Evaluation of the Dutch Environment ministry's 'climate standards'
One of the ways in which the Dutch government can effectuate ‘climate compensation’ is to purchase voluntary emission reduction (VER) credits, and in this context it is important there are guarantees as to the soundness of such credits. The Environment minister has therefore stated in the Lower Chamber that minimum quality standards will be developed for future activities in this area. Arcadis and CE Delft were commissioned by the Environment ministry (VROM) to research the issue.
In the VER market there are numerous standards for the credits on offer. At a minimum there are two criteria such standards should meet to guarantee the credibility of emission cuts. First, the quality of the auditors needs to be validated. These auditors evaluate project proposals, and on this basis a decision is taken on whether a particular project is assigned VER credits and, if so, how many. Second, projects must be tested for ‘additionality’: the guarantee that the CO2 emissions reduction would not have occurred without additional investment in VER credits. From a preliminary (desk) survey of VER standards it emerged that only the Gold Standard scores as well as CDM(1). Gold Standard checks auditors’ validation (and verification) reports and whether the additionality tests used are equivalent to or even tougher than the CDM tests. As yet it is only renewable energy and energy efficiency projects that are eligible for the Gold Standard.
At the request of VROM, the study paid particular attention to projects involving land use, land-use change and forestry (‘LULUCF’) and projects in which the emissions reduction will only be secured at some dat in the future (‘futures’). The question is to what extent it is desirable for national government to invest public funds in projects like this.
With regard to LULUCF projects, Arcadis and CE Delft recognise on the one hand that financial incentives have a crucial role to play in preserving the world’s afforested regions. This is something the government can contribute to by purchasing VER credits. Land-owners to whom credits are allocated receive a financial reward for afforestation/reforestation and for preventing deforestation. On the other hand, there are a number of valid criticisms of LULUCF projects, such as the risk of only temporary emissions cuts, ‘carbon leakage’ and the issuing of credits for ‘non-additional’ projects. To guarantee the quality of emission cuts, CE Delft therefore recommends that the government only purchase LULUCF credits that have been certified by the CDM Executive Board. This standard requires that credits be replaced in the course of time, as a means of guaranteeing permanent CO2 reductions. For the time being, these relate only to afforestation, as the prevention of deforestation is still not internationally accepted and is not CDM-certified.
Finally, Arcadis and CE Delft recommend that the government not acquire any ‘futures’, as there is a risk of projects turning out to deliver lower emission cuts (or none at all), even though these have already been paid for. In terms of communication, it is also hard for the government to explain that it is engaging in ‘climate compensation’, while at the time of announcement no such compensation has yet actually been effectuated.
(1) CDM was taken as a reference point because this system is grounded in the Kyoto Protocol, currently has a major share of the market and is embedded in numerous procedural guarantees with which there is already considerable experience.