower-cost, less rigorous standards, applied
to a wide variety of project types. Evolving buyer preference has
driven the adoption of several core principles to ensure value
retention in VER assets:
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Principle |
Description |
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Additionally |
VERs must represent real
emissions reductions in addition to the business-as-usual
scenario. While tests are generally not as strict as for
CERs, the principle remains the same. |
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Sustainability |
The compliance regime mandates
that projects have a twin mandate – to reduce emissions, and
contribute to local sustainability. However, the strict
project cycle of the CDM, designed to maintain environmental
integrity, has also resulted in projects which are more
focused on emissions reductions than sustainability, such as
large-scale industrial technologies which yield strong
profits to their private owners, but do not improve local
conditions. The voluntary market, driven by buyer
preferences, is far more sensitive to sustainability
concerns due to the impact on pricing and relative value. In
fact, there are currently two broad types of VERs – those
with high community and environmental sustainability such as
renewable energy, and those from large-scale, industrial,
typically pre-CDM registration projects. The former
typically commands twice the price or more than the latter.
This issue is also addressed through the use of quality
labels, which is explained in detail below. |
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Verifiability |
An
independent third party is required to verify the emissions
reductions; this may be carried out by entities accredited
by the UNFCCC to conduct similar activities for CER
projects, or by professional environmental consultancies. |
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Reliability |
Linked to the issue of verification, Buyers are wary of
purchasing VERs which may already have been sold to another
party. Without a central registry, as maintained by the
UNFCCC for compliance CERs, there is always the danger of
double-selling. To counter this, in June 2006 the Bank of
New York opened a VER registry where Buyers may set up
accounts to track VER purchases. TUV SUD, accredited by the
UNFCCC to assess compliance projects, has also set up the
Blue Registry, which is due to be launched in July 2007. |
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