Cut out a Kilo on June 5th 2009

In 2008, The CarbonNeutral Company launched the ‘Cut out a Kilo’ programme for World Environment Day (WED). 50 companies and thousands of staff joined in. ‘Cut out a Kilo’ is about reducing CO2 emissions, the framework is straightforward, and we’ve developed a downloadable logo, some poster formats and a microsite which generates a certificate to commemorate involvement. This year WED falls on Friday 5th June and we’re inviting companies and individuals to use our free programme once again.

For more information email Sharon.corrigan@carbonneutral.com or www.carbonneutral.com/worldenvironmentday/wed.asp

Join us with this campaign and reduce your emissions, engage your staff and save costs.

Voluntary Carbon Market Press Briefing

As a founding member of ICROA the International Carbon Reduction and Offset Alliance we are holding a press briefing this Monday the 28th of July 2008.

A panel discussion will focus on two recent reports from leading NGOs, both commissioned the UK Government’s DfID, which drew interesting conclusions on the role of voluntary carbon markets in promoting pro-poor sustainable development. Leading offset suppliers, corporate offset buyers and quality assurance organizations for the voluntary market will also be present.

Panelists:
(Chair) Jonathan Shopley: co-chair of the International Carbon Reduction and Offset Alliance (ICROA). www.icroa.org
Mark Kenber: Policy Director at The Climate Group and chair of Voluntary Carbon Standard, one of the leading voluntary market standards. www.v-c-s.org
Alice Chapple: Director, Sustainable Financial Markets at Forum for the Future and author of “Making the voluntary carbon market work for the poor”, July 2008. www.forumforthefuture.org
Ben Dixon: Programme Manager, The Ashden Awards for Sustainable Energy, and co-author of “Scaling up low carbon energy for the poor”, June 2008. www.ashdenawards.org
Chris Shearlock: Environment Manager, The Co-op Group, one of the earliest major companies to build offsets into their products (mortgage, car insurance and holidays). www.goodwithmoney.co.uk

Other leading figures from the voluntary market and key businesses will also be present for the discussion.

For more information contact sharon.corrigan@carbonneutral.com

Cut out a Kilo of CO2 for World Environment Day

Get actively involved in World Environment Day – 5th June 2008

World Environment Day is commemorated each year on the 5th June, it is United National programme aimed at promoting worldwide environmental awareness and action.

We are encouraging everyone – individuals – old and young - and companies - large and small - to get involved and help tackle climate change by reducing their carbon footprint for that day. We have put together a number of ideas that will help you get involved, if you have any other ideas that you are promoting then please contact us.

Our aim: to Raise awareness of climate change and to ‘Cut out’ as much CO2 on World Environment Day

How you can do this:

Join our campaign…’Cut out a Kilo’ of CO2
Register what you have done to ‘Cut out a Kilo’ and receive a certificate to commemorate your involvement…

Educate and include your web visitors on World Environment Day
Display the ‘Cut out a Kilo’ logo, link to The CarbonNeutral Company registration campaign page, offset every 100 visitors to your website…

Help to educate young people
Why not gift a CarbonNeutral® travel package to your local school or organization

Encourage as many businesses to go CarbonNeutral® for World Environment Day
Speak to your prospects and customers about getting involved and reducing their carbon footprint to net zero for one day – think of the impact that it would make on the environment

Educate your staff and customers on climate change
Why not gift ‘Carbon Jargon’ a ready-reference book which unpacks the language of climate change

Next steps:
Register your interest with our World Environment Day co-ordinator Sharon Corrigan (sharon.corrigan@carbonneutral.com) or tell us what you are doing so we can help promote this.

Position paper on the distribution of client funds from carbon offset sales

This position paper explains how our income from offsetting is distributed. As a commercial organisation, we do not routinely disclose sensitive margin data. However, given the nature of the voluntary carbon market, we know that our clients want to understand more about how their payments support carbon reduction projects around the world.

In overview, 76% of the price we charge clients per tonne of carbon (excluding applicable local taxes) goes directly to delivering verified carbon credits. This contribution is high compared to market norms due to the scale and efficiency of our business.

