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IR/PS CSR Case #07-12

The Center for Resource Solutions:
Can CRS Monitor
the Voluntary Greenhouse Gas Offset
Market?
By: Laura Tierney

GRADUATE SCHOOL OF INTERNATIONAL RELATIONS AND PACIFIC STUDIESUNIVERSITY OF CALIFORNIA, SAN DIEGO
Prepared for Professor Peter Gourevitch
Edited by Jennifer Cheng, MPIA 2008
Corporate Social Responsibility
Winter 2007

Abstract:
The Center for Resource Solutions (CRS), a non-profit non-governmental organization in San
Francisco is developing a product standard for retail marketers of greenhouse gas offsets. That
product standard will be recognized in the industry through a certification and labeling program
operated by CRS. The current market for voluntary greenhouse gas (GHG) offset retailpurchases lacks both a standard and a third-party monitor, and yet as a market it is still
experiencing exponential growth. This paper will evaluate CRS’ organizational credibility, its
proposed standard and certification process, and other efforts to monitor the GHG offset market
and will put forth one consumer’s evaluation of whether or not to buy a GHG offset today

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Table of Contents

I. Introduction...........................................................................................................................3
II. The Organization .................................................................................................................4
III. The Market .........................................................................................................................8
IV. CRS GHG Product Standard...........................................................................................11
V. The Process.........................................................................................................................15
VI. Sanctions & De-certification ............................................................................................17
VII. The Prognosis ..................................................................................................................18
VIII. A Consumer’s Assessment.............................................................................................19
IX. Discussion Questions.........................................................................................................23
X. References...........................................................................................................................24

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I. Introduction

The voluntary greenhouse gas (GHG) offset retail market has grown exponentially in the lastyear, paralleling the increased public attention toward global climate change. The term
“voluntary” denotes the absence of government regulations mandating the existence of themarket, as compared to a cap and trade emissions market. Corporations, local governments,
individuals are seeking ways to offset their greenhouse gas contributions to the atmosphere. The
market has responded to meet these needs, but a credible third-party monitoring organization has
yet to emerge to keep the market in check and to assure consumers that they get what they pay
for. The Center for Resource Solutions (CRS), a non-profit, non-governmental organization is
attempting to fill that void, first by establishing a product standard and then by creating a productcertification and labeling system to monitor the market.

This paper will explore CRS as an organization and assess its credibility as a third-party monitor,
the state of the GHG offset market, the standard-setting process, methods of monitoring andenforcement and the role (if any) of the government. Setting an effective standard creates anessential baseline from which the third-party monitor can operate. In the current absence of sucha standard or monitoring, the market has boomed. In attempting to explain this phenomenon,
several questions are raised. Are consumers simply uneducated? Probably not, but perhaps they
are over-trusting. Will this growth continue? Probably yes, especially with increasing publicattention to climate change in the United States. Will the addition of a standard and certification
process inhibit or amplify the success of the market? The belief is that a standard andmonitoring process will sustain the market in the long-run by adding credibility andtrustworthiness.

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CRS’ engagement of stakeholders in the standard setting process is an effort to place the roots ofthe standard in broad grounds from which it will grow. But such a process leaves room for
private incentives to dominate or deter the process. How can the consumer trust such a process
and unchecked market? As an individual consumer, I would not currently purchase a retail GHG
offset because I am not guaranteed of the quality or nature of the GHG offset nor am I assured
that what I purchase has not already been sold and re-sold. This paper will conclude with anevaluation of the proposed process and monitoring model offered by CRS, and a determination
on if it assuages my concerns about the GHG offset market as a consumer.

II. The Organization

The Center for Resource Solutions (CRS) is a registered 501-(3)(c) national non-profit, nongovernmental organization based in San Francisco. CRS was established in 1997 by its
Executive Director Dr. Jean Hamrin, with the following mission:“To build a robust renewable energy market by increasing demand and supply of
renewable resources. CRS is a proven leader in creating energy strategies toprotect both the environment and consumer, and has an impressive portfolio ofprograms in renewable energy policy and regulatory issues. Our provennetworking approach relies on collaborative efforts and partnerships with a hostof stakeholders -- from businesses to government agencies and NGOs -- toaddress major, long-term energy and environmental problems.”1
The mission statement of a non-profit organization acts as a focal point to guide its activities.
Before CRS decided to enter the retail GHG offset market, it carefully considered the relevanceof the initiative to its mission.2 Key elements that identify with CRS’ mission and its entry into
the GHG offset market are the desire to protect both the environment and consumer, and its

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demonstrated ability to successfully manage a stakeholder process and to enhance an emerging
market. CRS earned much of its positive reputation from the successful creation andimplementation of the leading independent certification and verification of renewable energy
through its Green-e program. The experience in the renewable energy market shapes thefoundation serves as a model from which CRS is formulating the standard and certification for
the GHG product market.

