Social & Ecological Co-Benefits

In the offset industry, people like to talk about ‘gourmet offsets’ versus ‘minimum standard offsets.’ A minimum standard ensures that offsets are real, not double-counted and additional. Gourmet offsets are sourced from projects that adhere to strict additionality standards and have strong social and environmental benefits (so called co-benefits or secondary benefits). Such offsets often fetch a considerably higher price in the voluntary carbon market. The distinction between ‘minimum standard’ and ‘gourmet’ offsets is to some extent a useful shorthand, yet it also reveals that sustainability and development benefits are no longer seen as integral requirements for a carbon offset.

Yet the carbon offset mechanism was originally conceived as a means to provide not only climate benefits but also co-benefits. As the word ‘Development’ in the Clean Development Mechanism indicates, when CDM was approved by developing nations, it was specifically because offset projects were not only to provide cost-effective reductions for Annex 1 countries but also development benefits for the host countries. In other words, to qualify as a CDM project, the original intention was that a CDM project would not only have carbon benefits but also development benefits. This two-fold goal is still included in the CDM guidelines (Article 12 of the Kyoto Protocol). In practice, however, the CDM has failed to consistently deliver development and sustainability benefits.

What anecdotal evidence has indicated for a while is corroborated by recent scientific analyses: a literature review (Holm Olsen, 2007) concludes that there is a trade-off between the CDM target of supplying cheap emission credits and the promotion of sustainable development, and that the former goal has taken precedence. Another study (Sutter and Parreño, 2007) evaluated registered CDM projects and concluded that none of the 16 analyzed projects scored highly on sustainability and “likelihood of real emission reduction” simultaneously. The authors found that the large projects in their sample had low sustainability scores, and that over 95% of reductions came from projects with low scores.

It is important to recognize that there is often a trade-off between maximizing emission reductions and increasing sustainability benefits. Projects that work on the grass-roots level and involve local populations are often small-scale and require much continuous support, capacity- building and follow-up. Such projects are not primarily about maximizing emission reductions but rather aim to provide financial alternatives to make projects with high sustainability benefits feasible.

Several initiatives are underway to support the growth of CDM projects with true development and sustainability benefits. Two UN initiatives focus specifically on linking development goals with carbon offset and energy projects:

MDG Carbon Facility

The UN Development Programme recently established its MDG Carbon Facility with the goal of broadening access to carbon finance by enabling a wider range of developing countries to participate, particularly those which are presently under-represented in the carbon project market. The MDG Carbon Facility promotes emission reduction projects which contribute to the Millennium Development Goals (“MDGs”), yielding additional sustainable development and poverty reduction benefits

CD4CDM

The Capacity Development for the Clean Development Mechanism (CD4CDM) project was developed by the United Nations Environment Programme (UNEP) with financial support from the Dutch government. CD4CDM was established to promote GHG emission reduction projects that are consistent with national sustainable development goals, particularly projects in the energy sector. CD4CDM gives guidance to participating developing countries regarding opportunities offered by CDM projects, and helps these countries develop the necessary institutional and human capabilities to plan and implement projects under the CDM.

Several of the voluntary standards also focus on strengthening the co-benefits of carbon projects.

• The Gold Standard (GS) has a very well-developed stakeholder process and stresses environmental and socio-economic co-benefits for host communities.
• The Climate, Community & Biodiversity Standards (CCB Standards) focuses exclusively on bio-sequestration projects and emphasizes the social and environmental benefits of such projects.
• Plan Vivo is a standard for community-based agro-forestry projects and focuses on promoting sustainable livelihoods in rural communities.

Stakeholder Consultations

Stakeholders are individuals or organizations that are in some way affected by the project. In the case of a wind farm, for example, stakeholders include the project owner, the wind turbine supplier, the employees, the municipality, nearby inhabitants, and banks. Stakeholder consultations are an important tool to minimize possible negative impacts of carbon offset projects. Because many offset projects are carried out in countries where regulations are poorly enforced, stakeholder consultations also function as a risk management tool.

The evaluated offset standards require stakeholder involvement to varying degrees, and differ in terms of how specific the stakeholder involvement rules are spelled out.

The CDM rules are quite general and require relevant local stakeholders to be consulted via “appropriate media.” The auditor who validates the project must confirm that relevant stakeholders have indeed been consulted with appropriate media and that comments from local stakeholders have been appropriately taken into account during the validation. Some countries, such as Brazil, require that certain local stakeholders be consulted in order to obtain a construction license or approval of the environmental impact assessment.

The Gold Standard most proactively spells out stakeholder rules. The Gold Standard tries to ensure project transparency and stakeholder participation with clear rules at to what media are to be used, what type of information is to be presented, and what questions are to be asked of local stakeholders. For example, the GS details the documentation that needs to be made available to local stakeholders along with a questionnaire for the stakeholders to fill out. It also requires an additional local stakeholder consultation for CDM projects (i.e., once the PDD is finalized and comments from the initial stakeholder consultation have been taken into account).