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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

Upcoming Melbourne event: Journey to a net zero world…

Upcoming event: Journey to a net zero world…

Can you imagine a net zero emissions world? What does it look like? And how do we get there by 2050?

To achieve the Paris Climate Agreement commitments and have a chance of keeping global temperature rise below 2°C, we basically need to achieve ‘net zero’ emissions globally by 2050. So it’s not surprising that we’re seeing a huge increase in interest in the net zero concept – from defining emissions reduction pathways through to setting science-based targets and organisational carbon neutral commitments.

But what does net zero really mean? What are our state and local governments doing to reduce their fair share of emissions? How is the Australian private sector taking on the challenge to stay ahead of the game and remain competitive? And what steps can individual organisations take to start the journey to net zero?

Come and join us for a drink, a snack and a lively discussion about these questions. Expect interesting insights from both the public and private sector and some good examples on how the net zero concept can be translated into action.

Who will be there? The following panellists will share with you their insights on their work towards net zero emissions:

What will we talk about? We will create a forum for both government and private sector attendees to discuss the transition to a net zero economy. Our panellists will discuss:

  • Victoria’s legislated net zero target and the Climate Change Act 2017
  • how they are taking on the challenge and putting measures in place to contribute their fair share to reach net zero
  • the main barriers and challenges faced
  • key lessons learnt as they act on their commitments.

We’re expecting an interactive discussion, and will allow plenty of time for networking and continuing the conversation over a glass of wine.

Event details: The event will be held at Point Advisory’s offices in Melbourne’s CBD from 5pm to 7.30pm on Thursday 19 April. Drinks and nibbles provided.

Please click here to visit our Eventbrite site to RSVP.

Draft NCOS Buildings & Precincts open for consultation

The Department of Environment and Energy has recently released drafts of two new draft standards for industry consultation: the National Carbon Offset Standard for Buildings and the National Carbon Offset Standard for Precincts. To see the draft standards and provide feedback, click here.

In addition, the Department (along with the NABERS team and the Green Buildings Council of Australia) are hosting a webinar on the draft NCOS for Buildings standard on Friday 16 December from 11.30am to 12.30pm. Those wishing to attend should register through the GBCA Event Calendar.

These voluntary standards will enable new and existing buildings and precincts to gain accreditation to declare carbon neutrality to the NCOS standard, and to use the highly-regarded NCOS trademark as a public statement of the integrity of their claim.

Point Advisory is very pleased to have assisted the Department in the development of these standards. We believe they are an important step in helping to drive the built environment sector towards the significant emissions reductions that we know are possible.

To discuss any aspect of NCOS or carbon neutrality, email Christophe Brulliard.