CRS possesses a qualified staff and governing board with expertise in the field of renewableenergy. As the GHG market is a relatively new phenomenon and emerging market, it isunderstandable that the staff does not necessarily have particular expertise in this field - yet.
Their staff is however skilled with the necessary tools to analyze this market. The staff consistsof eighteen people who possess a mix of qualifications in business & marketing, energy,
environment and public policy and practical experience in certification and stakeholder
management from facilitating the Green-e program. The Executive Director and founder, Dr.
Jean Harmin, has a PhD in Ecology and a masters in Public Administration; has served asadvisor to the G-8 Renewable Energy Task Force and to legislatures and regulatory commissions
in the US and around the world. She has also co-authored three books for the National
Association of Regulatory Utility Commissioners and is former founder and executive director of
the Independent Energy Producers’ Association in California.3

The governing Board of Directors is comprised of “leading experts and former legislators
dedicated to promoting renewable energy,” providing a mix of scientific, government, andprivate sector expertise4. An organization’s Board of Directors adds to the organization’s

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reputation and credibility in their role of advisors on fundamental business decisions. CRS’s
Board includes as Chair the current director of Environmental Energy Technologies Division at
Lawrence Berkeley National Laboratory; a former U.S. Congresswoman and current energy
consultant/Harvard professor; the head of the Renewable Energy Unit at the International Energy
Agency (IEA) and representatives of private sector energy and renewable energy corporations.
Again, perhaps what is missing is specific expertise related to greenhouse gas offsets inparticular and climate change markets in general. If the GHG Product Certification continues toprogress nicely in its development, this area is one in which CRS should seek recruitment both toits Board and staff.

The Green-e program administered by CRS certifies renewable energy power products sold bymarketers, utilities and energy service providers in wholesale and retail markets. The process ofcertification and monitoring established under Green-e serves the basis from which the new
GHG Product Certification Program is being modeled. The key aspects of this model include:•

Adherence to the Green-e national standard•

Adherence to CRS’ professional Code of Conduct & Customer Disclosure Policies•

Bi-annual compliance review of all marketing material using Green-e•Annual verification process audit of all certified renewable power products

Principles which govern this program include that for the marketer of renewable energy their
supply equals sale, the source of the product is verified and there is no double counting or sellingof renewable energy credits (RECs). The program is funded by a tiered structure of annual

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certification fees paid to CRS that are differentiated by organization size and product type. The
Green-e label has been likened to a “Good Housekeeping Seal of Approval.”5 Another nod
towards CRS and the Green-e label’s widespread acceptance is its partnership with the U.S.
Environmental Protection Agency and. U.S. Department of Energy to administer the annual
Green Power Leadership awards. To qualify, the applicant’s supply of renewable energy mustmeet certification standards of the Green-e program6. The Green-e program is now a defining
part of the renewable energy market.

The Center for Resource Solutions four main program areas are promotion of clean energy
policy, measurement and verification, promotional services and technical assistance. Both theGreen-e program and proposed GHG Product Certification program fall under measurement andverification. CRS financially depends on a mix of foundation grants, government contracts andprogram services. In FY2005, CRS’ revenue stream broke down as follows7:

SourceAmountGovernment Contracts
GrantsCertification Fees
Consulting
Total Revenue and Support$808,718$587,000$256,190$332,215$1.984,123

Approximate
Percentage of Total
40%
30%
13%
17%

Major contributors included the Energy Foundation, the Surdna Foundation, the Oak Foundation,
California Energy Commission, U.S. Environmental Protection Agency, and utility andrenewable energy marketer certification fees.

