Charismatic carbon anyone?

Small-scale, cute and cuddly carbon projects, or, as they are known in the business, "charismatic carbon" projects, are highly sought in terms of their additional benefits and marketing appeal. However, in reality, remarkably few of these projects have been successful in obtaining actual carbon credits due to the constraints of developing micro-scale renewable energy or energy-efficiency projects, often based in some of the poorest areas of the world.

Charismatic carbon generally relates to a project that tells a great story, as well as delivers real environmental benefits. For example, energy-efficient cook-stove projects, domestic scale biogas technologies, or solar lanterns for poor rural communities, have benefits that go way beyond reducing carbon emissions. They have the potential to reduce indoor air pollution and improve quality of life for rural villages by providing electrification, lighting and heating.

Whilst one can be cynical about large corporations wanting to put nice pictures in their corporate sustainability reports, the finance from these types of carbon credits really does help get community projects off the ground. But given that demand is there, where is the supply?

The biggest challenge in bringing these charismatic carbon projects to the market is the relative lack of understanding of the potential of carbon finance in many developing countries. While there are a growing number of local conferences and delegations in Bangladesh and sub-Saharan Africa, for example, there is still a missing link when it comes to getting local communities involved.

What is necessary is a more effective linking mechanism to bridge the gap between corporations wanting to buy offsets and the grass roots organisations that have to run the projects successfully. This link could take the form of local entrepreneurs, micro finance institutes, NGOs or donors.

Even though there has been progress in this area in recent years, there is still a huge amount of capacity building to be done. According to the United Nations Environment Programme (UNEP), less than three per cent of the potential emissions reductions from the Clean Development Mechanism (CDM) offsetting scheme's project pipeline come from Africa, and 40 per cent of these are from South Africa, which is dominated by large industrial energy-efficiency projects.

In terms of the actual implementation of the projects, there are numerous further challenges. Most of the carbon accounting standards required to get a project approved, such as the Voluntary Carbon Standard, demand that projects are validated and verified against an approved methodology by an accredited auditor. However, not only are there few verification methodologies available for small-scale, development-led projects, there are also obviously high costs associated with flying out third-party auditors to review them.

Whilst this verification helps to ensure the credibility of carbon reduction projects, it also leaves a high price of carbon per tonne for very small projects. In this economic environment, and with carbon prices in decline, it's going to be tough for such projects to be competitive, despite the wider development benefits. Without question, corporations need to be prepared to pay more, and so they should for worthy projects.

The other problem is that if emissions reduction projects such as the distribution of efficient cooking stoves or solar lamps are domestic in their nature, they are often widely dispersed and it can become difficult to ensure they are monitored properly. Taking a risk-based approach would surely lead to less of an auditing burden, while still retaining the integrity of the carbon offsets.

The obvious conclusion is that there needs to be easier systems to promote these types of project. The response that maybe these projects simply aren't suited for this type of financing just seems pretty lackadaisical. There may now be more programmatic style methodologies being rolled out, but even these are still heavy handed and slow to be adopted.

With regards to the standard for these types of project, I believe they should be appropriate to the size and scale of the project. Whilst the rush to quality in the carbon offsetting world is important, I can only wonder how many of these small-scale projects will ever end up issuing actual verified offsets due to the constraints of the system under which they try to operate.

There needs to be a radical new approach – one that doesn't undermine the development of the market but empowers the advancement and growth of such worthy projects.

I'd argue that this push needs to come from the corporations – to open up new ideas and cut some slack for the small guys. These projects require long-term sponsors and commitment, not just a one-off purchase of carbon credits. After such negative media backlash associated with offsetting, companies are too paranoid to use anything other than offsets that are platinum plated.

By supporting small-scale projects, they are perhaps underpinning their corporate sustainability strategy far more effectively than if they simply buy industrial-based, energy-efficiency credits. There has to be a place for a compromise position, where blending cheap and effective offsets with something more gourmet represents a sensible and cost-effective offsetting strategy.

Lisa Ashford is global head of voluntary and new markets at carbon offsetting specialist EcoSecurities