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Reports

Flying Into Trouble

Where Are Carbon Offsets Taking Us?

graphic of a jet leaving a contrail that reads 'carbon footprint'Istockphoto.com

According to the carbon calculator I found online, a passenger on a round-trip airline flight from San Francisco to Seattle generates about one metric ton of CO2. Since my destination was the Green Festival, it seemed only right that I should try to resolve the irony of frying the atmosphere in order to attend the country’s biggest eco-conference by purchasing a carbon offset. But where to start? Which carbon offset should I buy? Which would be the most effective and trustworthy?

Naturally, I began with Google. I typed “buying carbon offsets” into the search engine and instantly received an array of options: carbonfund.org, fightglobalwarming.com, terrapass.com, and a consumer guide from treehugger.com. I eventually clicked on a page sponsored by the Center for a New American Dream, an organization whose work to reduce US consumption I know and trust.

The organization’s guide was helpful enough. The top recommendation for travel-related carbon offsets was the Better World Club, a kind of environmentally sensitive AAA that has been in business about 10 years. At that site, I entered my departure city and destination, clicked the “calculate” button, and was told that I could offset my air travel for $7.50. This seemed a reasonable price (about three percent of the flight cost), so I hit “neutralize now,” and was bounced to another Web site, that of LiveNeutral™, which offered to sell me a “FlyNeutral Certificate.” I submitted my credit card number, and a few days later received in the mail a piece of paper informing me that I had bought CO2 lot number CFI 99982-031808-06 on the Chicago Climate Exchange (CCX).

Excellent. But what exactly had I just spent my money on? How would my $7.50 and carbon serial number help to “neutralize” the greenhouse gases that are unsettling the planet’s atmosphere? Had I bought anything more than hot air?

The circuitous route I had to take to purchase a carbon offset is indicative of the confusion surrounding the burgeoning greenhouse gas market. The conversion of CO2 into a tradable product is arguably the creation of the first new bulk commodity since the harnessing of electricity, of which CO2 is the effluent. And like any nascent market, the carbon offset industry is experiencing sharp growing pains as it tries to figure out how best to fulfill the growing demand for mitigating greenhouse gas emissions.

According to a report by the financial forecasting firm Ecosystems Marketplace, in 2006, roughly $97 million of carbon was traded on the voluntary market – that is, markets outside of the Kyoto Protocol. That number could increase to as much as $4 billion by 2010. The carbon trading occurring through the Kyoto Protocol’s “Clean Development Mechanism” is even larger, worth close to $24 billion in 2007. As an environmental manager at Barclay’s Bank has described it, a “carbon gold rush” is underway.

Most of carbon offsetting is occurring between businesses, as large corporations in Europe seek to comply with the Kyoto Protocol, and US companies try to burnish their environmental images or get a head start on the mandatory emissions reductions that will likely come with any new presidential administration. The retail voluntary market, as industry insiders call it, is a relatively small portion of the overall carbon marketplace. This is the segment of the industry that caters to individuals, families, and small businesses, people who want to make up for the greenhouse gases their lifestyles release.

But while the retail market is small in dollar terms, it may be more important in political ones, for the shape of the retail carbon offset market will influence the way the public perceives the threat of climate change and possible responses to it. People’s opinions about carbon offsets will play a major role in determining how they think about confronting global warming.

With the stakes so high, it shouldn’t be surprising that carbon offsets have generated controversy. Proponents view offsets as a beneficial way of directing investment toward clean energy technologies. Critics argue that offsets are, at best, a waste of pocket change, and, at worst, a dangerous distraction from the larger political and cultural changes that they say are necessary to avoid climate chaos.

The passions surrounding carbon offsets were on display in April when student activists, as part of an international “Fossil Fools Day” of demonstrations, held a protest outside the Portland, OR offices of the Climate Trust, a firm involved in offsetting. The student protesters said the Trust’s offsetting investments are nothing more than “greenwashing.”

Caught in the middle of the debate are millions of Americans who are committed to ecological sustainability, but are stuck between curiosity and concern, eager to do something to reduce climate emissions, but worried that the “something” may be worthless.

“The only benefit that can occur from carbon offsets is the acceleration of a transition to a low-carbon economy, and if the money isn’t going to accelerate that transition, it’s not accomplishing anything of value,” says Joseph Romm, a fellow at the Center for American Progress who writes the blog climateprogress.org. “I just don’t think people are accomplishing what they think they are accomplishing. … Most offsets are like trying to save the Arctic by getting people to collect their leftover ice cubes and ship them up north.”

Curious to learn what I had received for my $7.50, I visited LiveNeutral to talk about their products. The group’s office is in the heart of San Francisco’s Mission District, in the aging US Bank building, where the elevator started with a stutter before depositing me on the fourth floor. A scuffed and faded green carpet ran the length of a narrow hallway. At the LiveNeutral door, I was greeted by Jenna Carl, the organization’s young executive director and only full-time employee. The organization’s offices were sparse. A few bright promotional posters rested on tripods, but otherwise the walls were blank. Carl’s desk was completely bare except for a computer and a pile of business cards.

