Are Carbon Offsets More Than Hot Air?

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by: Joel Makower

A new report that rates providers of retail carbon offsets is out today, and even the anticipation of its publication has caused a flurry of anxiety among some of the 30 companies it reviewed.

Seems that "carbon neutral" isn’t just the Word of the Year for 2006. It’s also shaping up to be the Debate of the Year for 2007.

The report (Download – PDF) — published by the nonprofit group Clean Air-Cool Planet (CACP) and sponsored by Clif Bar, Interface, Inc., and Stonyfield Farm — represents the first independent review of retail carbon offset providers ever undertaken, according to CACP executive director Adam Markham. The goal of the report, he says, is to encourage more transparency and quality across retail offset providers as a whole.

It’s about time. Over the past year, retail carbon offsets — purchased by individuals and businesses as a means of zeroing out the carbon emissions created by their various activities and purchases — have become big business. The International Emissions Trading Association and World Bank estimate that the market for carbon credits, of which offsets are a part, is now worth more than $21.5 billion, according to a new study by ICF International. Nearly everyone is going carbon neutral (a.k.a. "climate neutral") these days, from airlines to academia.

But what, exactly, are buyers buying? There are no standards for offsets, and more than a little disagreement on what constitutes a "quality" offset. As the stakes grow, with more companies entering the offsets arena, it’s time to ask some basic questions.

CACP set out do that. It hired veteran offsets expert Mark Trexler, president of Trexler Climate + Energy Services (TC+ES), to rate 30 companies on seven criteria, using a 1-10 scale. (Full disclosure: Trexler writes the Ask the Climate Expert column on, which I run.) The criteria included such things as how well buyers are able to evaluate offset quality, the providers’ transparency in explaining how they spend your money, how well the providers understood the technical aspects of offsets, the priority each assigned to educating consumers, and their use of third-party project protocols and certification.

This stuff gets geeky very quickly, so understanding even the evaluation criteria requires expert knowledge on a range of issues. One key question revolves around something called "additionality." Emissions reductions are "additional" if they would not have otherwise occurred — that is, if an emissions reduction is not "business as usual." But not everyone agrees on what that means, and it’s proven exceedingly difficult to create a standard measure of what’s "additional." And therein lies one of the controversies.

Many offset providers purchase renewable energy certificates, or RECs, which represent the environmental attributes of electricity from a renewable source — solar, wind, geothermal, etc. (I previously covered RECs here.) When a wind farm generates power, it creates two things: electrons, which it sells into the grid, and RECs, which can be traded on the open market. When you buy offsets from some of the offset companies Trexler looked at, you are essentially buying RECs.

But Trexler is among those who believe that RECs aren’t "additional" — that is, they are being generated regardless of whether anyone purchases them. To be a true offset, says Trexler, "You have to say that the money you’re spending is paying for something that wouldn’t otherwise happen."

CACP’s Markham proffered this explanation: "If anyone is going to claim carbon neutrality for their actions or their corporation’s actions, they need to be able to show that the reductions in greenhouse gas emissions occurred because of the market for offsets. In other words, if you’re just buying something from a renewable energy project that would have happened anyway, we don’t think that’s a very good cause for claiming carbon neutrality."

As I said, this stuff is far from simple. TC+ES’s report delves into some of the minutiae. But even Trexler, who’s been working in the field of carbon mitigation since 1991, confided to me that, "It took me a long time to get my head around it."

In the end, TC+ES concluded that eight offset providers could be deemed "top performing" (in alphabetical order): 

  • AgCert/Drive Green (Ireland)
  • AtmosFair (Germany)
  • Carbon Neutral Company (UK)
  • Climate Care (UK)
  • Climate Trust (US)
  • CO2 Balance (UK)
  • Native Energy (US)
  • Sustainable Travel/My Climate (US)  

    But all’s not well that ends there. Several of the providers, anticipating that they didn’t make the cut, have already begun challenging the report; one of them contacted me when he heard I had received an advance copy. In an e-mail, he charged that the report "could confuse the public and ultimately harm the continued development of the voluntary carbon offset market" and noted that the report may be "premature," given that two organizations currently are working on separate standards for offsets. He also cited the report’s "narrow view of the role of renewable energy certificates."

    "Efforts to develop the new standards are admirable," countered Trexler, adding that, "People have been trying to do this for a decade. It’s very different difficult to do. And it all comes down to additionality — it’s almost impossible to write an objective, easily interpreted way to address additionality. I have no confidence that that’s going to be addressed by these standards."

    There’s much more to it, but I’ll confess to finding my head spinning from spending several hours pondering all these matters. Clearly, if carbon offsets are to become a mass-market purchase, buying them needs to be a no-brainer — simple enough for the average Joe to comprehend yet rooted in solid, scientific ground. We’re not yet close to that ideal, as the CACP report shows. And that may confound this nascent market, potentially risking a backlash as consumers throw up their arms in frustration, figuring it’s all yet another marketing scam.

    "This whole process has been insane," sighs Trexler. "Instead of focusing on how to improve the market, we’re all just focusing on what does it mean for us, which is frustrating."

    For now, read the report and make your own choices. It may not be perfect, but it’s the best assessment yet of the growing field of offset providers, and CACP, TC+ES, and their sponsors deserve thanks for shedding light on this all-too-murky topic.

    Bottom line: You’ve got to ask good questions when buying offsets; the report suggests several questions to ask. Whether you’ll fully grok the answers, of course, is a whole ‘nother thing.

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