Businesses lead the way with voluntary carbon offsets

The international carbon market, which includes both compliance and voluntary offsets is currently experiencing significant change as it evolves from the old ‘Kyoto Protocol’ to the new ‘Paris Agreement’.

Negotiations around Article 6[1] are ongoing and whilst some progress was made last December in Katowice at COP24, the draft text was scuttled at the last minute and subsequently removed from the (Paris) rule book. As such, governments have agreed to revisit Article 6 again this year at the UN’s mid-year intersessional in June with a view towards trying to reach final agreement at COP25 in December.

Once finalised the Paris Agreement (including Article 6) will essentially create one big new international voluntary carbon market as opposed to the old Kyoto Protocol which was a compliance based system. This is due to the nature of the pledges that have been made, known as INDCs (Intended Nationally Determined Contributions) which are non-binding at a government level.

Whilst the Paris Agreement is not the only game in town, on balance it is likely to increase international carbon prices post 2020 once the new rules around Article 6 (market-based mechanisms) are finalised, particularly the ones around the eligibility of specific unit types. Internationally several compliance markets are currently trading above AU$10/t (Source: Carbon Pulse) with some markets such as EUAs in Europe already north of AU$20/t. The exception to this rule is China’s new (pilot) emissions trading scheme that is currently sitting around AU$6-8/t.

Under the Paris Agreement, governments have agreed to (voluntarily) manage their own commitments going forward and to report back to the UN on their progress every five years whilst also scaling up their ambition as they go. Thus, attempting to prevent catastrophic global warming under a system where countries have agreed to monitor their emissions and collectively rachet them down going forward – assuming all goes to plan.

Whilst this voluntary top down approach is not perfect, it gives individual governments the opportunity to decide what levers to pull locally to meet their targets, the mechanics of which, the UN has been wrestling with for years.

In addition to Article 6 there are also several other interesting things happening globally which may or may not intersect with it (and the Paris Agreement) depending on the final text that is chosen. This includes how the old Clean Development Mechanism (CDM) and Joint Implementation (JI) mechanisms may or may not play a part under Article 6, the aviation industry’s intent to mitigate its emissions under CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) and the existing voluntary carbon market driven by motivations other than compliance.

Of particular interest in Australia is the existing voluntary carbon market which has been surprisingly buoyant of late. No longer are Australian businesses and numerous local governments prepared to sit around and wait for international negotiations to be finalised. Instead they have decided to step up and take a leadership role in the battle against climate change by committing to becoming carbon neutral.

This bottom up approach by leading organisations compliments the UN’s top down international method well, hopefully at some point allowing us to break through the political barriers that we are currently seeing.

In the short term, savvy carbon buyers are also taking advantage of historic low (voluntary) carbon prices internationally and banking offsets as part of their internal procurement strategies.

Last year Ecosystem Marketplace reported the average price internationally of all voluntary offsets transacted across all project types to be AU$3.35/t or US$2.4/t (Source: 2018 Outlook and First Quarter Trends), noting that it is still possible to procure carbon offsets at even lower prices if purchasing in volume. This is due in part to the current lack of certainty around Article 6 and which type of emission reductions may or may not be eligible under it post 2020.

This in turn allowing “early-movers” a cost-effective transition towards their public carbon neutrality commitments and the opportunity to get ahead of the curve.

 

[1] Article 6 of the Paris Agreement forms the legal framework to allow use of market-based climate change mitigation mechanisms to meet emission reduction targets.

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This article was written by Nathan Dale, Head of Origination at Bundle

Bundle (a Point Advisory brand) is a brokerage firm working across several sustainability and environmental markets. Bundle specialises in voluntary carbon offsets, low carbon finance and project advisory services, both in Australia and across South East Asia.

For further information please contact nathan@pointbundle.com

Case Study: The Victorian Department of Health and Human Services’ Emissions Reduction Plan

The Victorian Department of Health and Human Services’ Emissions Reduction Plan

The Victorian Climate Change Act 2017 sets a state-wide emissions reduction target of net zero emissions by 2050, and a timeline of interim targets set at five year intervals. The Act requires government departments to contribute emissions reductions by setting pledges for each five-year period, with the first period covering from 1 January 2021 to 31 December 2025.

As the government entity with responsibility for Victoria’s public hospitals, an extensive portfolio of public housing, and sport and recreation services, the Department of Health and Human Services has a large and complex emissions profile that is material in the context of Victoria’s whole-of-government emissions inventory. To support its contribution to the whole-of-government emissions reduction efforts, DHHS engaged Point Advisory (and partnering organisations Norman Disney Young and Moreland Energy Foundation) to assist in developing a department-specific Emissions Reduction Plan.

