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CO2 Offsets Aimed at Aiding Poor Countries

September 2, 2008

A London-based initiative is setting out to create a new funding scheme to address concerns about existing trade in carbon credits.

The main concern is that the scheme excludes the world’s poorest communities, which are most at risk from the impact of global warming.

“This is very much not a minor absolution for your carbon sins, but is honestly a compensation payment for the impact you know your personal carbon emissions will have,” said Andrew Simms, policy director at the New Economics Foundation (NEF), coordinating the initiative with the International Institute for Environment and Development (IIED).

The plan will be tested this year in regions expected to be worst and soonest hit by climate change in Africa, Asia and Latin America.

The plan will include efforts to teach Indian children to swim so they can survive floods, and planting drought resistant cashew trees as extra income for families.

The consortium has joined forces with partners including the U.N. Children’s Fund (UNICEF), Greenpeace, CARE International and Trocaire.

They call people who help fund the scheme investors, rather than donors: the capital involved is human as well as financial.

“It connects me with a human being at the other end of the world who’s being affected by my pollution, and I then invest in that person and relate to that person, and feel there is solidarity between us,” said Saleemul Huq, head of the climate change group at IIED.

“It’s not buying and selling — it is much more investing in people.”

Some existing projects backed with money from unregulated or so-called voluntary carbon emissions trading have been accused of not delivering promised environmental and social benefits. Critics also say carbon credits offer polluters a guilt-free way to carry on emitting damaging greenhouse gases.

“Offsetting is something that people have little faith in because they don’t know where the money goes,” said Betsy Joseph of aid agency Mercy Corps, which has launched a separate initiative aimed at strengthening the relationship between carbon offsetting and poverty reduction.

The United Nations has called for around $86 billion in new financing by 2015 to help the world’s poor cope with climate change. But so far funds from governments and a levy on U.N.-regulated carbon trading amount to a fraction of what aid agencies say is needed. A growing number regard the sale of voluntary carbon offsets as one way to fill the gap.

The market for voluntary carbon trades is growing rapidly, more than tripling between 2006 and 2007 to reach a value of $331 million, according to a report from environmental information providers New Carbon Finance and Ecosystem Marketplace.

But charities have found it difficult to access buyers in the voluntary market, partly because offset companies, which act as brokers, prefer large projects that deliver high volumes of emissions savings.

“The transaction costs are quite high for small projects,” said Andrew Scott, policy director at Practical Action, which is planning to raise around 400,000 pounds ($782,000) over five years by selling carbon credits from four energy projects in Sudan, Peru, Sri Lanka and Bangladesh.

“It is a very slow, time-intensive process for the initial assessment and verification, and you do begin to wonder whether it is worth the effort.”

Michael Schlup, director of the Gold Standard Foundation, which administers a widely used quality label for clean energy projects that also support sustainable development, questioned whether the carbon market was the best place to raise money for climate change adaptation work.

“People see it as a miracle cure, but it could be a diversion from other policy measures,” he said, adding his organization had not yet tried to convert climate change adaptation into a service people could pay for.

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