Appendix 2: Indicative Cost of Implementing the Carbon Offset Framework

 

This appendix sets out:

1)    Examples of different types of carbon offsets in the voluntary offset market, the cost per tonne of carbon and examples of recent customers (table 2).

2)    The possible cost to the Council of purchasing carbon offsets from the UK’s voluntary carbon market, based on the assumptions set out within figure 3. 

 

This appendix is for information only and does not form part of the carbon offset framework.

 

Type of scheme

Example of schemes

Example of customers

£ per tonne of carbon

Emissions avoidance

Methane abatement

‘Mootral ruminant’, natural feed supplement to reduce ruminants burping, Europe

Fungi Perfecti, 89up

£65

Wind farm

Salkhit wind farm, Mongolia

UNESCO, Southampton Airport

 

£4

Emissions reduction with short-lived storage

Woodland creation

Woodland Carbon Code, UK

PwC, Basingstoke Borough Council

 

£50

Rainforest protection

Ecologi, Brazil

Vodafone, BBC

 

£13

Emissions capture with long-lived storage

Carbon capture & storage

Low Carbon Fuel Standard, US

Regulated industries

 

£125

Orca, Iceland

Microsoft, Swiss Re

£1,100

Table 3. Examples of carbon offset schemes.

 

Voluntary carbon markets are based on trading “units” of carbon, where 1 ‘unit’ represents 1 tonne of CO2 removed from the atmosphere. Currently, there are only 2 standards that the Council could purchase through that would meet the requirements set out in the carbon offset framework above, namely the Woodland Carbon Code and the Peatland Code, although a handful of other standards are in development.  There are two types of carbon units typically available for sale under these two codes, which indicate whether the carbon removal is either promised or achieved. Units which represent promised removals are issued to a project developer once a project has started and the quantity of carbon it is expected to remove has been calculated. In UK carbon codes these are known varyingly as “estimated issuance units (EIUs)” or “pending issuance units (PIUs)”. Carbon units which have been achieved are known to sell at approximately double the price of PIUs, most likely because the carbon removal is certain, and they can be used immediately. Once used, credits are then retired and cannot be traded or used to offset any other emissions, to avoid the risk of double-counting.

 

Figure 3 and table 4 below provide a simple illustration of the potential annual cost up to 2050 of offsetting 10% of the Council’s scope 1 and 2 carbon emissions, assuming the County Council keeps within its carbon budget trajectory. The assumptions are:

1)    The cost of offsetting a tonne of CO2e is £77 and remains fixed up to 2050. This price is based on recent advice from the consultancy EY, in the absence of actual market rates because there are no carbon credits available from either the Woodland Carbon Code or the Peatland Code.

2)    An inflation rate of 3% has been applied to the cost of £77/tonne.

 

At £77/tonne and an inflation rate of 3% p.a. the total cost to offset 10% of scope 1 and 2 emissions up to 2050 would be approximately £1.87m.

 

Figure 3. The cost of purchasing 10% of each year’s scope 1 & 2 carbon reduction target at 77/tonne  and 3% inflation p.a.

 

Figure 1 is a graph which shows the cumulative cost of purchasing 10% of each year’s scope 1 and 2 carbon reduction target emissions between 2024 and 2050, if the cost of each tonne of carbon is assumed to be £77, and the cumulative tonnes of carbon that would be offset during this period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

Current Annual Carbon Budget

13% Carbon Reduction p.a.

10% Maximum Offset p.a.

£77 per Tonne of Carbon

2024

7139

1,067

107

8460

2025

6211

928

93

16074

2026

5403

807

81

22960

2027

4701

702

70

29220

2028

4090

611

61

34944

2029

3558

532

53

40209

2030

3096

463

46

45083

2031

2693

402

40

49628

2032

2343

350

35

53893

2033

2038

305

30

57926

2034

1773

265

27

61765

2035

1543

231

23

65447

2036

1342

201

20

69001

2037

1168

175

17

72455

2038

1016

152

15

75833

2039

884

132

13

79155

2040

769

115

11

82441

2041

669

100

10

85707

2042

582

87

9

88968

2043

506

76

8

92237

2044

441

66

7

95527

2045

383

57

6

98847

2046

333

50

5

102207

2047

290

43

4

105617

2048

252

38

4

109085

2049

220

33

3

112618

2050

191

29

3

116223

 

 

Totals:

1,227

1,871,530

Table 4. Data table to support figure 3. 

 

Table 4 provides the numbers that are used in figure 3.