The Voluntary Carbon Standard is a new standard intended to cover greenhouse gas (GHG) emissions reduction projects developed for voluntary markets. It is being promoted by the International Emissions Trading Association and The Climate Group, and is in response to the absence of a universally recognized voluntary standard for carbon offsets. According to The Climate Group, "the Voluntary Carbon Standard will ensure that all voluntary emissions reductions that meet its criteria are additional and represent real, quantifiable, and permanent emission reductions."

I've addressed the issue of "additionality" of GHG emissions reduction projects in previous columns, and it is abundantly clear that no standard can ever be perfect. The real question is whether the Voluntary Carbon Standard is likely to result in a higher proportion of “additional and real” reductions than the application of other voluntary standards.

It's not intuitively obvious to me from reading the available information on this new standard that we should expect such an outcome. What I find most interesting about the standard is that it takes many elements of mandatory GHG markets and simply moves them over into the voluntary market. You can see this in the standard’s approach to additionality, the documentation of reductions, and the monitoring and verification (M&V) provisions.

Is this the direction we should go with voluntary carbon markets? After all, key differences exist between mandatory and voluntary markets. Compliance markets are charged with implementing specific policy mandates, which can dramatically constrain the scope of qualifying activities and raise transaction costs. Voluntary markets, however, do not implement any particular policy mandates. A key role of voluntary markets can be to set the stage for future policy. As such, it can make sense to apply different standards to voluntary offsets.

Voluntary markets can maintain environmental integrity without the precise quantification, unambiguous ownership requirements, and in-depth M&V protocols required of compliance markets. The voluntary market has the flexibility to encourage innovation. It may be able to provide the most benefit to small-scale projects and technologies that the regulatory market tends to overlook (either because the projects fail to meet a required threshold or because they are too small to bear the high transaction costs often associated with regulatory offsets). For example, one could include sectors that may be harder to quantify or credits for which it is more difficult to demonstrate ownership, or allow credits to be front-loaded, which makes it much easier to fund truly additional projects with limited funding. As long as these issues are transparently addressed, voluntary markets offer much more flexibility in program design than do compliance markets.

The goals espoused by The Climate Group and IETA are laudable, and I find much I can agree with in terms of trying to ensure credibility and avoid undue complexity. But the Voluntary Carbon Standard seems to be willing to sacrifice considerable flexibility, flexibility that -- I would argue -- is a key component of the voluntary GHG market. My suspicion is that there will be considerable pushback from voluntary market players that don’t see the advantages of the standard and who chafe at its increased costs.

---------
Dr. Mark C. Trexler has more than 25 years of energy and environmental experience, and has focused on global climate change since joining the World Resources Institute in 1988. He is now president of Trexler Climate + Energy Services, which provides strategic, market, and project services to clients around the world.