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III. The Market

The target of CRS’ certification and monitoring system is the voluntary GHG offset market andis also commonly addressed as the “voluntary carbon market,” since carbon is the primary
greenhouse gas of interest or concern. The specific market segment that CRS focuses on iscomprised of roughly 30-50 retailers or marketers of GHG offset products. Consumers of the
GHG offsets range from common and celebrity individuals to municipalities to corporations.
The market is currently most appealing to the climate-change aware individual and tocorporations seeking to obtain a “first-mover” advantage of sorts and benefit from the green
marketing advantage of going “carbon neutral.” The price to offset one ton of CO2 also varies
dramatically, from $5 to $25/ton, averaging around $10/ton. A very recent consumer guide cites
there is “probably a general correlation between price and quality in the retail offset market” buthas no evidence of a causal link.8

Information about market size, market value or number of offset transactions is extremely
unclear. By one report, from 2005 to 2006 the size of the global carbon market is stated to havemore than doubled in size. Another report states that in 2006, the regulated carbon credit market
was estimated to be worth $21.5 billion and the voluntary carbon market at about US $100
million for the first three quarters of 2006.9 However, the distinction between “voluntary” and“mandatory” carbon markets is always not so clear. What is common to all reports is a
projection of exponential market growth. Industry reports and news articles lead with “eyecatching” headlines such as “The volume of voluntary carbon emission reduction credits has
surged 1000% over the past two years and is set to double again by next year.”10 Methodology
for calculating such projections is rarely explained or cited. With so much undefined in the

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voluntary carbon offset market – from the definition of an offset to the overall market size – theconsumer is left highly vulnerable to misinformation and enticing marketing campaigns by offset
retailers. ICF International (a consulting firm) indicates in the press release of its assessment of
the voluntary carbon market11 that the key factors of concern for this exploding market are thechallenges of “credibility, fragmentation and overlap with mandatory carbon emissions market.”

The voluntary carbon offset market’s contribution to global GHG reduction is a mere “drop in
the bucket” when considering that global carbon dioxide emissions are estimated at more than 25
billion metric tons in 2003.12 A World Bank estimate for 2005 states that the market forvoluntary carbon offsets makes up less than 10 million tones of CO2e (carbon dioxide
equivalent) or less than 1 percent of global carbon market transactions and less than 1 percent of
the total market value.13 Despite this small impact in volume of carbon tonnage reduction,
retailers rightly assess there is still money to be made in the offset market. Other retailers statepublicly that a strong incentive for market entry is to educate the consumer public on the value ofindividual action on climate change issues. The nature of the market is that all market players –retailers, consumers, and even non-consumers receive positive externality of reduction of global
greenhouse gases.

However, a carbon offset market free of standards or third-party monitoring and facing such a
positive growth trajectory could potentially invite less well-intentioned organizations into themix who are interested only in seizing a quick, unregulated profit margin at the consumer’s
expense. Current retail players appear to be against entry of such players, and cite this as one
reason for the push for industry self-monitoring and standard setting. We can infer from this10

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observation several points, including that within the relatively small existing market, players see
greater potential long-term economic gain from a “monitored” market and that players have an
incentive to prevent competitors from cheating the consumer. All players do not have the sameinterpretation of “fair,” and such variation of individual interests will manifest itself in thestringency of the standard and extent of monitoring that is ultimately accepted.

In addition to CRS’ current effort to develop a product standard, several project-based standards
for the voluntary market have emerged within the past year (2006). The main efforts include theGold Standard established by the Clean Development Mechanism’s (CDM) Executive Board
under the Kyoto Protocol and the Voluntary Carbon Standard that is being developed by the
Climate Group and the International Emissions Trading Association. The Gold Standard iscurrently limited in its certification to only small-scale renewable energy and energy efficiency
projects that have received approval through the CDM process. However, a modified version of
the standard has been released that allows non-CDM projects of the same type to be approved,with relaxed additionality tests.14 The Voluntary Carbon Standard (VCS) has recently completed
the second round of consultation on its second version, and the final version is expected to belaunched in the middle of 2007. The VCS is designed to be a global benchmark that provides adegree of standardization to the voluntary carbon market and creates a credible voluntaryemission reduction credit (VCU) that can be trusted and traded by consumers.15 The proposed
CRS GHG product standard is not designed to establish a tradable credit; rather it focuses on thesale and purchase of a credible product.

