Buying Carbon Reductions to Offset Climate Sinfulness

Voluntarily paying for somebody else to reduce carbon emissions to compensate for something you're doing to increase them--few other subjects have aroused so much controversy in the last year, inside and outside the environmental community. Climate change skeptics naturally see the whole idea of carbon offsets as silly and pointless. But even those who see carbon reduction as an urgent necessity wonder whether offsets really help.

How do you know whether you're getting real value when you purchase a carbon offset?

Eileen Claussen, president of the Pew Center on Global Climate Change, thinks on balance that offset programs help individuals see that they "are neither blameless nor helpless, and can really make a difference." But Daniel F. Becker, director of the Sierra Club's climate program, has compared offsets to papal indulgences--the get-out-of-hell-free cards that were being peddled in Germany in the early sixteenth century, when Martin Luther launched the Protestant reformation.

The press has been quick to identify cases in which carbon offsets have been purchased to dubious effect, no doubt leaving the environment-minded consumer more confused than ever about whether there's any way of doing this right. Last week, for example, the Los Angeles Times reported that the makers of Al Gore's film "An Inconvenient Truth" paid a broker, Native Energy, to purchase offsets to compensate for carbon emitted in making the documentary. If the paper got the facts right, the film makers paid $12 per ton to purchase the credits, but Native Energy sold them to fund a methane collector on a Pennsylvania farm and a small Alaska wind turbine complex, at $2.40 and $4.00 per ton. In both cases, the projects would have gone ahead without the carbon credits, and the offsets provided only a small fraction of their costs.

An obvious moral is that if you're thinking of buying offsets from a broker, try to make sure that the broker isn't skimming two thirds or three quarters of what you pay. But there's also a larger message, which is that you also shouldn't buy your offsets at too low a price, if you want to really accomplish something. Though it may sound counter-intuitive at first blush, if you look for too good a bargain and end up spending too little for something, the thing you're buying may not be any good.

It helps to think of carbon offsets in the larger context of carbon trading because, after all, when you buy offsets you're doing essentially the same thing that a large coal-burning utility does when it buys emission allowances from some party that has found a way to cut emissions economically. In the carbon trading system that Europe has set up, the initial carbon allowances were made too liberally, and carbon prices--at around $5/ton--were much too low to have much impact on corporate decision making. The result was a windfall for the big carbon emitters that got most of the allowances.

For carbon trading to have a really strong impact on investment decisions, says James Cameron, vice president of the trading firm Climate Change Capital in London, prices would have to be in the vicinity of $20 or $25 per ton.

So here's a rule of thumb: if somebody offers you a carbon offset at less than $20/ton, don't buy it. What you want is something that will prompt somebody to do something good that otherwise would not have happened. At less than $20, you probably won't be getting that.

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