Buy Now, Pay Later
Can a new trend right our environmental wrongs? Adam M. Bright scrutinizes the practice of carbon offsetting.
In 1989, a small, progressive power company paid $2 million-roughly equal to its annual profit at the time-to help plant 52 million pine and eucalyptus trees in Guatemala. Applied Energy Services was building a new coal-burning power plant in Connecticut. Concerned that its carbon-dioxide emissions might contribute to the gradual warming of the planet, the company hoped that the new 385-square-mile forest would, in theory anyway, balance out the damage.Applied Energy Services wasn't trying to avoid a fine. Back then-as now-there were no limits on greenhouse gases in the United States. The company's rewards were oddly intangible: a couple of pockets of goodwill, a sprinkling of positive press coverage, a few charmed regulators. Even more impressive, Roger Sant, then CEO, made it clear that the trees were not a license to continue building coal plants forever. "We're going to have to stop burning fossil fuels someday," he said at the time. "We have to figure out how to invest $250 million not in a power plant but in energy conservation. That's the next step I'd like to take."It seemed like a new vision of corporate responsibility. It looked like a break with the status quo. It was the first carbon offset.In the 20 years since, one man's tree-buying spree has become a $91-million global market. The pace of growth has been extraordinary, rivaling the run-up to the dot-com years. In 2006, the voluntary carbon market tripled in size, and it is anticipated to grow tenfold by 2010. That kind of profit opportunity has attracted a motley crew of providers-more than 60 of them at last count-offering a bewildering mélange of reductions. There are still trees, sure, but carbon finance today also flows to new wind farms, solar-panel arrays, carpooling initiatives, factory overhauls, and vent-stack-capture projects. Pricing is diverse as well: The cheapest offsets sell for about 50 cents a ton; the most expensive ones run $45 a ton-a 9,000-percent spread.Just as rapid has been the fall from grace. What once looked like altruism is today panned as hypocrisy. Critics claim that the market has been flooded by poorly designed projects, while the media slams offsets as "a modern indulgence," a way to blithely pay off one's carbon sins. The abundance of dubious offsets may stem from the fact that the voluntary market is still unregulated: Companies can choose from 15 competing standards, or elect to abide by none at all. But even regulation won't fix the fundamental flaws of offsetting, according to Jutta Kills, an ecologist with SinksWatch, a group that monitors the industry. "The prevalence of low-quality projects has made it a little more difficult to focus our attention on the underlying problem, on the fact that it's not just a few bad apples," she says. Improved standards may help reduce the range of uncertainty and error, "but ultimately, it is still a story which we have to trust a carbon consultant to tell us."
|Offsets, no matter how innovative, cannot promise us a velvet environmental revolution. Rather than bringing about major change, they may extend the life of business as usual.|
Forestry projects used to be the only game in town. Today, they account for just about half the credits on the voluntary market, but they're still what most people think of when they hear the word "offset"-in part, no doubt, because of their popularity in the celebrity universe. Brad Pitt has a forest. It spreads along the slopes of a valley road in Bhutan. Jake Gyllenhaal's plot is in Mozambique, the Rolling Stones have one on the Isle of Skye, in the United Kingdom, and Leonardo DiCaprio owns the carbon rights to a stand of oak, lime, and hornbeam on a former Soviet launch site outside Dresden, Germany. In the past few years, though, concerns about the effectiveness of forestry schemes have caused major shifts in the industry. To wit, the company that originally planted on behalf of Brad, Jake, Mick, and Leo used to call itself Future Forests, but since 2005 has gone by the distinctly un-arboreal moniker the Carbon Neutral Company. Less than a quarter of its offsets now come from trees.As tree-planting has withered in popularity, a host of ostensibly transformative new projects have emerged to fill the void, and with that, big business has gotten onboard. In April of last year, TerraPass-which has a fairly good industry record for transparency-teamed up with Ford to unveil Greener Miles, a new program that allows all Ford drivers to obtain online assessments of their model's annual emissions, and a place to buy offsets to balance them out. (Reduction was a goal too: the site includes tips for lower-emission driving.) It was, as the press release pointed out, "an innovative industry first": one of the country's largest auto manufacturers teaming up with a respected offset provider to take responsibility for emissions-or at least urge its customers to do so. "We view this as one of the prongs in a three-pronged approach to addressing climate change. The prongs include the vehicle, the fuel, and the driver," says Kristen Kinley, a Ford spokeswoman. "We control only a portion of the system that is responsible for greenhouse gas: emissions from the vehicles consumers drive. ... There are a number of initiatives underway to address the vehicle technology end of the equation."Indeed. While it was promoting Greener Miles, Ford was already at work on another initiative: to slow down change. The company, represented by its trade association, was suing the state of California for attempting to pass the nation's first law capping automobile carbon-dioxide emissions. The automakers claimed that California was passing legislation that only the federal government had the right to demand. Then, this June, when Congress looked as if it was finally ready to raise national fuel-economy standards (they have been virtually frozen since 1985). Ford's president and CEO, Alan Mulally-along with other