The increasing concentration of carbon dioxide in the air and its part in global climate change have motivated individuals and corporations to consider ways to reduce the amount of it. As a solution, the notion of carbon emissions trading—also known as carbon offsets—came into being and was approved by elected officials. This approach allows people and companies to purchase permission to pollute. It is part of a “cap and trade” system, whereby a certain amount of pollution is deemed allowable, and, within that allowable limit (or cap), it is possible to buy credits. This is intended to prevent or at least curb or delay increases in carbon monoxide emissions from vehicles, for example. Do such offsets work? Or is the system flawed?
I. What Are Carbon Offsets and How Do They Work?
II. Emerging Questions
III. Not Enough Regulation to Be Reliable?
What Are Carbon Offsets and How Do They Work?
Carbon offsets are a financial instrument intended to reduce greenhouse gas emissions. They typically are used in the form of investment in a project, such as wind farms, biodiesel plants, or hydroelectric dams or systems for destroying landfill methane, industrial pollutants, and agricultural by-products. Some of the most popular carbon offset projects from a corporate perspective are energy efficiency and wind turbine projects.
Sanctioned by the Kyoto Protocol, the system is a way for governments and private companies to earn carbon credits that can be traded. That means companies will receive a certain amount of credits, allowing them to run their businesses and pollute a certain amount. If their business needs more than the allotted amount, they may purchase emissions credits from a company that does not need as much as its allotment. Therefore one company may sell to another or purchase from another for an unregulated price, creating market competition for pollution credits. This economic stimulation is provided for in the Clean Development Mechanism (CDM) written into the protocol. Organizations unable to meet their emissions quota can offset (supplement) their quotas by buying CDM-approved Certified Emissions Reductions.
The CDM exists to ensure that projects produce authentic benefits. It validates and measures projects to make sure that they involve genuinely “additional” activities, which would not otherwise have been undertaken.
Carbon offsets extended to the level of individual air travelers when companies specializing in brokering emissions trades reached out to them, asking if they might want to pay for their share of the carbon dioxide on a particular flight. Airplane emissions are substantial. Besides fuels and lubricants, airports use wing deicers and other toxic solvents. With acres of paving, the runoff of these pollutants usually affects local water supplies unless treated. The money paid is supposed to go to an activity that uses carbon dioxide to offset the carbon dioxide emitted on the flight, such as tree plantings. Some have estimated that the carbon offset market could be as high as $100 million.
U.S. businesses have also been buying carbon dioxide offsets in order to engage in international business. The Kyoto Protocol set global caps on emissions of greenhouse gases like carbon dioxide. Many nations have devoted substantial resources for many years to the Kyoto process, as did international bodies like the United Nations and the Union of Concerned Scientists. National and international environmental groups, along with community groups and labor unions, all also devoted considerable resources to this process. There is an international movement of cities that sign on with the Kyoto Protocols, including many of the major U.S. cities. U.S. businesses feel strong pressure to reduce the emission of greenhouse gases in order to continue international business transactions, where higher standards are required.
There are still some questions about how carbon dioxide emissions are calculated. Although the emissions estimates for most major activities are known, one significant issue concerns how the money for carbon offsets is spent. There is no well-defined offset protocol or policy. If the money goes to develop alternative renewable energy sources like wind and solar power, is the carbon dioxide from the petrochemicals that would have otherwise been used offset? Does it make a difference if the companies assisted make a profit, are nonprofit, or are state operated? Another gray area is home weatherization to save energy costs as a carbon offset. Does it make a difference to an offset program if a single homeowner is benefited? The argument for it counting as a carbon offset is that decreased energy use through conservation measures reduces carbon dioxide emissions by lowering consumption of pollution-causing energy sources. These differences can easily become the basis of public controversy.
Not Enough Regulation to Be Reliable?
The biggest upcoming battleground in this controversy is whether government regulation will help,. There are big differences in program costs and projects. There is a private, nonprofit effort to create a Green-E certification requiring the carbon offsets to meet a prescribed standard. Consumers want their carbon trades to truly reduce the amount of carbon dioxide emitted into the air, but that is not what they often get. There are also concerns that without regulation some offsets may be sold many times or go to projects that occur anyway.
Two powerhouse investigative reporting teams—the Christian Science Monitor and the New England Center for Investigative Reporting—have turned up evidence showing the system to be an unreliable form of environmental protection. In April 2010 the Christian Science Monitor online reported that individuals and businesses feeding a $700-million global market in carbon offset trading typically are buying vague promises instead of the greenhouse gas reductions they expect.
The team described the system as a scam or con game, one of whose effects was that people and companies were paying for projects that would have been carried out anyway. Their purchases fed middlemen and promoters “seeking profits from green schemes that range from selling protection for existing trees to the promise of planting new ones that never thrive. In some cases, the offsets have consequences that their purchasers never foresaw, such as erecting windmills that force poor people off their farms.”
Discoveries made by the investigative reporters showed that carbon offsets are the environmental equivalent of financial derivatives in the banking industry: complex, unregulated, unchecked and, in many cases, not worth their price. And often, the reporters said, those who received “green credits” (among them the Vatican) thinking that their own carbon emissions had been offset, were fooled.
Carbon offsets grew out of ideals to do the right thing to mitigate air pollution. Some feared that the system would attract graft, and their fears seem to have been justified. Others believed the system would favor big polluters, allowing them to pay for the privilege of degrading the environment and contributing to global warming. There is some evidence of that. On the other side of the controversy are those who feel that the criticisms of the carbon offset market are infl ated. But no matter what side you are on, the system bears serious scrutiny.
Robert William Collin and Debra Ann Schwartz
- Bass, Stephen, and D. B. Barry Dalal-Clayton, Sustainable Development Strategies: A Resource Book. London: James and James/Earthscan, 2002.
- Bayon, Ricardo, Amanda Hawn, and Katherine Hamilton, Voluntary Carbon Markets: An International Business Guide to What They Are and How They Work. London: James and James/Earthscan, 2007.
- Follett, Ronald F., and John M. Kimble, The Potential of U.S. Grazing Lands to Sequester Carbon and Mitigate the Greenhouse Effect. Boca Raton, FL: CRC Press, 2000.
- Smith, Kevin, The Carbon Neutral Myth: Offset Indulgences for Your Climate Sins. Amsterdam: Transnational Institute, 2007.
- Struck, Doug, “Buying Carbon Offsets May Ease Eco-Guilt but not Global Warming.” April 20, 2010. http://www.csmonitor.com/Environment/2010/0420/Buying-carbon-offsets-may-ease-eco-guilt-but-not-global-warming