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In the absence of any governing standard, academics and consultants are also aiding the attempt
to fill the void with “consumer guides.” In December 2006, Trexler Climate + Energy Services
published “A Consumers’ Guide to Retail Offset Providers” 16 on behalf of Clean Air-Cool
Planet. The guide provided a market overview and reported its assessment of the top eight
performing retail offset providers. Trexler Climate is a climate change consulting firm andcarbon emissions broker that was commissioned to do the study on behalf of Clean Air-Cool
Planet, and at best qualifies as an “insider” third-party. The methodology behind the study isadmittedly weak and self-reported as a “first-step.” Other first steps include the Tufts Climate
Initiative’s evaluation and recommendations of thirteen offset companies consumers can use tooffset air-travel carbon emissions,17and a study commissioned by the International Institute forEnvironment and Development (IIED) on “Exploring the Market for Voluntary Carbon
Offsets.”18 These guides all good first-steps toward a more robust system of retailer evaluation,
one that would be further enhanced by widely accepted standards.

IV. CRS GHG Product Standard

A very important clarification to make is that CRS’ standard will certify carbon or GHG offset
products as opposed to projects under the Gold or Voluntary Carbon Standard. The twoconcepts are interlinked – a product is a GHG offset that is generated from a GHG reduction
project. The role of the Gold or Voluntary Carbon Standard will be to certify and verify that the
proposed project does indeed create viable GHG offsets that can then be sold as retail products tothe consumer. CRS plans to partner with these standards to in effect create a dual level of
independent certification and verification.

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Common types of offset projects include bio-sequestration (soil, geological, forest); methane
capture and destruction (from landfills, livestock, coal mines); industrial gas destruction, direct
fossil fuel reduction & energy efficiency and renewable energy projects. Much debate surrounds
the identification of viable projects, mainly around issues of permanence, leakage, additionality(beyond business as usual) and quality of generated offsets. The key issue of contention for
projects is additionality, which states that the GHG offset/project would not have come into
being but for the existence of the GHG offset market. This concept is often difficult to define, as
projects often have multiple benefit streams – a reforested area could serve both as a carbon sink
and a biodiversity protected area. Another point of concern is the viability of these offset
streams – what happens if the trees planted to sequester carbon die or the company which sells
future offset streams to consumers go out of business? Who protects the consumer’s purchase of
those offsets? CRS sees its GHG Product Standard and certification program as offering such asafeguard to the consumer.

When a consumer purchases a GHG or carbon offset, s/he is buying the reduction or removal of
one metric ton of GHG or carbon from the Earth’s atmosphere. Often the consumer is
attempting to “offset” the GHG emissions s/he creates, either through driving a car, flying on aplane, or daily household energy consumption. The methods for calculating how much GHG an
individual actually emits are varied and are not standardized. “Carbon calculators” are found online at websites of retailers and non-governmental organizations such as the Environmental
Defense Fund.19 Controversy also surrounds the effectiveness of carbon offsets to truly reduceoverall GHG emissions, when individual consumers are not actually required to change their

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own personal behavior. The concept of additionality should help answer the first part of thatquestion, by demonstrating that the offsets are new options to reduce greenhouse gases thatwould have otherwise not existed. However, due to the lack of consensus on how to define
additionality this point remains wide open for debate.

Another area of concern in regards to GHG offset products is that of double-counting or doubleissuance of GHG reductions. The CRS standard would prohibit a situation where more than one
end-user claims the same GHG emission reduction benefit or where the GHG emission reduction
is sold more than once along the transaction chain.20 CRS hopes to strengthen the transparency ofthis transaction chain so that ownership of a GHG offset is clear and that offset product is retired
on behalf of the consumer once it is purchased.

Recognizing these areas of concern, the CRS GHG Product Standard is designed to ensure that
products sold by GHG marketers abide by the following requirements:21•

Supply equals sales (and both are verified);•

GHG reduction types retired are the same as advertised;•

GHG reductions are independently certified;•

Consumer disclosures are accurate and follow program guidelines.

The proposed product standard is currently under revision as it recently concluded its first roundof stakeholder consultation on January 31, 2007. CRS aims to launch the standard sometime
during mid-2007, and following its adoption it will be reviewed every three years with a similar
stakeholder process. According to the publicly listed stakeholder comments on the CRS website,

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thirty stakeholders responded to the draft standard. This group was roughly comprised of 16
non-profits and non-governmental organizations; 11 for-profit companies; and 3 public utilities(for a complete list please see Appendix B). Of particular note is the inclusion of 5 of the 30-50
carbon offset retailers/marketers.