The Context
Key definitions
The voluntary carbon market is not governed by reporting standards (although The CarbonNeutral Company is involved in initiatives to establish these on an industry wide basis). This has led to a great deal of variation in the way different companies present how monies are distributed. Acknowledging this, we have developed this position paper to help clients navigate the complexities of this area and provide a basis from which to compare “apples with apples”.

First, we need to establish some basic terminology.

Carbon projects give rise to, or result in, greenhouse gas emission reductions.

Carbon projects must be validated, and their emissions reductions verified, by independent entities which are accredited for such activities. These independent review steps are required before emission reductions can be transacted as carbon credits. The common currency for carbon credits is a tonne of CO2 equivalent (tCO2e).

When an entity wishes to compensate or offset their greenhouse gas emissions, carbon credits are purchased to balance out emissions, usually in conjunction with an internal emission reduction effort. There is a significant cost associated with the audit, verification and quality control involved in translating reductions into carbon credits used for offset in programmes carrying the CarbonNeutral quality brand mark. There are also transaction costs associated with the transfer of ownership of credits from the project to the offsetter.

To help clarify the way we report our figures, listed below are the different elements that are necessary for delivery of a guaranteed carbon reduction to our offset clients.

• Assurance: Confirming to clients that what is promised in terms of carbon credit quality and quantity is delivered. Our independently audited end-to-end chain of carbon custody includes:
  - Independent project review and verification, publicly reported.
  - Independent auditing of our financial and carbon accounts, publicly reported.
  - Adherence to the independently assured CarbonNeutral Protocol.
  - Periodic review of our carbon management systems by our Independent Advisory Group.


• Sourcing: Building and maintaining a quality procurement network including due diligence of project partners and contracting for the delivery of suitably certified carbon credits.


• Insurance: Insuring the integrity of a CarbonNeutral programme with a guarantee that every tonne of CO2 purchased by clients is delivered. This is central to CarbonNeutral claims and the value of carbon offsetting to the environment. To enable this promise, we maintain extra ‘buffer stock’ so if a project fails, carbon of an equivalent standard can be substituted in client carbon offset portfolios.


• Verification and Certification: Ensuring that carbon reductions materialise, and establishing legal title and generating appropriate certificates for each credit.
  
• Monitoring: Managing the risks of future credit streams by conducting project reviews and site visit reviews through independent third parties.


• Carbon Management Systems: Internal processes used to manage and control the carbon chain of custody from project to client.


• Allocation: Recording clients’ carbon transactions in an auditable manner on proprietary systems that will link to independent registries as they emerge.


• Intermediary commissions: Commission and agency fees paid when we are introduced to projects through third parties e.g. brokers, project developers or carbon funds.

Collectively these activities represent the contractual rigour that is essential to deliver verified or certified carbon credits for carbon offsetting. Transactions without such contractual rigour are in essence donations to carbon reduction projects on a ‘best intentions’ basis. Any organisation seeking to develop an in-house offset program would need to establish processes with sufficient rigour to manage each of these activities.

Important considerations
There are two critical elements that a client needs to be aware of when investing in carbon credits.

First, the money paid for the carbon credit is not the same as money received by the project. For example, where the end customer is not dealing with a single intermediary, the carbon credit may have been traded and re-traded at commissionable rates and margins so money received by the project is considerably diluted compared to the price paid per tonne by the end user.

Second, how a client frames its investment in carbon credits – either as a donation to a charity, or as a commercial transaction expensed to their profit and loss account. Whilst the net tax position is more or less the same for both, charitable donations are by definition a ‘best intentions’ philanthropic response to climate change. No specific good or service may be provided as a result of a donation to a charity and there is no guaranteed benefit to the environment.

The CarbonNeutral Company engages its clients on a commercial basis and, as such, carbon transactions are treated as a business expense. This has the same financial impact as charitable donations , while ensuring that a specific quantity of emissions is offset.

The CarbonNeutral Company Position
In summary:

• On average, 76% of the price we charge clients per tonne of carbon (excluding VAT) goes directly to delivering verified carbon credits.