LiveNeutral, Carl told me, was founded in 2005 by a group of graduate students from the Presidio School of Management, which runs a “sustainable MBA” program. Since then, the non-profit organization has worked with corporations such as Williams-Sonoma, Dupont, and American Electric Power, a major utility, to create education campaigns to raise employees’ awareness about climate change. The group has also created customized carbon calculators for some of its corporate clients. Each month, LiveNeutral sells between 50 and 100 offsets to retail customers; the most common are “drive neutral” credits, with airline offsets coming in close behind.

So what exactly had I purchased when I bought a carbon offset through LiveNeutral?

“The way our carbon reduction credits work is through the Chicago Climate Exchange, which is the only cap and trade carbon market in the US,” Carl says. “You’re taking one ton of emissions off the market – you’re retiring that credit – and you’re making it more expensive to pollute because you’re reducing the supply [of marketable carbon].”

Launched in 2003 by financier Richard Sandor, the CCX is a greenhouse gas market involving more than 100 businesses, government agencies, and financial institutions. Some of the corporate members – Ford Motor Co., Bayer, and Smithfield Foods, for example – have committed to reducing their greenhouse gas emissions six percent below their baseline number by 2010. Other exchange members are companies involved in projects – whether capturing methane from dairy cattle or building windmills – that are either reducing the amount of climate-changing gases released in the atmosphere or creating alternatives to carbon-intensive energy. Companies or governments hoping to reduce emissions can buy “carbon credits” from the enterprises that are actually doing so.

“You have to have a baseline,” Carl says. “And this is the only organization that does that. And their calculations are pretty conservative, to make sure there’s no over-counting. … No one else does it as well.”

Other people aren’t so sure. LiveNeutral’s reliance on the CCX reveals one of the complications of carbon offsets that critics often complain about. Specifically, the exchange’s model apparently fails to meet the test of “additionality.” That is, does the money exchanged through the CCX lead to carbon reductions additional to what is already occurring? Or are they improvements that would have happened regardless of the new capital entering the market? For a carbon offset to be truly meaningful, it should be funding projects that go above and beyond existing efforts, and, in the process, help spur the transition to a clean energy economy.

“The problem with the CCX is that they have no meaningful additionality,” Romm says. “I don’t know if they really understand additionality, but I do know that they don’t really care about additionality. Does the money go to good projects? Yes. Does the money bring about those projects? The answer is almost certainly ‘no.’”

The failure to meet the additionality test has led to some of the best-known embarrassments involving carbon offsets. A March 2007 investigation by BusinessWeek found that the carbon offsets issued by the company TerraPass for the 2007 Oscars were for an Arkansas methane capture project that had already been in the works for six years. And a January 2008 Washington Post story revealed that the $89,000 the US House of Representatives spent on carbon reduction credits through the CCX were for projects that had been underway for at least a year before the money arrived. Such experiences help explain why the National Resources Defense Council and many of the state PIRGs have urged local governments not to participate in the CCX.

Beyond the challenge of guaranteeing additionality, some offsets critics say, lies another problem: pricing. A system like that of the CCX may make carbon more expensive, but that doesn’t necessarily mean it will reduce the overall amount of greenhouse gases as long as people are willing to pay to pollute.

“I’m completely for the market; I’m a market kind of guy,” says Peter Barnes, a co-founder of Working Assets and the author of the recent book, Climate Solutions. “But the market cannot do what it needs to do unless the government puts a cap on the fuel supply. We need to crank down that valve. We need to physically limit the supply of fossil fuels. Otherwise, we could have higher prices and more emissions.”

As Barnes sees it, buying an offset as a way to address the emissions from an airline trip is nothing more than a “nice token.” It is, he says, a reaction to climate change, not a solution, especially since there is no way the buyer can actually pull their carbon out of the atmosphere.

“I think, philosophically, offsets is a very misleading word,” Romm says. “As is ‘carbon neutral,’ which I also have opposed. You can’t really neutralize carbon emissions. Once you burn fossil fuels, a substantial percentage of the CO2 stays in the atmosphere. You can’t unring the bell.”

In an effort to address these concerns and ensure that offsets are, in fact, fostering to a transition to a clean energy economy, groups of entrepreneurs and NGOs are rushing to put new standards in place that ensure additionality, establish transparency, and provide retail customers with a guarantee that they are buying something worthwhile.

“The problem in the marketplace is that consumers don’t know what they’re buying,” says Lars Kvale of the non-profit Center for Resource Solutions. “This is a commodity you can’t see, feel, or taste. It’s not like a TV, which you know you have in your living room. … We want to make sure there are consumer protections in place, so that people know what they are buying.”

In March, Kvale’s organization launched what it calls the Green-e Climate, an independent verification system based on an earlier program the group created to monitor renewable energy products. The Green-e Climate-certified projects rely on strict standards for additionality. The offset programs have to prove they were started after a certain date, that they were not mandated by any government laws, that they are using cutting edge technology, and that they are relying, to some degree, on a fresh infusion of capital.