The following is a snapshot of the types of comments submitted by the stakeholders22. Terrapass,a newly created for-profit carbon offset provider who originally encouraged CRS to enter thismarket comments “the proliferation of marketing claims and quality standards threatens to
overwhelm consumers’ ability to differentiate between vendors and may undermine thecredibility of the industry as a whole.” Terrapass is an example of a new market entrant thatneeds the credibility that a market standard and certification program can provide, andspecifically that of a program that it is helping to shape. Community Energy, a wind company,
advocates for the inclusion of renewable energy credits & projects into the GHG Product realm –because there are others who argue against its inclusion. The counter-argument states renewableenergy does not offset any carbon, it only adds a cleaner unit of energy to the grid. The
consumer group Second Tonne Club calls for public display of relevant documents in disputes
surrounding a GHG product to be archived online and made available to the public. The World
Green Building Council wants to ensure that the value of the carbon reduction credit accrues tothe entity that creates the reduction, i.e. the building owner or developer and not the utility.

A core value of CRS as an organization is its faith in transparency and the stakeholder process,both in reviewing the standard and certification program applications. However, one stakeholder,
The Climate Trust, comments that “the presence of a stakeholder process alone does not

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guarantee environmental integrity” when it comes to assuring credible greenhouse gas reductions
and consumer standards. The Climate Trust strongly advocates for a rigorous and credible
criteria defining “real, verifiable and additional” reduction of GHG emissions. It is unclear why
CRS is reticent to set such a threshold of criteria within the text of its Standard. One potential
reason probably stems from its desire to work with existing certification programs and to notsupersede their authority nor add an extra level of burdensome bureaucracy. The Climate Trustrightly highlights the need to have a careful balance between reliance on stakeholder review andinput and creating a standard that has technical teeth.

V. The Process

As outlined in the first version of the draft standard, the CRS certification program will firstinvite existing project certification programs to apply to determine compatibility CRS’s GHG
program principles. These principles include: broad participation & transparency; balance andimpartiality; technical provisions that ensure real, measurable, verifiable and beyond-business as
usual reductions; validity of GHG reductions with respect to the standard; and public disclosureand avoidance of double counting. Applications will be reviewed and approved by the Green-e
Governance Board (which is comprised of representatives of prominent environmental NGOs
and is chaired by a CRS Board Member). These certification programs will then become“Green-e” approved.

GHG offset marketers will then apply for certification by CRS and a label similar to the Green-elabel used in the renewable energy market. An application package will include the necessary

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information proving that the Standard has been met, as well as the requirements under the GHG
Product Code of Conduct and Consumer Disclosure Guidelines. Key aspects of the application
include that the marketer is obligated to use verified and certified sources (i.e. projects) to obtainits carbon offsets; its supply must equal its sale; and it must disclose to the consumer relative to
the GHG offset the type of project that the offset comes from, the year it was or will be generated,
its country of origin and the project verification/certification process used.

A marketer that is granted certification under the GHG Product standard signs a contract with
CRS to fulfill all its obligations under the standard and the Product Code of Conduct andConsumer Disclosure Guidelines. The marketer must also submit to a bi-annual review of its
marketing materials and an annual compliance audit at the end of the calendar year. To prepare
for the annual audit, the marketer must complete a series of forms and spreadsheets created by
CRS documenting the past year’s sale and supply of GHG offsets. The marketer must hire an
independent third-party auditor to review these documents and adherence to the CRS protocol,
and issue an evaluative report. The report plus materials will be reviewed by CRS staff for final
approval.23 In this process, CRS is acting as the final gate or check point before the GHG offset
product can be sold to the consumer.

The certification program’s general administration costs will be funded primarily by certification
fees and the remainder by government or foundation money. The certification fees will becomprised of both the initial application fee and subsequent annual fees thereafter. The fee scale
has not yet been determined, but will be similar to and probably slightly higher than the scheme
used in the Renewable Energy Green-e Certification Program. The latter scheme varies

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according to product type and number of products certified. The current stage of developing thestandard and stakeholder process is funded entirely by foundation grant money.

VI. Sanctions & De-certification

The success of the certification program and subsequent monitoring model depends first on
establishing a credible standard and second on effective enforcement of these rules. CRS must
create a system that consists of valid penalties and/or financial disincentives to not “cheat thesystem.” CRS will rely on the contractual agreement the marketer signs with CRS to adhere to
the Product Standard, Code of Conduct and Customer Disclosure Agreements. Violations ofthese agreements will be handled through the appropriate legal, public or government channels
necessary to make the customer whole and or compensate other damaged parties. Marketingviolations will incur suspension of label use. Legal action would be taken against a non-certified
organization claiming certification.

