The voluntary carbon offset market

Calculating OEC's Carbon Footprint, Part 3: The Voluntary Carbon Offset Market

Prior to starting this project my exposure to the voluntary carbon offset market (voluntary market) was limited to news snippets, PGE’s renewable power program, and the green tags Mt Hood Meadows suggested I buy along with my lift ticket.  Today, it seems everyone is talking about carbon footprints and carbon offsets, from the emissions attributable to daily food choices, to long-term decisions like building a new house.  From GE’s Money Earth Rewards Platinum Mastercard (instead of frequent flyer miles you rack up offsets) to your travel agents offer to offset you entire vacation itinerary, you have opportunities to offset everything.   Clearly a little research is in order.

The voluntary market is evolving rapidly and quickly becoming big business.  According to a May ’08 Climate Biz article the global voluntary offset market tripled from 97million in 2006 to $331million in 2007.   

The U.S. voluntary market is typically grouped into two categories:

1. A ‘legally binding’ cap and emission trade system by which members purchase and sell offsets to each other; and
2. The Over The Counter (OTC) market.  

The ‘legally binding’ market consists primarily of two providers, the Chicago Climate Exchange and the Climate Registry.  The OTC market contains no legally binding provision, lacks standards and oversight, and is flush with hundreds if not thousands of players.  Many of the OTC organizations that sell the offsets also offer consulting services and/or free tools to help individuals and organizations calculate their carbon footprints.   The fragmented nature of this market becomes readily apparent to people who engage with OTC providers.

The challenges of the OTC market for individuals and organizations begin with the carbon footprint calculation. The OTC’s offer pre-configured calculators with inputs or factors that vary greatly from provider to provider.  Thus, each OTC provider will likely yield a different carbon footprint and different cost to offset the emissions of an individual or organization.  The majority of the calculators for individuals and organizations include emissions (in metric tons) from three categories:  driving, air travel, and energy use (electricity and Natural Gas).  

The challenge of deciding which factors or inputs to use is compounded by variations in the calculations.   With a little experimentation you will quickly find that different OTC calculators, with identical inputs (i.e. miles driven and estimated mpg for your vehicle), yield inconsistent results. 

Once the challenges of performing a calculation have been navigated its on to Carbon Offsets which are typically sold by the metric ton.  A couple of quick online searches will reveal that Organizations selling carbon offsets do so at wildly different rates. My search revealed costs per metric ton from less than $1 to upwards of $45 per metric ton.  How can this be you ask?  This disparity is rooted in the wide variety of mechanisms that the offset organization may invest in to offset your emissions. As an example, Carbonfund.org supports three types of offset projects at a cost of $10 per metric ton of emissions: renewable energy, energy efficiency and reforestation.  While Sustainable Travel International sells offset by category that range from $12 for International Reforestation Projects to $36 per metric ton for Renewable Energy and Efficiency Projects.  This disparity raises a question that leads to the largest criticism of the OTC market - the manner and effectiveness in which these organizations invest the dollars you have paid to offset your emissions.  Check out articles in the Economist, the NY Times, and the June 16th 2007 article in The Guardian, titled, ‘The inconvenient truth about the carbon offset industry,’ for critiques of the market.  

A quick recap of the OTC markets isn’t too reassuring:  Different factors or inputs can be used, different calculators yield different results with identical factors, different organizations charge vastly different amounts to offset emissions, and there are questions about how the collected money is invested.

Where should you start?  Start with a basic understanding of carbon footprints and carbon offsetting (try Wikipedia).  Next, find a voluntary offset organization that you trust (this might take a little time). Select an organization with a solid reputation in both the business and environmental community that is investing in projects you value.

There is an excellent article on the OEC website titled ‘Go Carbon Neutral’ that lists local providers and links to reviews of offset providers that you will likely find helpful.  This article and the in particular the reviews of the offset providers was a key factor in my selection of The Climate Trust for both calculating and offsetting the OEC’s carbon footprint.   After all of the bad news about OTC providers, I was thrilled to find a highly regarded local organization that invests in projects right here in our backyard. 

Once you have completed the heavy lifting of finding a credible organization, things get much easier. By starting with a credible voluntary carbon offsetting organization you address many of the problems you could encounter with this process:  

• Choose a calculator that will identify the factors to include in your calculation;
• Identify a reasonable amount of CO2 emissions attributable to the activities of you or your organization; and finally
• A fair cost and an effective vehicle for offsetting your CO2 emissions.

For all its imperfections the OTC market based mechanisms for dealing with the CO2 emissions are here to stay.   The Climate Trust and other quality OTC providers provide reassurance in an uncertain landscape, serving as welcome reminders that this evolving market based system can yield great results.   With a growing chorus of voices calling for a shift from taxing income to taxing waste or outputs, we will no doubt see additional focus and interest in various tools for articulating our outputs.   The EPA and a couple of large corporations, including General Electric, are working to establish standards for the offset market, and  the FTC is looking at the issue as well.  With any luck government and corporate interests will compliment and not preclude many great local and small scale OTC offset projects.

While researching this topic I calculated my own carbon footprint, which I included in my presentation to the Council.  Regardless of which OTC organization you chose, there is something to be said for the process of gathering data and completing the footprint analysis.  It takes something intangible and brings it into focus, providing a framework for action.  Even if you don’t plan to purchase offsets, I encourage you to play with a couple of the online calculators to get a feel for the size of your footprint.  Voluntary carbon offsetting is clearly not the answer to the combating global climate change.  However, after completing this project I think it is an important tool.  It helped to raise my awareness of the impact of my activities and has encouraged me to make different choices on a daily basis. At the end of the day, isn’t altering the way one does something a good indicator that the tool one used has value and is worthy of consideration?

Aloha, Noah