Are Carbon Offsets the New Snake Oil?
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Loading ...** Note: I updated the post based on feedback I received from Peter at STI. Thanks to Peter for helping to clarify some of the inaccuracies. Additions are noted in green.
I was contacted recently by a client who wanted to integrate a carbon offsetting program into the checkout process of their travel booking engine. They had been recommended to partner with a company (who shall remain nameless) who sells Carbon Offsets. Upon further investigation, I learned some very important information about Carbon Offset schemes. In response to the request from my client, I contacted Peter Krahenbuhl, President of Sustainable Travel International about how he and STI have been dealing with the onslaught of Carbon Offsetting companies that have sprouted up ever since Al Gore’s “An Inconvenient Truth” came out. STI is a non-profit organizations whose primary mandate is to promote responsible travel and ecotourism, support sustainable development, and help travelers and travel providers protect the cultures and environments they visit. Here is a quick summary of what I have learned so far:
1. There are no regulatory bodies that govern the sales of Carbon Offsets in the US. In essence this means that ANYONE can sell carbon offset credits. There is no licensing required, no associations to join, no rules to follow, and no laws to which the organizations are accountable. Countries that have adopted the Kyoto Protocol have to follow certain standards such as CDM.
2. There is a lot of profit to be made in the sales of Carbon Offset Credits. One company I found claimed to plant a tree for every $20.00 credit that it sold. I found a PDF document online which lays out the metrics used in most carbon offset calculators. According to Carbon Zero, the cost of planting and maintaining a tree is $2.00. Do the math and that results in a 90% gross profit. Peter does point out that this is a little misleading because there are operational and other costs that come into play that reduce the profit, however, that is why I say “gross profit” and not “net profit”. Under the Gold Standard, for example, the requirement is that 80% of the funds collected from the sales of Carbon Offsets must go directly to the projects for which the funds are being collected. In a marketplace where a company doesn’t even have to prove that they have planted any trees or show any kind of accountability for funds, this is a very attractive business model.
3. The Carbon Offset market is driven by guilt. The Carbon offset market is driven by societal guilt over climate change. The fact that many of the organizations that sell Carbon offsets are for-profit companies, should be the first indication that there is something wrong. Would you donate money to an organization who supports children in the Third World if the company was a for profit corporation? Probably not. Why? Because for one thing, the primary mandate of a for profit corporation is to build value and returns for it’s shareholders. This means reducing costs and watching the bottom line. Only in this case, the bottom line is the very programs that are supposed to be getting the funds. Do you see the dilemma here?
Peter brought up a very good point in his response to me saying that organizations are taking sincere steps to reduce their impact and that by them investing in local projects and initiatives, they are helping to shift the marketplace. By shifting the marketplace, the desire to offset becomes less about guilt and more about being the right thing to do for one’s community and society at large. Peter also raised the point that being for-profit isn’t necessarily the issue, but being transparent and being accountable are the keys. There should be nothing wrong with being a for-profit company and being paid to do the right thing as long as consumers know how much of the money the company is keeping and what they are doing with it.
4. The consuming public is relatively ignorant. Most consumers don’t understand that when they are asked to offset their carbon emissions, they are paying for various alternative energy projects around the World. One company uses slick radio ads that proclaim that you can offset your vehicle emissions for a year and live guilt free. They even call it a “Pass” and recommend you buy them for your friends. Very nice, there is nothing quite like promoting the idea that if you buy a “Pass” you can keep driving your gas guzzling vehicle all year with no guilt. The problem, again, is that when one reviews the projects they support, there is only a cursory summary of the project and no accountability for how much money is spent on the projects.
Peter noted to me that he recommends organizations first look at solutions to reducing emissions like changing their light bulbs or using hybrid cars and then going to offsets as a secondary measure for the emissions that are left over. I think this is a hugely important point because at the end of the day, we are not going to be able to buy ourselves out of the problem.
5. All hail CO2 sequestering. CO2 sequestering is a fancy term for CO2 absorption. The most popular CO2 sequesters are trees and they are, by far, the most popular basis for the for-profit carbon offset programs. Why? Because trees are relatively cheap and they don’t require any follow-up. An organization that is truly interested in reducing green house gases would be working on finding ways to reduce actual emissions rather then simply giving consumers a way to relieve their CO2 guilt.
In a subsequent post I will post some excerpts from the email that I received from Peter. I think you will agree that there is much more to the Carbon Offsetting discussion than many organizations are letting on. In the meantime, I recommend you review http://www.carbonoffsets.org, STI’s educational site about what Carbon Offsetting is all about and how to determine if a program is legitimate or not.
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Written by Stephen Joyce · Tags rants, Sustainability · Filed Under Sustainability ·
** This is a response from Scott McGregor at Search Intelligence http://www.searchintelligence.com regarding the post that was sent via email. He has asked me to post the comment on his behalf.
Stephen - great post on this new emerging marketplace and some of the really serious concerns around it. I was recently engaged to provide some market research into this industry and I had the opportunity to dig into the industry and learn some things of interest I would like to share.
The carbon credit industry is not entirely unregulated, but it is certainly under-regulated and there are significant concerns about the monitoring of the ‘personal’ carbon offset sales. You were bang on in noting that consumer confusion is rampant and perhaps because of this we can expect that national governments will step into this ‘void’ soon to protect consumers (In fact, the UK is already investigating the ‘carbon cowboys’ http://www.guardian.co.uk/travel/2007/jan/21/green.escape ). But with the market still in its infancy we know from experience it may need to develop some critical mass before governments are prodded into action.