• The delivery of verified credits is made up of a series of inseparable activities that include: finding and selecting high quality projects; supporting those projects through carbon finance; monitoring and verification; and, reporting on performance and insurance.


• The systems that we use to govern these activities, are set out at: www.carbonneutral.com/pages/assurancetoff.asp
  where there are links to our Carbon Report, third-party Carbon Assurance Statement, the CarbonNeutral Protocol, and our Policy on Accounting and Reporting Carbon.


• We currently reinvest our earnings in the growth of our business and, as a business focused on promoting voluntary action on climate change, a substantial proportion of our general overhead is for activities which educate, engage, and market services which address climate change.

This paper combined with our Carbon Report, Carbon Assurance Statement, the CarbonNeutral Protocol and our Policy on Accounting and Reporting Carbon, provides a rigorous and transparent framework for reporting our performance, and the headline figures for our income distribution.

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1. Based on The CarbonNeutral Company’s audited statutory accounts for the 12 months to 30th June 2007.
2. In the majority of cases The CarbonNeutral Company deals direct with projects to minimise these intermediary commissions.
3. If a company decides to give money to charity, it simply makes the payment and deducts the amount as a `charge' when working out its profits for corporation tax purposes. Full payment is made to the charity, no tax is deducted from the payment and the charity does not claim back any tax on the gift. Source: HMRC

New Standards in the Carbon World

New standards will boost market integrity says The CarbonNeutral Company

Launch of Voluntary Carbon Standard
Launch of Policy for Carbon Accounting and Reporting

The CarbonNeutral Company welcomes the launch of the Voluntary Carbon Standard (2007), a clear indication that the voluntary carbon market has come of age. We believe this standard will help provide reassurance to buyers and credibility and transparency to the market.

Jonathan Shopley, Executive Director, The CarbonNeutral Company, commented:
“The launch of an independent standard like the Voluntary Carbon Standard is critical to establishing the foundations of sound carbon management strategies. It provides the standards companies like The CarbonNeutral Company have been calling for to build trust and integrity in the voluntary carbon market.”

In addition, The CarbonNeutral Company today (19 November) announces the launch of its Policy for Carbon Accounting and Reporting (PARC). Whilst the VCS is focused on quality assurance for emission reduction projects themselves, the PARC is for ‘end to end’ measurement and reporting of carbon contracts and offset programmes. It sets the standard for transparency, and aims for commonality across the market.

The CarbonNeutral Company developed the Policy with input and review from PricewaterhouseCoopers LLP. The Company is now calling for this innovation to be adopted by operators across the offset industry.

.The policy builds on The CarbonNeutral Company’s existing leadership position in monitoring and standards bound up in its total quality assurance programme. The Company is unique in the voluntary carbon market for its multi-year track record both in independent verification of projects and management systems, its public register of contracted emission reduction projects, and its guarantee against every tonne of carbon sold.

The PARC has been used, along with the CarbonNeutral Protocol, for the fourth year of the Independent Review and Report on the company’s activity, published at www.carbonneutral.com/pages/assurancetoff.asp

Jonathan Shopley, Executive Director, The CarbonNeutral Company, added:
“Our new policy allows us to state clearly how tonnes of CO2 emissions reductions are achieved and when, setting a new industry benchmark."

“This complements the top level quality assurance on emissions reductions projects that will be provided by the VCS. We believe that the onus is now on the carbon offsetting industry to work to a common standard, showing exactly how our figures add up and communicating these clearly.”

Inisght Series #7

You are invited to Carbon Insights: Selecting your Carbon Offset Portfolio

"Carbon finance is one of the ways of providing reliable sustainable energy to billions of people in developing economies"
- Harish Hande, MD, SELCO, India

"Carbon offsetting does very little to reduce global carbon emissions"
- Cheatneutral.com

What - A seminar and discussion covering:

External perspective on offsetting options and standards; Carbon credit
types and an approach to building a portfolio that meets your needs.

