Climate Finance Transparency Initiative FAQs
We have recently launched our Climate Finance Transparency Initiative as part of our broader demand building strategy to help strengthen the market. We have received many questions about this new initiative, which we have summarised below. If you have any further queries or questions, please do not hesitate to contact us>>
We believe that carbon markets will strengthen and grow for everyone involved with greater credibility and transparency delivered through better access to market information.
This initiative is expected to encourage prospective buyers to enter the market by providing access to pricing data they need to inform their purchasing decisions and help project developers understand what prices they can expect.
The public consultation for the initiative ran through 20 November. You can review the documents related to this consultation here>>
NOTE: Due to a large volume of feedback and questions about the initiative, Gold Standard has made the decision to take adequate time to respond to all concerns, weigh the merits of different options, and share a revised proposal in 2016. We will work with our stakeholders to define the best way forward to meet our stated objectives.
Why are we pursuing price transparency of Gold Standard credits?
CSR and sustainability professionals frequently contact Gold Standard with questions about pricing of our credits. The lack of reliable information on prices, volumes and beyond-carbon impacts of projects is causing uncertainty and distrust among these potential buyers. This contributes to fewer new market entrants and lower volumes and prices. Further, project developers are choosing not to issue credits or initiate important new projects because they lack clarity about the prices their credits might be worth in the market.
While not our only effort to support demand building, improving transparency is expected help build credibility by providing access to information, and thus contribute to strengthening the market.
Much like the real estate market, where home sale pricing data is used to help a new buyer understand market trends and their value for money for a comparable property, understanding the market value of a Gold Standard credit will help reassure buyers, especially those new to the market, that they are engaging in a transparent and credible market.
Who supports the initiative?
Refer to our page where we track early adopters and supporters>> which include UNFCCC Executive Secretary Christiana Figueres and Microsoft Chief Environmental Strategist Rob Bernard.
What is the incentive to join?
We understand that this is a change, and we are here to support your transition to this scheme. We will reward those who voluntarily join this Climate Finance Transparency Initiative for their existing projects and credits for sale. Those who agree to participate in this program and agree to disclose the price of transactions of Gold Standard VERs and WBCs will be eligible for promotion in Gold Standard communications, in our conversations promoting investment in Gold Standard projects, and in PR efforts. This includes:
- Announcements at Gold Standard’s events Sustainable Brands on 17 November for first adopters and at COP21 in December for all early adopters.
- Listing on Gold Standard’s website as an endorsed seller of Gold Standard credits (those who do not participate in the Climate Finance Transparency Initiative will not be listed).
- Eligibility to feature projects in Gold Standard’s dynamic new project portfolio and any future relevant e-commerce platforms that sell GS credits
- Inclusion in promotional material that is shared at Gold Standard’s participation in CSR/sustainability events as well as policy events and workshops
- References to your participation in this initiative in the press release announcing the program, to also include endorsements from government and civil society signatories within ongoing PR efforts
- Social media promotion of the initiative by Gold Standard and other signatories
- Eligibility to participate in a forum of Gold Standard project developers, retailers, and corporate partners, to be developed
- Participation in a consultation of the first two reports prior to publication
What do you have to do? What will this change?
First, you will first have to sign our updated Terms and Conditions, which will include a clause that requires price disclosure. Signing the Terms and Conditions signifies that the buyer or seller of VERs or WBCs from Gold Standard projects makes the commitment to disclose the price of credits for all future transactions.
Then, whenever you initiate a transaction of Gold Standard credits within the registry, the field for Price per credit must be completed. When the account holder approving the transaction receives the pending notification, completing the transaction indicates that this price is acceptable and accurate.
How will Gold Standard collect pricing information?
We will collect price information at the transaction level through the registry. This has been identified as the most accurate and timely means available to collect price data.
How will we check that information has been properly entered?
The Terms and Conditions will include a clause affirming that the information will be entered accurately and without misrepresentation, subject to exclusion from the program and relevant penalties. An auditing partner may be empowered to verify that contracts and bookkeeping with buyers accurately reflect prices that were entered into the registry. Any discrepancies would be subject to investigation.
How will Gold Standard share and report pricing information?
Pricing data will not be made public at the transaction level. We plan to use aggregated data to report anonymous pricing information back to the market. This will be done through a third party research partner. All steps will be taken to ensure commercial anonymity. If sample sizes are not adequate to do so, we will aggregate differently or omit reports for relevant transactions.
The proposed phased approach to reporting:
- 2015 Q3 and Q4 – Issuance/Retirements Reporting: At the end of 2015, we will publish issuance and retirement data on Gold Standard credit volumes according to project types and geographies.