At this point in the planning, enforcement actions are to be determined on a case-by-case basis.
This plan is due in part to the fact that CRS has experienced few violations under its ten-year old
Green-e Renewable Energy program. In one example, the construction of a wind-energy site
was delayed a year, but the wind company continued to sell wind renewable energy credits(RECs) to the consumer. CRS intervened and required the wind company to purchase the RECs
from another wind provider on behalf of the consumer, and once the site was operational thecompany was also required to repay that debt of wind energy in addition to its normal

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production.24 There is no list of past or present violators of this program on the website, only alist of certified vendors in the Renewable Energy Annual Verification Report.

VII. The Prognosis

The vibrancy of the voluntary carbon/GHG offset market is thriving, even without consensus ona standard or regulation of the state. How will the emergence of either affect this market
vibrancy? The former topic was addressed earlier in the paper, but a quick re-cap highlights thebenefits of a “monitored” market with an independent standard to be: It gives credibility to retailplayers who can put forth a product that meets the standard; it increases the appeal of the market
to the consumer because it guarantees consumer protection and thus grows the market further;and it deters market entrance of fraudulent GHG marketers/retailers. However, the question ofstate involvement or the potential involvement of the state remains unclear. There is
anticipation of the emergence of a “carbon economy”’ in the United States and regional if notnational mandatory emission standards and cap and trade market-based systems. This affects thevoluntary market in that corporations or other potentially-regulated entities are moving to offset
their carbon emissions now and pre-empt future compliance expenses and costs of a mandatory
market. The current absence of government regulation is often cited as allowing for innovation,
especially in the area of project-development. The shadow of the state, however, probably offers
no incentive to the individual retail consumer as it is highly unlikely that an individual’s GHG
contribution will ever be regulated, because of the enormous cost to benefit ratio of doing so.

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However, a recent development in the United Kingdom reports that regulators announced in
February 2007 that future voluntary carbon credits will be subject to the same scrutiny as carbon
credits sold in the mandatory market. Industry critics argue that regulation “will strangle theinnovation side of the market that keeps transaction costs low and contributes to sustainable
development.”25 The latter part of the argument may just be an empty threat, but one thatpoliticians may be vulnerable to hearing. Another interesting issue that comes to light is that thegreater carbon market is subject to regional political forces, while the impact of greenhouse gas
emissions is global. Yet just as this issue is potentially an unsolvable global dilemma, CRS’
efforts are reasonable and practical attempt to bring standards and act as a “third-party” monitor
to the North American voluntary carbon offset market.

VIII. A Consumer’s Assessment

I stated at the outset of this paper that I would not buy a GHG offset from today’s unfetteredretail GHG offset market. The question to now answer is if I would buy a GHG offset one year
from today, assuming acceptance of CRS’ standard and certification process. Do these steps
provide the necessary level of monitoring and independent checking to assure me as a consumer
that I will get what I pay for? As a consumer, I have a certain level of confidence in CRS
because of the success and respect of its Green-e Renewable Energy program, and that
program’s subsequent stabilizing effect on the renewable energy market. CRS’ focused attention
on protecting the consumer is also reassuring. However, this sole focus on the consumer may
highlight one weakness in the system, in that CRS does not focus as much on the offset itself andchooses to pass on responsibility of verifying the offset projects to yet another third-party. Such

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a decision may be a smart assessment of what one’s organization true expertise is and is not, but
it does instill a certain degree of vulnerability into the model. In addition, much of the CRS
model is based on transparency and trust, and that requiring transparency throughout the many
stages of the process will naturally put forth truthful information. I am a bit worried that
reliance on such a strategy may be overwhelmed if the number of retailers follows the
anticipated dramatic growth of the market. Such growth would demand organizational
expansion on behalf of CRS.

Financially, the survival of the model is dependent on certification fees and that retailers andcertification programs would pay into the system. An increase in the number of retailers would
also potentially increase certification fee revenue streams. Although currently managed as only
13% of the revenue stream in 2005, CRS needs to watch the potential “budget creep” that anincreasing stream of fees would create. As CRS has a vested interest in the success of its
product certification program, it may not clearly qualify as a “third-party monitor,” but rather a“second-party monitor.” CRS is embedded with the stakeholders. They are working together todevelop an acceptable and appropriate standard, which is a very comprehensive and timeconsuming planning process to employ. Individual stakeholders may change over time, but CRS
has signaled its intent for its program efforts to always be grounded in the stakeholder process.
As such CRS will never truly have distinct independence from the market players.