One of the first businesses to be Green-e Climate-certified is a company called 3 Degrees, which works with 250 corporations – as well as individual retail customers – to fund clean energy projects. A methane capture system at a Brazilian hog farm and an array of windmills in the Indian state of Andhra Pradesh are among the 3 Degrees projects that have already been certified. Gabe Petlin, the director of regulatory affairs and carbon markets for 3 Degrees, says that the Green-e certification is crucial toward providing his customers with assurances that their money is well spent.

“Often what gets criticized are the products that aren’t being certified and don’t meet a standard,” Petlin says. “Our philosophy is to provide customers with independent, third-party verification that they are getting what they pay for.”

3 Degrees charges $17 for a ton of carbon purchased from their Web site – more than twice the LiveNeutral price. A ton of carbon costs $9.90 if purchased from TerraPass, one of the more popular retail offsets companies. The Nature Conservancy charges $20/ton to pay for reforestation projects in the Mississippi Delta. Why the big range in price if what you are buying is essentially the same amount of greenhouse gases? The difference comes down to piece of mind. What you’re paying for is the guarantee that your dollars will help underwrite emissions reductions that are permanent, verifiable, and additional. It’s not unlike purchasing fair trade coffee, where some of what you are paying for is the certification costs of ensuring that the farmers were paid a living wage for their harvest.

“If you want cheap tons, they are out there,” Petlin says. “But whether they come with a guarantee of additionality and certification, you have to be the judge of that.”

Petlin and Kvale are careful to say that purchasing an offset should only be something you do after you’ve taken steps to reduce your carbon footprint. First, they say, you should make your home as energy efficient as possible. Second, you should purchase electricity that is certified to come from renewable sources. Only then should you look toward carbon offsets.

“If you have to fly for business, or your job requires you to commute, you are going to have some emissions that are unavoidable,” Petlin says. “If you truly want to be carbon neutral, offset the rest.”

As Petlin points out, for many people airline flights are the carbon emission hardest to avoid. Unlike home energy use (in which you can switch to compact fluorescent bulbs and energy efficient appliances) and daily transportation (in which you can walk, bike, or take the bus), there are no obvious environmentally sound alternatives to jet travel. The dilemma will likely only get worse. The amount of jet travel is expected to double in the next 10 years, and airplanes already account for about 3.5 percent of global greenhouse emissions, according to the Intergovernmental Panel on Climate Change.

“For some people, a certain amount of air travel is required,” Kvale says. “And buying offsets is better than not buying offsets.”

Critics remain unconvinced. Kevin Smith, a London-based researcher with the Transnational Institute, says the problem with offsets goes beyond the accounting details of additionality. As Smith sees it, offsets are dangerous because they promote an unrealistic view of what is required to address the threat of global climate change.

“The offsets companies have an emphasis on individual response, the discourse of lifestyles and lightbulbs,” Smith says. “The big problem is individualizing the responsibility for taking action on climate change. It’s transforming people’s concerns into another commodity. … We are going to have to have a societal shift to make a transition to a low carbon society and culture.”

Peter Barnes agrees: “The reality is that we can’t keep doing what we’re doing, and it’s going to cost a lot of money to solve the problem.”

Oddly enough, those criticisms echo some of the justifications for offsets. According to Jenna Carl of LiveNeutral, it’s precisely because individual actions are insufficient that carbon offsets are necessary. She argues that only a large pool of new money – much of it donated by individuals through their offsets – will be able to shift the energy markets in time to forestall catastrophic climate change.

“You can’t change people’s lives and lifestyles efficiently,” Carl says. “But you can help fund the big changes.”

This apparent contradiction – different conclusions arrived at from similar arguments – reveals that the question of whether or not to offset comes down to a values debate. The offset discussion raises the unresolvable tension inherent in any progressive movement – the clash between the instinct for revolution and the arguments for reform. Do we need to wholly transform the ways in which we live in order to avert climate chaos? Or is it enough to tinker around the edges?

And, even if everyone agrees that a sweeping transformation is necessary, do offsets hasten it by boosting beneficial investment, or distract from it by directing personal energy away from the political system? Ultimately, it’s hard not to see offsets as a compromise, a way of reconciling the way the world is with the way we might want it to be.

“It’s just impossible for people to change the structures and systems we’re living in in time to avoid hitting the wall,” Carl says. “It’s more efficient to fund these big projects than to completely abandon our way of living.”

She may be right. I guess I could have taken Amtrak to the Green Festival and spent a lovely few days gazing at the scenery as I made my way up the Pacific Coast. But our relentlessly fast-paced society rarely allows the room for such leisurely pursuits. In the carbon versus time equation, two hours seemed a smarter way to travel than did two days.

I suppose that, yes, by purchasing a ton of carbon I had made the privilege to pollute slightly more expensive. But looking down from the airplane and thinking about the steady acidification of the oceans, the collapsing salmon runs, and the persistently odd weather, the gesture seemed futile. Drink in hand, I couldn’t help feeling that many people will happily pay the small price of a carbon offset as long as they can keep their comfortable spot at the window seat.

Jason Mark is the editor of Earth Island Journal and the co-author of Building the Green Economy: Success Stories from the Grassroots (PoliPointPress).

   

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