Carbon neutral, my ass Issue #36

The down-and-dirty truth on putting a Band-Aid on environmental woes

By Amy Westervelt
Published: June 1st, 2008 | 3:29pm

It’s time to call a spade a spade: carbon offsets are bullshit. Yeah, I said it. Sure, they were an OK stop-gap, a short-term way to get people thinking and (sort of) acting responsibly about their impact on the environment. I’d even go so far as to say that for individual consumers, offsets aren’t a terrible idea. For large multi-national corporations, though? No way.

To give you a little background, carbon offsets are part of what’s called the “voluntary carbon market.” Developed countries that have signed the Kyoto Protocol have instituted aggressive emissions requirements and carbon trading schemes. The basic premise of carbon trading is that the government allows each company a certain level of carbon emissions and those with emissions below the maximum may “sell” carbon credits to those who emit more than the maximum.

The U.S. did not sign the Kyoto Protocol, but greenhouse gas emissions and their environmental impact have nonetheless become increasingly worrisome to government officials, the public, and a number of companies. Consequently, a voluntary carbon market has emerged in the U.S. that includes both the organized Chicago Climate Exchange, which launched in 2003, and what is known as the “over-the-counter” market.

The Chicago Climate Exchange (CCX) is an organized, voluntary, legally binding greenhouse gas (GHG) market. CCX members have committed to reducing their emissions by 4% and 6% by 2006 and 2010 respectively, relative to their 1998–2002 average. Members can purchase allowances from other members or credits from approved offset activities in order to meet their reduction commitments.

The over-the-counter segment of the voluntary market, however, doesn’t have a regulated marketplace or standard. Customers in the over-the-counter markets are companies as well as individuals that want to reduce or offset their “carbon footprint.”

Although smaller than the compliance markets, according to Scott Settelmyer of TerraCarbon, a financial services firm focused on carbon markets, the voluntary carbon market is growing fast. In 2006, Settelmyer says, the worldwide voluntary market was estimated at 24 million tons valued at just less than $100 million, split roughly evenly between CCX and the over-the-counter market. A recent survey of market participants indicated that this market is expected to grow from 25 million tons to between 400 million and 1 billion tons by 2012, driven in large part by greater consumer awareness and desire to offset emissions.

“There’s a lot of activity in the voluntary carbon market among what people call corporate social responsibility or CSR buyers — companies that want to project a green image by offsetting emissions — but then you’ve also got a lot of growth being driven by businesses that are giving consumers the opportunity to offset emissions related with an event, a product, or a lifestyle,” Settelmyer says.

The over-the-counter market takes money from consumers or companies and funnels it into a variety of projects that contain methane from landfills or farms, build solar or wind projects, plant trees, or pay timber companies not to fell them, fund clean technology research, or, like LiveNeutral, buy offsets from the Chicago Climate Exchange.

The truth hurts
Planting a tree to soak up the CO2 you’re emitting is appealing in its simplicity, but unfortunately, it’s just not that straightforward. A tree has to survive for decades to offset an individual’s emissions, and what you pay for today is not likely to be a direct one for one swap. With other offset projects it’s even more difficult to track where your money is going and what direct impact your offset purchase has. In many cases the money you pay in, say, California, goes to an offset project on another continent where there may be unforeseen permitting or development issues.

It’s important to track where the money paid to offset companies goes because, in general, carbon offsets ain’t cheap. Washington-based research firm the Katoomba Group reports the average price of carbon in the voluntary market for 2006 was $4.10 per metric ton (2204.6 pounds) of CO2. Third-party offset company TerraPass charges individuals $39.60 to offset the emissions for a flight between New York and London — the equivalent of $32.50 per metric ton, or eight times as much. Companies such as TerraPass have to pay administrative and staff costs on top of the cost of forestry or renewable energy projects, and they take anywhere from a 10 to 30% profit to boot. Offset companies also have to build in a cushion to cover the renewable energy projects that don’t pan out.

While individuals often look to offsets to assuage carbon guilt, companies are increasingly throwing money into the offset market in order to make “carbon neutral” marketing claims. While it sounds good, it’s impossible for companies to be carbon neutral unless they actually generate all their own renewable energy, incorporate 100% of their waste back into their production processes, and transport all employees and goods in a 100% renewable way.

Carbon neutral claims associated with offsets have increasingly come under fire after a series of congressional hearings on carbon offsets in 2007. Following the hearings Rep. Edward J. Markey (D-Mass.), chairman of the House Select Committee on Energy Independence and Global Warming, called on the Federal Trade Commission (FTC) to review its “Green Marketing” guidelines ahead of its proposed review date in 2009. The guidelines govern marketing claims related to the environment. The FTC began reviewing its guidelines in a series of workshops, the first of which focused on the carbon offset market and claims of carbon neutrality. Environmental activists hope the FTC will eventually start cracking down on green marketing guidelines, limiting carbon claims to those who are really walking the walk. Any sort of regulation is an important step in the right direction, especially as California prepares to launch the first U.S.-based regulatory carbon trading market, followed shortly by numerous other states.

Carbon offsets aren’t inherently bad, it’s just that individuals and companies need to be more educated about what they are: a Band-Aid. Investing in renewable energy projects that won’t be actually built and producing energy for another year at best or planting trees that won’t be mature for five years is not the equivalent of just plain reducing your carbon emissions. And the more we allow people and companies to buy their way out of environmental responsibility, the harder it will be to get anyone to actually change.

If you must, buy responsibly
If you’re thinking about buying offsets, consider all the things you can do to reduce your impact — simple things like walking, biking, or taking the bus more; carpooling; unplugging your electronics when you’re not using them; recycling; composting; and so on. Then, if you still want to invest in a carbon-reduction project, make sure the company you purchase offsets from gives you solid information about concrete projects they are undertaking and has been audited by a reputable third party (KPMG, Rainforest Alliance, SCS Engineers, and the Center for Resource Solutions are all good bets). If you’re a consumer interested in evaluating the carbon neutral claims of a company, check out the Carbon Disclosure Project (cdproject.net), which posts detailed information about what companies are actually doing to reduce their carbon footprints.