While I want to believe in the important role of transparency and trust in the model, the great
potential for fast and easy profit in the voluntary market demands that the Standard andcertification program have clear technical thresholds and strong penalties for cheating. CRS

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needs to put forth a program with teeth that will catch any violators and remove them from themarket. I would like to see penalties made explicit in the Standard, and the use of public“shaming” or display on the website used as tool. To address the issue of technical thresholds,
although there is not consensus on key definitions of topics such as additionality, acceptableproject sources or over the sale of future offsets, CRS needs to put forth a set of clear andunequivocal definitions. A step forward must be taken and while the resulting program may
thrive or it may die, the market will ultimately answer the question if CRS’ interpretation ofdefinitions was correct or not.

I would also like to see the market come to some consensus – both in terms of its industry
definitions, acceptable offset projects, market size, volume and worth. While I know this isbeyond the scope of CRS as an organization, the potential of a widely-accepted GHG productstandard and certification program could lead the way for the industry to fall in line. Such an
expectation is perhaps too naïve, but the market players have for the most part identified
themselves as parties primarily interested in promotion of a market mechanism that individuals
can partake in to assist in the overall reduction of greenhouse gas emissions. I would also like to
see an organization keep tabs on the market, track the volume and value of sales, and act as arepository of information. This role could potentially be played by CRS, as it has establishedrelations with the majority of the market players.

So, a year from now, would I buy a GHG offset certified by CRS? I think I would, provided that
CRS’s revision of the standard takes a more aggressive approach in its technical threshold,presents real enforcement procedures and penalties for buyers, becomes an overall monitor for

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the industry and acts as a repository of market-wide information. This “hypothetical purchase”
is based solely on the evaluation that as a consumer I will be able to have full confidence that the
GHG offset I purchase will be retired on my behalf when I purchase it, and that it is sourced
from a verified and certified project meeting the CRS standard and definitional thresholds ofadditionality and no-double counting. However, before making such a purchase I may
personally act as corporations are advised to do – to first look internally for energy efficiency
opportunities and to then purchase offsets for the GHG you are unable to reduce.

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IX. Discussion Questions
1. Discuss the development of the voluntary greenhouse gas offset market. What is it, what is theargument in favor of doing it=, and what is the current nature of the market? Will such programs
help address the issues of climate change?
2. Why is it necessary to create one universal standard for the voluntary greenhouse gas offset
market? Why is it important to establish a monitoring organization for the market? Should auniversal standard be a result of a collaborative effort by major players in the market or should it
one be unilaterally developed by a single credible organization? Which method is more likely to
succeed?
3. Discuss the Center for Resource Solutions’ (CRS) organization capacity and its work inestablishing the Green-e program. How credible to you find the Center for Resource Solutions inmonitoring?
4. What are the challenges for an organization that seeks to be both a standard-setter and monitor
or a certification process? Do you agree with the author that CRS can be an effective leader inestablishing a product standard for the voluntary greenhouse gas offset retail market? Can it also
be effective in creating a product certification process and monitoring system of the market?
Why or Why not?
5. How robust do you find the CRS GHG product standard? What are the challenges of thestandard-setting process?
6. Should the sources of CRS’s revenues streams be a cause for concern?
7. What are the incentives of the consumers who buy carbon offsets? What are the motives of
CRS for selling offsets? Who are CRS’ active stakeholders in the program development process?
8. To whom is CRS accountable? Who has an incentive to blow the whistle on transgressions?
How should we evaluate the lack of known violators to the program?
9. Is there a role for government regulation in the voluntary greenhouse gas offsets market? What
problems can it solve? What is it not able to do?

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Copyright 2007. No quotation or citation without attribution.

