By David Fogarty, Climate Change Correspondent, Asia
SINGAPORE (Reuters) - Fear of Western-imposed carbon tariffs on goods and services from Asia is likely to drive growth in offsetting emissions by large firms in the region, a voluntary carbon market executive said.
The market, worth $705 million in 2008 and likely much less in 2009, relies on businesses to voluntarily manage their carbon emissions, for example from the energy they use to produce and transport goods around the globe.
Western companies can buy carbon offsets from clean-energy projects in developing countries, which boast a high number of plants that capture methane from landfills or wind farms for example.
The offsets then allow these companies to cut their overall carbon footprint, or production of greenhouse gases, such as carbon dioxide.
While this concept is new to many Asian firms, there is a growing realisation that customers in the West will scrutinise the carbon content of goods and services, said Jonathan Shopley, managing director of The Carbon Neutral Company, a UK-based offset company.
"It's about requirements in Western markets," Shopley told Reuters in an interview in Singapore.
This was likely to prompt companies to make greater efforts to curb emissions arising from production, as well as a rise in offsetting, both to please their customers and differentiate themselves from the competition.
There are effectively two carbon offset markets. The compliance market, in which companies must buy offsets to keep their emissions below a certain cap, and the voluntary market.
Each offset set represents a tonne of avoided pollution from carbon dioxide, the main gas responsible for raising the temperature of the planet.
"I think the failure of Copenhagen to get to a binding target has fragmented the market into regional responses," he said of last December's U.N. climate talks.
"You're already hearing from the U.S. that (it's) thinking about a carbon tax on the border. This is going to drive demand for product assessments," Shopley said.
Indian firms, in particular, understand the cost of carbon, as the country is the second largest source of U.N.-backed carbon offsets from clean-energy projects.
"They're manufacturing and exporting goods into Europe and the U.S., where there is a clear message the carbon content of your product going to become important. It's coming from Walmart, Tesco, Macy's, Marks & Spencer," he said.
GROWTH FROM LOW BASE
In Europe, the voluntary carbon market is driven by corporate social responsibility, while in the United States, it is more of a pre-compliance market ahead of mandatory national or regional regulation on curbing greenhouse gas emissions.
Overall, the voluntary market struggled last year because of the financial crisis and is estimated to have shrunk by over 60 percent in 2009, according to Bloomberg New Energy Finance.
Hurdles to a U.S. federal emissions trading scheme, continued uncertainty about the future of the global carbon markets and pessimism about clinching a global climate deal this year in Mexico has disappointed investors.
"If we look at our business as an indicator, it was just above level over 2008 and 2009. We didn't see any massive growth at all," Shopley said.
He forecast a rise in the number of Asian companies that measure their greenhouse gas emissions, before offsetting, as businesses around the globe join the fight against climate change.
"We're working with between 20 and 30 companies in Asia," said Shopley. Of these, five were offsetting at an average of about 5,000 tonnes per year.
These five clients had chosen offsets backed by the Voluntary Carbon Standard and U.N. offsets, called Certified Emissions Reductions, he said.
"In terms of the number of clients that we expect to be measuring and reporting greenhouse gas emissions (in Asia), I think that will increase ten-fold at least over a year or so."
He said interest in offsetting was emerging from South Korea, Sri Lanka, Malaysia and Indonesia.
(Additional reporting by Nina Chestney in London; Editing by Amanda Cooper