As concepts go, carbon offsets are a simple thing: for every ton of carbon dioxide pumped into the atmosphere, a ton can be "offset" by, say, using wood waste instead of coal in a cement manufacturing plant.
The hard part comes in determining what should and shouldn't qualify as an offset and setting up a system to track and trade the units. As offset systems have evolved over the past two decades, there have been problems with verification as well as charges that carbon offsets let industry and governments take a 'business as usual' approach instead of investing in technology to reduce climate-warming greenhouse gas emissions.
Despite the hiccups, a carbon market has emerged, with the World Bank pegging its worth at about $176-billion (U.S.) in 2011. One of the players in that market is ERA Carbon Offsets Ltd., a Vancouver-based company. Last year, the firm acquired Offsetters, a company co-founded in 2005 by James Tansey, an associate professor at University of British Columbia's Sauder School of Business. Dr. Tansey is now CEO of the merged company, which has a portfolio of projects that include selling carbon offsets from the stretch of B.C. coast known as the Great Bear Rainforest.
The Globe and Mail spoke to Dr. Tansey a few days after Jan. 1, when California and Quebec became the first jurisdictions in North America to adopt carbon cap-and-trade regulations under the Western Climate Initiative.
What is the status of the global carbon offset market – and where is that market best established?
The biggest single market by far is within the European Union, with the EU Emissions Trading System, the cap-and-trade system there. Although pricing is down now, it probably accounts for 90 per cent of global volume of carbon trading.
But with California and Quebec coming on line, that's now the second-largest [offset] market in the world.
B.C., despite holding off on cap and trade, still has a sophisticated, regulated market and as some of the regulations evolve around [proposed] new LNG plants, there's a reasonable chance there will be an offset component to that as well.
The European Union's ETS has had growing pains – will it survive?
It is going to survive. A lot of people are saying it isn't working because the prices are low. But the reason the prices are low is that economic output and emissions are down in Europe. So demand for allowances are down. It's still functioning, it's still operating, the only problem with it right now is that the prices are too low to send a big signal to drive change.
Is there a globally recognized standard for carbon offsets?
There is definitely a globally recognized set of standards. The most pervasive international standards are the Clean Development Mechanism, under the United Nations. And the second is the Verified Carbon Standard. What B.C. did, because we have forestry that's unlike really any other parts in the world, is take some of the best pieces from the VCS and one or two other standards and create a B.C. protocol.
Our forestry protocol in B.C., the Forest Carbon Offset Protocol, is considered the highest-quality in the world and the most conservative.
The Great Bear Rainforest project is the first FCOP-based project. It includes a benefit-sharing agreement with first nations that is unprecedented. It's going to become a global benchmark for how to do forest carbon well.
That sounds great – and obviously some jurisdictions are working hard on carbon markets. But isn't that just a drop in the climate-change bucket when countries like China aren't doing carbon offset programs of their own? Or are they?
China has six pilot programs in place for cap-and-trade. We have been hiding behind China for a few years when they are actively exploring carbon management and trading systems.
The real story here is that in the absence of federal movement [in North America], you've got the seventh-largest economy in the world – California – combined with 70 per cent of emissions in Canada shifting toward regulation.
The fact that China is a few years behind doesn't mean we shouldn't move and that we shouldn't lead.