- 2016 – Quarterly Anonymized Price Reporting: We will aggregate pricing information for Gold Standard credits according to project type and geography and publish this anonymized pricing data in a report, subject to sufficient data to ensure representativeness and anonymity
- Additional Consideration - Benchmark or minimum pricing: Based on analysis of data, we will consider creating benchmark minimum pricing per project type and geography using historical data. Prices could be negotiated to higher points, with even greater legitimacy when beyond-carbon benefits are more rigorously quantified and verified in Gold Standard 3.0.
Please see our sample report for a proposed way of reporting.
Educating buyers also about why costs of different projects vary would also support efforts to justify variable price points among credits.
Indeed, this will be a critical element of the report. We plan to consult our stakeholders to provide information in the reports about the varying costs of developing different projects in different regions, as well as the difference in value based on the impacts different projects deliver. We would also like the report to feature case studies of different projects to bring this data to life, as well as highlight buyer’s climate strategies and motivations for supporting Gold Standard projects.
How is this an improvement on the information that is already available?
We would first like to applaud the work that Ecosystem Marketplace has done over many years in producing the State of the Voluntary Carbon Market Report that filled a void in the market and provided invaluable information and analysis. The vision of this initiative is to provide more detail and more context about supply, demand and price variability of Gold Standard credits. The initiative aims to educate buyers and support sellers’ efforts when marketing their projects. Specific to the differences in information, this initiative would deliver information that is:
- More timely, because it can published more quickly without an extended outreach to individual sellers to package and deliver their data, and would be delivered more frequently than annually.
- More accurate, since price information is captured at the point of transaction rather than self-reported
- Contextualized through segmentation by project type and geography, key factors in evaluating supply and demand dynamics
How does this build the market?
Price information that’s more timely, accurate, and segmented is expected to:
- Build trust and credibility through greater transparency.
- Better position investments in emission reduction projects to be adequately recognized and rewarded
- Serve as a resource to justify higher price points through a section dedicated to education on project costs and impact value.
- Remove a barrier that exists today among some prospective buyers because of a lack of sufficient price data. Much like the real estate market, where home sale pricing data is used to help a new buyer understand market trends and their value for money for a comparable property, understanding the market value of a Gold Standard credit will help reassure buyers, especially those new to the market, that they are engaging in a transparent and credible market.
- Boost the image of a market that undeniably suffers from reputational damage—partially due to lack of transparency.
How else is Gold Standard contributing to demand?
We published our high-level demand building strategy in October 2015, found here. Our near-term efforts include hosting a session with climate action leaders Jaguar Land Rover, Desso and Marks & Spencer at Sustainable Brands London, where they discussed how they’ve built brand value from their investments in climate and development projects in “How to make carbon offsets more popular: The evolution of effective messaging tactics”, co-hosted with the Global Alliance for Clean Cookstoves and CodeREDD.
We are also hosting a workshop with ICROA to discuss the potential role of offsetting within the Science Based Targets initiative with CDP, WWF, WRI, and the UN Global Compact. We will continue to seek opportunities to build the business case for supporting climate and development projects at CSR and sustainability events at COP21 and beyond.
How will Gold Standard ensure that this doesn’t drive prices down in a market already characterized by oversupply?
This is an important question that we take very seriously. Our proposed mitigation strategy includes the following:
- Continue our additional efforts to build demand. Additional stimulation of demand may also result from outcomes from COP21 and the negotiations to follow, an associated increased awareness of the importance of climate action – both at an individual grassroots level and among businesses, and new compliance schemes like ICAO, which will require 30 million additional credits each year starting in 2020, with pre-compliance activity likely.
- Educate buyers about variability in project cost and impact.
- Ensure we reach critical mass to ensure sufficient data samples before publishing.
We also realize that these efforts still leave uncertainty. For this reason, all early adopters (deadline of 30 November 2015) will be eligible to participate in a consultation on the first two reports before they are published.
This is an important initiative. We would also like to see data for Gold Standard CERs.
We have engaged the UNFCCC and received enthusiastic support, including a quote from Christiana Figueres. They also believe this applies to CERs, which is why their Climate Neutral Now platform features transparent pricing. The UNFCCC is also investigating how they can further support our initiative.
"Transparency and access to information are crucial for maturing carbon markets to build the confidence needed for new supporters to enter the market and for current supporters to expand their commitments." - Christiana Figueres
We would also like to see information about pipeline supply projections, trends of retirements over time to see if the market is growing or shrinking.
All noted, will look to include.
We want to be early adopters, but some of our long-term ERPAs include confidentiality clauses. Will we be excluded from participating?
We are working on precise details here, but we will ensure that those who want to participate as early adopters or who sign on later will be able to do so.