X. References1

Retrieved from website: http://www.resource-solutions.org/who/index.htm, Accessed: March 11, 2007
Telephone interview with Lars Kvale, Measurement Certification & Verification Services Analyst,CRS, March 7,
2007.
3
Retrieved from: http://www.guidestar.org/pqShowGsReport.do?partner=justgive&ein=94-3265560. Accessed:
March 11, 2007.
2

4

Retrieved from: http://www.resource-solutions.org/who/board.htm. Accessed: March 16, 2007.
Kenny, Alice. ( December 11, 2006) “The Missing Link? Green-e Attempts to Join the Voluntary Markets forRECs and Carbon Offsets in U.S.” The Ecosystem Marketplace. Retrieved from:http://ecosystemmarketplace.com/pages/article.news.php?component_id=4742&component_version_id=6965&lang
uage_id=12. Accessed: February 24, 2007.
5

6

Details retrieved from: http://www.eere.energy.gov/greenpower/conference/awards.html.
CRS Annual Report 2005. Retrieved from: www.resourcesolutions.org/lib/librarypdfs/CRS_Annual_Report_2005.pdf
8“A Consumers’ Guide to Retail Carbon Offset Providers.” Prepared for by Clean Air Cool Planet, Wrtten by
Trexler Climate + Energy Services. December 2006. Retreived from: www.cleanaircoolplanet.org/ConsumersGuidetoCarbonOffsets.pdf. Accessed: February 24, 2007.
7

9“Offsetting Emissions: A Business Brief on the Voluntary Carbon Market” (Decemeber 2006) Business for Social
Responsibility and The Ecosystem Marketplace. Retrieved from: http://www.bsr.org/meta/BSR_Voluntary-CarbonOffsets.pdf. Accessed: March 4, 2007.
10
Zwick, Steve. (June 29, 2006) “In Search of a Standard for the Voluntary Carbon Market Comparing Apples &Oranges” The Ecosystem Marketplace. Retrieved from:http://ecosystemmarketplace.com/pages/article.news.php?component_id=4431&component_version_id=6521&lang
uage_id=12. Accessed: February 24, 2007.
11

I attempted to get a copy of this report from ICF International, but they were unwilling to share any part of thereport with me.
12“International Energy Outlook 2006” (June 2006) Ch. 7: Energy Related Carbon Dioxide Emissions. Report #:DOE/EIA-0484(2006). Retrieved from: http://www.eia.doe.gov/oiaf/ieo/emissions.html. Accessed: March 16,
2007.
13“ICF International Study Forecasts Explosive Growth in the Voluntary Carbon Offsets Market” (November 30,2006) Press Release, ICF International, London, UK. Retrieved from: www.icfi.com/newsroom/carbon-offsets2006.asp. Accessed: March 4, 2007.
14
Retreived from: www.cleanair-coolplanet.org/ConsumersGuidetoCarbonOffsets.pdf.
15Retrieved from Voluntary Carbon Standard website: http://www.v-c-s.org/. Accessed: March 16, 2007.
16
Retreived from: www.cleanair-coolplanet.org/ConsumersGuidetoCarbonOffsets.pdf.
17Kollmuss, Anja and Bowell, Bejamin. (January 27, 2007) “Voluntary Offsets for Air-Travel Carbon Emissions:
Evaluations and Recommendations of Thirteen Offset Companies.” Tufts Climate initiative. Retrieved from:www.tufts.edu/tie/tci/pdf/TCI_Carbon_Offsets_Paper_Jan31.pdf. Accessed: March 2, 2007.
18
Taiyab, Nadaa. “Exploring the market for voluntary carbon offsets.” International Institute for Environment andDevelopment. London. Retrieved from: www.iied.org/SM/eep/documents/MES8.pdf. Last accessed: March 18,
2007.
19
See http://www.fightglobalwarming.com/carboncalculator.cfm.
20
Draft version of “The Green-e Greenhouse Gas product Standard, Version 1.0.” Retrieved from CRS website at:
http://www.resourcesolutions.org/mv/docs/DRAFT_Greene_GHG_Product_Standard_for_Stakeholder_Comment.pdf

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Copyright 2007. No quotation or citation without attribution.

21“Introduction to the Green-e GHG Product Standard.” Retreived from CRS website at: ww.resourcesolutions.org/mv/docs/Intro_to_GHG_Product_Standard.pdf.
22
All stakeholder comments are downloadable from the CRS website: http://www.greene.org/getcert_ghg_standard.shtml. Last accessed: March 16, 2007.
23
Entire process was reviewed in telephone interview with Lars Kvale, Measurement Certification & Verification
Services Analyst, CRS. March 7, 2007.
24
Ibid.
25
Kenny, Alice. (March 2007) “Voluntary Carbon Offsets: Boon or Boondoggle.” Retrieved from:http://www.greenbiz.com/news/reviews_third.cfm?NewsID=34705. Accessed: March 12, 2007.