In fairness, it should be noted that the issuing of Carbon Credits (under the Clean Development Mechanism (CDM) vis a vis the Kyoto Protocol) is supervised and under the guidance of the United Nations Framework Convention on Climate Change (UNFCCC). When a project seeks to obtain credits it must be validated by a third party agency to ensure the project results in real, measurable, and long-term emission reductions. The Kyoto Protocol created an ‘economic incentive’ for the creation and trading of carbon credits and , since these carbon credits are tradable instruments with a transparent price, financial investors can buy them on several ‘markets’ ($60 billion worth was traded in 2007). Of course with this kind of activity there is much criticism from all sides.
Nevertheless, I think it is important to make a clear distinction between purchasing carbon credits (or offsets) and making charitable donations to environmental causes. Certainly a non-profit organization makes a lot of sense for being the beneficiary of a donation to support ‘green’ causes such as alternative energy production or other projects. I don’t think anyone can suggest otherwise - and of course we all should make personal decisions to reduce our carbon footprints and support organizations that bring about global awareness and facilitate change.
However if a consumer is unable (or unwilling) to not take a flight -or drive a car- and decides to reduce that ‘carbon guilt’ by offsetting the emission from a particular activity (such as a specific vacation/flight or driving a car for a year) they may go somewhere online and use a ‘carbon calculator’. They discover they are generating X amount of carbon dioxide and are prompted to purchase carbon credits to offset this amount. Before they plunk down that credit card they should do some research…
Do you know the current market price for a ‘ton’ of CO2 offsets? How it was calculated (that’s a very tricky subject)? are you buying “green tags’ or REC’s? Finally, do the due diligence on the organization to make sure it has clearly stated where that money goes (and lists and accreditations and certifications in place).
But to be clear, in this case, the consumer is really buying an ‘eco-commodity’ through an intermediary and NOT making a charitable donation. It’s similar to when you buy an Ethical ‘Green’ Fund - do you also have to buy it from a non-profit brokerage house (if there is such a thing)? I don’t think that’s the point - the purchase of the credit is for a specific activity and it is not a charitable donation per se. It is not a ” here is my $20 donation - do what you think is best … “. It is linked to purchasing a specific commodity amount through an intermediary - whether that intermediary is a non-profit or not - that is buying and selling a unit on your behalf and the true impact value of your money lies in their profit margin or mark-up and quality of the projects they support. I saw no evidence that non-profit agencies were selling carbon credits ‘at cost’ in my research and in fact some of them are on the high-end of the pricing grid.
Certainly, we need to donate to charities (and non-profits) that support the causes we believe in, but if you decide to purchase carbon credits to offset an activity you are doing (that flight to Jamaica say) purchase carbon credits from someone who is legitimately putting that money to work for real projects that meet all the standards of the CDM/JI (such as ‘additionality’). Whether they happen to be a non-profit (with its own requisite overhead and expenses) or a corporate entity, the same rule should apply - is all your money going where you expected it to go?
Hi Scott,
That is a great response and the kind of passion I was hoping to elicit from readers. I don’t claim to know everything about the Carbon Offset market but what I do know is that perception is reality in the eyes of the consumers. The companies that I found on-line and that I commented about are only a few of the hundreds of companies that are new in this market.
My concern has less to do with industry as a whole and more to do with how travel marketers (you being one as well) choose to partner with these organizations. Many organizations simply don’t have the savvy to determine whether a Carbon offset provider is legitimate or not. I’m hoping that we, as the facilitators, can provide them with the information they need to make those choices.
As an extra note… I chose not mention the names of any of the companies I visited because I don’t think it is fair to point them out. I would hope that if they recognize themselves in the post, that will take note of some of the things they can do to improve the perception of their company through their websites and provide clear, transparent accounting and disclosure of their projects and funding.
Hi Stephen -
“Are Carbon Offsets the New Snake Oil?,” is an excellent question.
Your readers should be advised that Peter Krahenbuhl is not an unbiased authority on Carbon Offsets. He and his organization Sustainable Travel International are commissioned sales agents of the Swiss carbon offset ‘non-profit marketer’ myClimate.
Here are some resources that have helped me to separate the sales hype regardless of its source(profit or non-profit) from the issues at hand:
“Carbon offsets are the modern day indulgences, sold to an increasingly carbon conscious public to absolve their climate sins. Scratch the surface, however, and a disturbing picture emerges, where creative accountancy and elaborate shell games cover up the impossibility of verifying genuine climate change benefits, and where communities in the South often have little choice as offset projects are inflicted on them. -Transnational Institute The Carbon Neutral Myth: Offset Indulgences for your Climate Sins
“..essentially what carbon trading does is it turns the earth’s carbon cycling capacity into property that is to be bought and sold in a global market. And by turning carbon into a commodity, we’re essentially taking the earth’s ability to support a climate conducive to life and human societies and passing it into the same corporate hands that are destroying the climate.” -Daphne Wysham
Learn More:
Eyes Wide Open Carbon Off-Sets & EcoTravel
-David
Hi David,
Thanks for the comment. This is obviously a big issue with many people, especially those who believe that we simply cannot buy our way out of climate change. I’ll take a look at the link you posted.
Stephen