Random Nature #103
Buying a Stairway to Heaven: Purchasing carbon offsets is becoming an increasingly popular way for businesses, organizations, and individuals to reduce their carbon footprint--the global warming emissions for which they are responsible. Many buy these offsets for altruistic reasons. So why is the song title sometimes attached to this type of purchase? Well for instance if you drive a Hummer and feel a bit guilty about it, just buy some carbon offsets rather than changing your lifestyle.
There are a number of organizations--mostly non-profits--selling various types of carbon offsets, both retail and wholesale. And, that's not counting the products that are packaged with carbon credits to make them carbon neutral (like airline tickets and the carbon-free shipping of packages).
Carbon Offsets: From Wikipedia...
A carbon offset zeros out (offsets) all or part of the carbon dioxide emissions of a party, by reducing the emissions--or increasing the carbon dioxide absorption--of another party. This reduces net greenhouse gas emissions with the aim of combating global warming. Effectively offsetting the emissions of an activity makes that activity "carbon neutral".
My only nit with this definition is that one's carbon footprint isn't just restricted to carbon dioxide. For instance, our bodies naturally produce some methane, and it's also common in things like food waste. Methane is a global warming gas whose molecule contains carbon (CH4). Note though that in many instances, greenhouse gas emissions are referred to in carbon dioxide equivalents to avoid the confusion of multiple categories of gases.
A Virtual Asset: When you buy the typical carbon offset, you don't gain ownership of anything (other than some sort of proof of purchase--certificate, magnet, etc.). You're donating money to others, who do the following types of things with it.
- Pay for the construction of wind farm. This makes wind energy more affordable, helping to reduce (or prevent the increase of) the use of fossil fuels. Of course, by not directly investing in the wind farm yourself (or buying stock in a firm which builds and manages them), you lose any shot at the potential profits.
- Pay for the planting of trees that will grow and absorb carbon dioxide for the time contracted. Some plan to allow the plantations to mature into old growth, while others prefer to develop tree farms to prevent the cutting of existing old growth. There's profit potential in the latter.
- Purchase tradable offsets generated by a feedlot implementing methane collection and destruction. The owner might not make the investment--either continuing to operate as is or closing--if not for others buying the offsets. The new owners gain the right to pollute in the amount purchased. Buying the offsets helps such investments pay off, and retiring those offsets ensures that they aren't available for others to use.
- Buy carbon allowances from an exchange and then retire them. Consider though that EU nations issued an excess of credits when establishing their cap-and-trade system (the emissions trading scheme...previous blogs here and here). The reductions that the EU proposed and trumpeted yesterday (for only a partial list of EU nations) won't soak up all of that excess. That's why the price of an allowance dropped upon the news. Retiring an allowance when there's an excess doesn't accomplish much for the environment...though the purchasing of carbon offsets does help dry up the excess.
And this brings us to the Chicago Climate Exchange. If the U.S. enacts emission limits and goes to a cap-and-trade system, this system could become its foundation. From this link:
Hundreds of corporations, organizations, states, counties and cities have signed legally binding agreements promising to limit their emissions by 2010. Thus, they've created a voluntary cap and trade system that functions the same way a government regulation would.
The Chicago Climate Exchange, or CCX, is regulated by the NASD, the world's largest private body that regulates financial services. Polluters, clean-energy companies and everyone in between can trade carbon offsets and allowances similar to stocks in the stock market.
King County is a member of the CCX, meaning that it has promised to reduce emissions by 6 percent by 2010. If it does, it can sell credits. If it doesn't, it will have to buy allowances. The city of Seattle has not signed on.
Buying such credits is rather speculative at the moment...phase one (a 4 percent emission reduction below the original baseline, 1998-2001), closes out next month. Thus, it's difficult to assess whether buying a credit will help drive a pollution reduction.
There are many other examples. But the point is that there are lots of choices when it comes to spending money on carbon offsets. Some of those choices are better than others, and some are simply value judgments. And sadly, a number of the organizations selling carbon offsets could use to be more transparent. It's often hard to tell what you're actually buying and what percentage of your money instead goes towards overhead, profit, etc. Carbon offsets are relatively new and subject to little oversight and standardization (though that's changing)...so buyer-beware is certainly in order.
To be Continued: Next week I'll give an overview of a number of the organizations selling carbon offsets (here).



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