The development of this plan (which has been designed to be iterative as Victoria progresses with setting interim targets) involved the calculation of a whole-of-department emissions inventory and modelling of a “business-as-usual” trajectory to 2050, and the identification of potential opportunities to reduce emissions across the department’s operations. The opportunities identified across health, housing, corporate and sport and recreation services were then evaluated for their capital costs and abatement potential and flexible emissions reduction pathways to 2025 and 2030 were modelled for the department’s consideration.

Subsequent iterations of this Emissions Reduction Plan will aim to define the scope and direction of the department’s emissions reduction pathway, and its first mandatory pledge under the Victorian Climate Change Act.

To see some of the other work we’re doing in the net zero space, check out our interactive online net zero model at (works best in Google Chrome browser). For further information, contact Charlie Knaggs.

Nina Haysler joins Point Advisory’s Sydney office

Point Advisory is pleased to welcome Nina Haysler to our growing team in Sydney!

Nina is a Senior Consultant at Point Advisory’s NSW office based in Sydney. She is responsible for project managing Sydney-based projects. Nina’s area of expertise is in Environmental, Social, Governance (ESG) integration and business and human rights.

Prior to joining Point Advisory, Nina worked at CAER ESG Research in Canberra for four years, firstly as an ESG Analyst assessing the extra-financial disclosures of the ASX300 and NZ50 companies, and then as a Research Project Manager, leading on CAER’s bespoke projects and providing advisory services for investors. In these roles, Nina travelled to and worked in the London, Brussels and Paris office of Vigeo Eiris – a global research service provider that provides ESG research and solutions for investors. Nina has experience developing sustainability ratings and extra-financial strategies for asset owners and asset managers.

Nina holds a Bachelor of International Relations (Honours) from the Australian National University. In 2018 Nina was selected for the Audrey Fagan Leadership Program, completing a series of Australian Institute of Company Directors courses. Nina also has a Diploma of Financial Planning.

Nina’s academic background and work at CAER have helped form a specialised interest in international humanitarian law and human rights issues. Nina has worked on both the 2016 pilot and the 2018 iteration of the Corporate Human Rights Benchmark, has been an active member of the Responsible Investment Association of Australasia’s (RIAA’s) Corporate Engagement Working Group and Human Rights Working Group and regularly presents on human rights-related developments.

Outside of work, Nina has been involved in the development of Girls on Bikes, a migrant and refugee learn to cycle program. Nina also enjoys playing and writing music.

Point Advisory welcomes George Wang to our Energy team!

George Wang has recently joined Point Advisory as a Manager in the Energy and Climate Change team in Melbourne.

George holds a Master of Mechanical Engineering and has over seven years’ experience in the energy efficiency and sustainable built environment consulting fields. He is an accredited NABERS (National Australian Built Environment Rating System) and CBD (Commercial Building Disclosure) assessor and has delivered numerous ratings and Building Energy Efficiency Certificate (BEEC) applications for clients. George is also a Certified Monitoring and Verification Professional (CMVP) and a Certified Energy Efficiency Specialist (CEES). He has extensive experience in energy audits for commercial and retail buildings, building tuning and monitoring services and building upgrade management services.

In 2017, George was part of the team that delivered consulting services of National Construction Code Section J Review for the Australian Building Codes Board. George has a special interest in data analytics and believes that big data will be a key driver for energy efficiency and energy management. Prior to joining Point Advisory, George was a senior energy consultant at Energy Action.

Outside of work, George enjoys exercising, cooking and playing music. He especially likes playing classical and jazz piano and hopes one day to form his own jazz trio.

Point Advisory welcomes Farema Yazdi

Point Advisory welcomes Farema Yazdi as a Consultant in our Melbourne team.

Farema has experience in qualitative research, data management and analysis in the climate change field, predominantly gained through her Master’s thesis and conducting research for local government and non-profit organisations. Farema has also conducted research for a UN Global Compact for Cities report which sought to inform climate adaptation policy in Victoria, and worked with the Climate Reality Project in Canada to assist with the research, development and launch of the National Climate League ahead of COP24.

In her Master’s thesis, Farema analysed the interactions between climate change mitigation and adaptation in the context of Melbourne’s city resilience. Farema is interested in the ways in which contributions of mitigation can be strengthened in resilience theory and practice, particularly in the Middle East. She hopes to eventually pursue a PhD in this field.

Outside of work, Farema enjoys all things art, culture and bouldering.

Farema can be contacted here.