auto industry leaders-flew to Washington for a day of closed-door lobbying. Automakers built up to the showdown with an ad blitz warning voters that an increase in fuel-efficiency standards would "take your pickup truck away." In his public statements, Mulally reminded everyone that the industry had already made "tremendous progress" and was "absolutely committed to increasing fuel efficiency."Ford's vehicles have long been among the least efficient of any manufacturer's: The fleet average is just a few miles per gallon better than that of the first Model Ts, which came out almost a century ago. In light of this kind of behavior, it's reasonable to ask what the phrase "absolutely committed" really means. Does an improvement of a few miles per gallon per century qualify? The Greener Miles program can be trotted out anytime at the bequest of PR handlers, but remains otherwise buried-try looking for it-on Ford's website, where it won't remind potential customers that his or her F150 will chug out seven tons of greenhouse gasses a year.That's not to put the blame on TerraPass, or to suggest it was played for a patsy. It does reinforce the fact that if carmakers just keep making gas-guzzlers, and we just keep offsetting them, we are not doing nearly enough to prevent the Greenland ice sheet from sloughing into the ocean. When I asked James Hansen, the director of NASA's atmospheric research institute, how long we have before climate feedback loops start kicking in-that is, before the effects of global warming start inexorably leading to more warming-I was expecting him to tell me that we had 20, perhaps 50 years, time enough to offset our emissions while we find other solutions. He replied, "We are already at or near the tipping point."While offsets are certainly helpful, no one should view them as the immediate and necessary solution to climate change. But Ford is not the only big company to use offsets to toy with carbon neutrality while quietly retaining its grip on the status quo. A whole league of companies employs this strategy and most of them gather at the Chicago Climate Exchange to trade carbon credits. The scale of the CCX is astounding-half of all global voluntary carbon offsets are "transacted" there. The CCX's commitment to change is harder to assess.There is much to like about the CCX. It gives corporate America crucial experience in managing, monitoring, and reducing emissions, and it helps set a price for a ton of carbon dioxide-an important step toward spurring new technologies and correcting our fossil-fuel-laden energy portfolio. All member companies must pledge to reduce their emissions by a set amount each year. If they reduce emissions in excess of that amount, they get to sell the surplus reductions as offsets-either to members that have been unable to meet the reduction quota, or to providers who sell the resulting offsets to average consumers.Offsets are intangible goods-a hypothetical ton of gas is about as intangible as it gets-so it's critical that buyers and market observers be able to review project standards to determine offset quality. The most important standard is that for "additionality." Not every cutback in emissions counts as an offset. The reduction must also be "additional," meaning that it must go above and beyond what would have taken place under a "business as usual" scenario. It must be a willful detour from the status quo, not something that would have occurred anyway. If you wanted to check out, say, CCX's additionality standards, you'd need to get a copy of the CCX rule book. But that rule book is only available to members-and it costs $5,000 to become a member, then another $5,000 in annual membership fees."It's just outrageous," says a leading carbon-market analyst. "The standards and how they define additionality are the crux of the whole program, and without that information you have no idea what's going on." (He requested anonymity, joking, "I have to travel with bodyguards periodically because of how pissed off some of the providers can get.") According to sources who have seen the rule book (several calls to CCX were not returned), the CCX is virtually unique in that it judges its reductions against calendar baselines: If a member company emits less carbon dioxide than it did a few years ago, it gets to sell those reductions as offsets-regardless of whether they are the result of legitimate reductions in carbon output or just declining sales, plant closures, routine maintenance, or, say, rising sea levels. (Determination of whether a project meets CCX standards is made by a closed-door committee, staffed by representatives of the member companies.) "The idea that you can just sell all of those offsets into the voluntary market and thereby render people carbon neutral is just not true," said the market analyst. "In order to render somebody carbon neutral you've got to be able to argue that you're making something happen that wouldn't have otherwise happened. Otherwise you're just moving chairs around on the Titanic."This questionable commitment to real change has already led to a wavering in the ranks. The World Resources Institute, an environmental think tank that until now had lent considerable nonprofit credibility to the CCX, is rumored to be pulling out before the Exchange goes into its second phase. Most alarming, though, is that as CCX attracts more member companies-it is now seven times bigger than when it was founded, in 2003-its lobbying power, and its ability to influence future carbon policy, only grows as well. Already, CCX representatives spend a considerable amount of their time at the Capitol. Last year, at a climate hearing, a Senator asked Michael Walsh, a senior vice president of CCX, "What would be wrong, at least on a theoretical basis, with just taking what you have come up with by way of requirements for your members and essentially mandating that everybody in the country just comply with those?"
|People have problems with the idea of getting CO2 credit from something that is producing more fossil fuel.|