Offsets:

New carbon registry aims to provide more transparency, credibility in offsets market

Can carbon registries ensure high-quality offsets? Will mismanagement of offsets and lack of transparency be brought under control before a federal cap-and-trade plan is implemented? During today's OnPoint, Wiley Barbour, founder and chief technical officer of the American Carbon Registry, explains how his registry's efforts will bring more transparency and credibility to the offset market. He discusses the impact of the economic crisis on carbon markets and companies' willingness to spend money on emissions reductions. Barbour also explains the benefits of acting early on offsets and emissions reduction.

Transcript

Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. With us today is Wiley Barbour, founder and chief technical officer of the American carbon registry. Wiley, thanks for being here.

Wiley Barbour: Thank you for inviting me, Monica.

Monica Trauzzi: Wiley, your company was originally known as the Greenhouse Gas Registry and you've recently relaunched as the American Carbon Registry. Why was the relaunch necessary and what's different this time around?

Wiley Barbour: Right, I get that question of launch. The company has actually always been Environmental Resources Trust and the Greenhouse Gas Registry was one of our flagship and signature programs. The registry is a concept that's familiar to people that are expert in greenhouse gas trading, but it serves as an online repository of qualified information about greenhouse gas emissions and greenhouse gas reductions. And we have recently gone through some consolidations and amalgamating with a larger, nonprofit association and focusing, again, on the registry and trying to help companies and individuals, landholders and private investors, prepare for the coming greenhouse gas regulation in the United States. So, relaunching as American Carbon Registry is just part of a broader commitment to invest in the whole endeavor and the software and the platform and the standards. We think it better communicates who we are and what we're all about.

Monica Trauzzi: Considering the current economic crisis and the fact that many companies are tightening their belts and perhaps not focusing so much on reducing their emissions, because they're just trying to keep their bottom lines up, is this a bad time to be launching a carbon registry?

Wiley Barbour: Well, I think it's a great time and I think, again, we've been doing this type of work really for a decade, helping American companies understand what climate change means for their business and prepare for change. And so it's never too early to prepare for dramatic change. And I think we're going to be seen dramatic changes in our economy and in our business strategies as we cope not only with changing climate, but also with changing regulatory circumstances.

Monica Trauzzi: Are you seeing a slowdown or do you expect a slowdown in the near term in terms of the amount of emphasis that companies are placing on reducing emissions?

Wiley Barbour: No, not really. We're seeing actually a lot of demand for expert advice and guidance and a real appetite to find where is the quality. Where are high quality greenhouse gas reductions and how can those be found and what are the characteristics of a serious effort to create a tradable and fungible commodity of greenhouse gas offset and a real reemphasis on transparency. And that's really always been our strengths, the very, very clear documentation of the projects and what goes into making these real offsets.

Monica Trauzzi: And we're going to talk about that specifically in a moment. Going back to the current economic situation, do you think that that sort of foreshadows what could happen in the carbon markets? And do we need to find a way to stabilize the price of carbon in order to avoid the kind of volatility that we're seeing right now?

Wiley Barbour: Well, two questions there. I mean one, I think in terms of today's current financial crisis and what brought it on. I mean one of the things that brought it on were really kind of dark markets and a lack of transparency. And so if anything, I think what I and others like me do in this greenhouse gas phase, by really diving into project details, bringing all of that to light and to the surface, making that available for potential stakeholders and investors, it really amounts to doing due diligence on behalf of buyers and bringing that information up in an easily digestible form is very, very much part of what we do at the American Carbon Registry. In terms of the demand and the appetite for this, maybe we've seen a little bit of a slowdown in terms of the urgency of legislation. And I hate to say that, but it is possible that this will delay, six months or a year, the passage of legislation, but if anything, recent events in our election have shown and demonstrated that this change is coming and we are ready for a change. And so the certainty is still there, it's just the timing issue.

Monica Trauzzi: It's sort of raises the overarching question of whether markets can really be depended on to solve environmental problems. Can they?

Wiley Barbour: It does. I think that's one of the unfortunate things about this. You know, I really believe in the power of markets when properly harnessed to protect and improve the global environment. But part of what needs to happen is some structure and some oversight and really clear policy signals from Washington. And so the market is hungry for that. People are waiting for that. I believe there's a lot of investment and capital on the sidelines waiting to get into the game, but we need clear guidance from Washington. So a cap-and-trade bill of some sort would be that type of guidance, or even potentially an early offsets bill that would provide some structure and send clear signals to the private sector.

