[Analysis] The Low-Carbon Label: How It Could Be a Game-Changer

On November 29, 2018, the decree announcing the creation of the Low-Carbon Label was published. Officially launched at the Ministry of Ecological and Solidarity Transition during a public event on April 23, 2019, it is described in detail on the websites ofI4CE or the MTES. Nevertheless, many questions remain unanswered at this stage. Carbone 4 offers its perspective.

What exactly is the Low-Carbon Label (LBC)? This is a new framework that makes it possible to quantify and certify greenhouse gas emission reduction and carbon sequestration projects taking place in France, and to generate economic value from them.

What’s new about the Low-Carbon Label (LBC)?

Before the creation of the LBC, Joint Implementation (JI) was used to certify emissions reductions that took place on French territory. Along with the Clean Development Mechanism (CDM), the MOC was one of two carbon offset mechanisms established under the Kyoto Protocol. France benefited significantly from this through so-called “domestic” projects, with no fewer than 9.6 million metric tons certified across some twenty projects, using 16 recognized methodologies. The methodologies for flagship and innovative projects such as Eco-Méthane (led by Bleu-Blanc-Cœur) and Compte CO2 were then approved by the UNFCCC, and the MTES compensated project developers by converting unused emission allowances into carbon credits. Since 2012, no framework has taken its place, despite growing demand for local carbon offsets. The LBC is therefore reintroducing a framework that lends robustness and credibility to the emissions reductions achieved in France. A framework that will necessarily have to align with the future rules under Article 6 of the Paris Agreement, which will be adopted at COP25 in Chile. What are the specific features of the Low-Carbon Label?

• Cheaper: "Low-carbon project" certification is more accessible than any other form of international certification.
• Faster: The Directorate General for Energy and Climate (DGEC) has taken steps to limit the waiting time associated with the approval of methods or projects (a two-month review period for a project).
• Simpler: if emissions reductions are diffuse—that is, difficult to monitor or imprecise—or if the project sponsor cannot afford an annual audit, the project sponsor may still certify its emissions by applying a discount to the quantity of credits issued.
• More transparent: By banning the secondary market and promoting short supply chains, the Low-Carbon Label takes a stand against the proliferation of intermediaries and the lack of transparency that characterizes international carbon credit transactions.

Can a company that is already environmentally responsible qualify for the certification?

The low-carbon label certifies changes in practices and is not intended to reward the business as usual, no matter how low-carbon and environmentally sound it may be. This is known as the principle of additionality. The LBC is designed to promote emissions reductions at the source and a net increase in carbon sinks by triggering new projects, and thereby contribute to achieving France’s goal of carbon neutrality by 2050.

What are the approved methods and those currently under development?

To date, three methods in the forestry sector have been validated and are available on the ministry’s website: reforestation, restoration of degraded forests, and selective cutting (i.e., converting coppice forests into high forests through thinning). Other sector-specific methods are currently being developed in fields as diverse as agriculture, the circular economy, construction, and wetlands. These include both carbon sequestration projects and emissions reduction projects. Carbone 4 is proud to be currently supporting several of its clients in the development of these methods.

Where and when can I get LBC loans?

Projects resulting from the three forest-based methods could be approved as early as the end of the year, but it is quite possible that the associated emission reductions are already “reserved” for stakeholders already involved in the project. For now, only the Ministry is responsible for promoting and coordinating the projects. At what price are certified low-carbon emission reductions sold? As with international carbon credits, it all depends on the project developer and the buyer’s willingness! Because we have the human, technical, and financial resources, it is more difficult to achieve emissions reductions within France. Since projects often require more investment than in a developing country, the price of emission reductions is higher as a result. For example, the cost of reforestation in France ranges from 2,500 to 3,000 € per hectare, depending on local government subsidies and the tree species planted; the cost per metric ton sequestered therefore ranges from €50/tCO₂ to €150/tCO₂

What role does Carbone 4 play?

Carbone 4 is a leader in the development of methodologies and reporting for greenhouse gas emissions, reductions, and avoidance. As part of the Low Carbon Label initiative, Carbone 4 assists several partners in defining and submitting methodologies to the DGEC. In addition, since early 2018, Carbone 4 has been supporting the La Rochelle region in implementing the first local carbon cooperative. These future low-carbon project aggregators are mechanisms that facilitate:

• access to carbon certification for project developers,
• citizens’ contribution to their region’s carbon neutrality by directly participating in emission reduction projects and/or purchasing local emission reduction credits;
• the emergence of new methodologies and projects in the region.

This new label therefore provides a new framework to promote the development of robust and additional French carbon reduction and sequestration projects. Furthermore, by limiting the number of intermediaries, the trading of credits will promote short supply chains and maximize revenue for project developers. Carbone 4 welcomes its creation and will contribute to its development in several ways:

• by assessing the emissions reduced or sequestered by low-carbon projects;
• by defining new sector-specific methods;
• by recommending platforms that aggregate regional projects;
• by enabling companies that will use the framework Net Zero Initiative for projects currently under construction, and more broadly for all organizations with low-carbon strategies, to have new tools for implementing an ambitious carbon-neutrality goal.