Who
Bill Sneyd, Directory Advisory Services, The CarbonNeutral Company

Tim Webb, Industry Editor, The Observer

When
Thursday 29th November 2007

8.15am for 8.30 - 10.00am (breakfast will be provided)

Where
The CarbonNeutral Company, Bravington House, 2 Bravington Walk,

King's Cross, London N1 9AQ

RSVP To reserve your place please contact Joanna Smolka, 0207 833 6025

Places are available on a first come first served allocation

Value Added Tax (VAT) and carbon offsetting in the UK and Europe

Here in the UK, since the inception of carbon offsetting, and with gathered momentum over the last 12 months, there has been confusion as to whether Value Added Tax (VAT) is due on the supply of offsetting services, and on the trading of carbon credits in the European Union economic zone. In the UK, some carbon offsetting businesses have been instructed by Her Majesty’s Revenue & Customs (HMRC) to charge VAT on their services in the UK, while others have been advised that offsetting is simply the making of donations to “projects” and therefore the money received for offsetting is outside the scope of the European Union’s rules on VAT.

The confusion has been made worse as a number of carbon offsetting entities have established themselves as charities or not-for-profit organisations. As a result, there has been an incorrect assumption that the activities of these organisations must be outside the scope of VAT due to their charitable/not-for-profit status. This does nothing to give consumers or business confidence in the carbon offsetting business – what it is, how it is executed, how much it costs, and what customers get for their money.

HMRC attempted to remove the confusion in the carbon trading market recently with the issue of a Revenue Brief in this area, but remained silent with regard to the carbon offsetting market.

The CarbonNeutral Company (TCNC) has been lobbying HMRC to sort out the confusion once and for all with a Business Briefing, settling – nationally – whether VAT is to be charged or not. The issue boils down to – is a payment being made by an individual or entity for something in return? Is there cause and effect?

We believe that in the case of offsetting that this answer is ‘yes’. If you (business or consumer) pay for 1 tonne of CO2 to be offset, that’s what you need to know happens. You are making a payment for a guaranteed service. You aren’t paying for ‘best efforts’. After all if the 1 tonne is not delivered, you have not offset anything, and both you and the environment have not been served. Of course, you could make a donation to an emission reduction project – but that’s an entirely different no-strings-attached donation and no offsetting is happening.

We also believe that all the mess around charity/not for profit/business is undermining the enormous value carbon trading and offsetting can bring. To test our beliefs and move the debate along we commissioned Legal Counsel from leading VAT and indirect taxation QC, Paul Lasok.

Paul Lasok felt that it was pretty much a black and white case. He said that carbon trading and carbon offsetting are business activities, and in accordance with current UK and European indirect tax legislation, clearly subject to VAT. The UK has little room for maneuver within European taxation law, and would need to pull carbon activities in line with the legislative framework. This applies whether the transactions are on a regulated or voluntary basis, whether the instruments (credits) are Verified Emission Reductions (VERs), Certified Emission Reductions (CERs) or other regulated instruments, and whether the organisation concerned is established as a corporate body/charity/not-for profit entity. A copy of this opinion has been made available to HMRC Headquarters, and is with their legal team, awaiting a response.

The exact quote is: “Paul Lasok QC of Monckton Chambers – a leading VAT and indirect taxation specialist – has advised The CarbonNeutral Company that carbon trading and carbon offsetting are business activities, and in accordance with current UK and European indirect tax legislation, clearly subject to VAT. This applies whether the transactions are on a regulated or voluntary basis. HMRC is asked to clarify the VAT position for organizations, both businesses and charities operating in this sector, and issue a Revenue Brief accordingly.”

Lasok has advised that there would be a situation in which donation (and charity) can play a part in carbon projects. This would be when money is donated on a no-strings-attached basis to an Emission Reduction Project. When strings are attached (i.e. offsetting which requires a delivered benefit) then it is a business activity.

We want the UK’s Revenue to recognize offsetting as a business service and therefore as a VATable activity. However, we also believe that there is a case for the VAT rate on offsetting to be set at zero in order to maximize the flows to carbon finance to carbon reduction projects. So the next step is to encourage the UK government to seek EU legislation which treats carbon offsetting as a VATable activity, but on which the rate of VAT is set at zero. With airline travel zero-rated for VAT, the case for offsetting receiving the same treatment is compelling.