Monica Trauzzi: You've mentioned transparency a few times already and the debate over the viability of offsets continues. I mean just last week we were hearing from Senator Bingaman, who is the chair of the Energy and Natural Resources Committee, expressing concerns about the mismanagement and misuse of offsets. The Government Accountability office recently found that there's not enough transparency when it comes to carbon offsets. So what is your company specifically doing to ensure that you're providing high-quality offsets?

Wiley Barbour: Yeah, I heard Senator Bingaman's comments and it was distressing to me as well as somebody who believes that this is a powerful tool to harness. But I like the comments of another panelist who said, you know, I like apples and if I buy a bushel of apples there may be a bad apple. That doesn't mean I don't like apples. I just have to learn how to pick and choose a little bit. What we're doing specifically to help companies address this issue of confidence in these types of instruments is to help explain the difference between things that go on in sort of charitable contributions, voluntary market activities, and then really what's more of a hard core set of pre-compliance and mandatory market activities. And so when you look at what trades in terms of greenhouse gas offset in today's voluntary market my guess is at least half of those offsets are never third-party verified and they're never registered with a greenhouse gas registry like American Carbon Registry. And they don't have the same rigor and level of detail in terms of how those are created and all of the characteristics of offsets that I'm sure we'll get into. So what we are trying to do is help prepare by bringing to our requirements for eligibility, just to make it into our registry, all of those characteristics of a high-quality offset that helps the buyer know that this really is offsetting emissions somewhere else.

Monica Trauzzi: It seems to many that by allowing offsets we're essentially giving companies a free pass and they don't necessarily need to - it's a way around regulation. Is this an easy way out for companies who have a lot of capital to throw around?

Wiley Barbour: What we're trying to do is find the most economically viable, cost effective solution to the problem. And so I think of it not as a way around the regulation, but as an inherent design within the regulation, within a cap-and-trade legislation, which is what we believe is the right way to go forward in terms of climate change. So, it's just giving companies a little bit of when-where flexibility. They have a little bit more flexibility in terms of where the reductions occur. It could be in one facility or another. It could be even in one of their competitor's offices or factories. And the when flexibility, in terms of most designs for cap and trade, provide a five-year period of compliance. So, if it makes more sense to make investments early on and then get reductions later on in the cycle, then that's allowed. So that flexibility is really one of the hallmarks of well-designed cap-and-trade systems. It's what keeps the costs down. It's what keeps businesses able to innovate and come up with creative solutions. And, really, it's the exact opposite of a command-and-control approach where EPA would come in as the big regulator and knows all the best ways to get things done. I've been in the EPA and worked in the agency for years and I truly believe that finding a way to identify the target and make it very, very clear, this is where we need to go and then give business a little bit of flexibility in finding the best way to get there is a win-win.

Monica Trauzzi: Right now there are several small, private registries throughout the U.S. Are you confident that a national type registry could happen? Is that something that we want and that should happen?

Wiley Barbour: Absolutely, I mean I think it's a given that when we finally get climate legislation there will be a federal registry which would be used for determining compliance with the cap. And so companies have a year, and at the end of each year there's a true-up period and during that true-up period the emissions of the company are clarified and emissions have to be offset by the retirement of credits. I think that the private registries are serving an essential service, particularly to focus on projects which need to be developed now. We can't really postpone action on climate and there are great opportunities to begin reducing greenhouse gas emissions today. And so private registries are helping to bring those projects forward, help them find financing, help them begin to implement and get started, work through their startup phase. And, ultimately, delivering the offsets which will be in great demand as we get closer to the start of the first compliance period under a cap-and-trade system.

Monica Trauzzi: Are companies putting themselves at a disadvantage if they're not looking at their emissions at this point? I mean is there some benefit to acting early on this issue?

Wiley Barbour: Right, I mean that's absolutely the case and actually I feel bad when I look internationally at what the rest of the world, having moved ahead with the Kyoto protocol and mandatory compliance systems. They've already been out looking for the low hanging fruit all over the world, especially in the developing world, and already been investing in projects which have very, very effective greenhouse gas regulation for the dollar spent. And we're going to be coming in afterwards and going after the next tier of opportunities, both domestically as well as internationally. So, absolutely, I think that there's so much learning to be done and strategizing and developing relationships and partnerships that the sooner companies begin to think about what this means, the better able they will be to take advantage of opportunities.

Monica Trauzzi: OK, we're going to end it right there. Thanks for coming on the show.

Wiley Barbour: Well, thank you very much, I appreciate it.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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