On February 2 the Intergovernmental Panel on Climate Change, a coalition of 2,500 scientists from 130 countries working under the auspices of the UN, released a report on the role of carbon dioxide (CO2) and other greenhouse gases in global warming. The panel’s conclusions provide the strongest evidence to date, affirming with more than 90 percent certainty, that global warming since 1950 has been driven by the buildup of CO2 and other greenhouse gases. The report warns that we will experience further warming, up to three degrees centigrade by 2050, complete with rising sea levels and drought, if emissions are not aggressively addressed. But how will humanity enforce aggressive solutions when the largest polluter, the United States, has not ratified the emissions-capping Kyoto Protocol?
Rather than enforcing caps, the US has implemented a voluntary system for curbing emissions. The inefficiency of this system is under increasing fire, with the report likely to turn up the heat. Meanwhile, a blossoming market has arisen for “carbon neutrality.” Carbon neutrality means offsetting one party’s carbon emissions by either reducing the emissions or increasing the CO2 absorption of another party. Because net carbon emissions are not decreased through this process, many environmentalists have expressed concern that the carbon-neutrality market may undermine regulation aimed at reduction.
In 2006, the New Oxford American Dictionary chose “carbon neutral” as its word of the year. Coldplay, Brad Pitt, Ben & Jerry’s, and HSBC, amongst many others, have declared themselves carbon neutral. The offset industry has expanded from soliciting companies to neutralize their carbon emissions to marketing penance to individuals. The newest additions are offsets for air travel, the world’s fastest growing source of greenhouse gases. Travelocity and Expedia have partnered with the Conservation Fund, a nonprofit that works to regenerate wetlands and forests, and TerraPass, a carbon offset retailer in San Francisco, respectively, so consumers can purchase offsets when booking flights.
How It Works
The individual or company seeking carbon neutrality buys carbon offsets from a retailer like TerraPass. The buyer’s emissions are calculated by the retailers, which have widely varying and mostly opaque methodologies, thus producing differing fees. The retailer funds worldwide environmental projects to generate power, such as wind farms and solar, as well as energy efficiency projects like upgrading factories, switching fuels (usually from coal to natural gas), and incorporating energy-saving technologies. The number of offsets produced is based on the retailer’s calculations of the amount of carbon absorbed or reduced.
While the notion of buying credits might seem strange, it is modeled on the cap-and-trade system of the Kyoto Protocol. Under that system, national emissions caps are imposed on the Annex 1 (developed) countries. The caps can be met by reducing national emissions or purchasing emissions credits from other Annex 1 countries or non-Annex 1 (developing) countries.
Although the voluntary carbon offset market has existed since the early ’90s, the growing public participation in these programs has sparked new debate about the market’s credibility. Does the market encourage carbon-offset projects that otherwise could not be funded? These range from very beneficial but costly projects to projects with debatable benefit. In order to legitimize the market, the carbon offsets must be a result of the funding provided by the carbon-offset retailer, a concept referred to as additionality. In other words, the retailer can’t find a project or business that is already absorbing or not emitting carbon and use it to offset emissions from another business.
TerraPass funds biomass projects that purchase anaerobic digester systems for dairy farms. The systems convert manure into biogas, composed mostly of methane (50-80 percent) and carbon dioxide (20-50 percent), with traces of other gases. The biogas powers a generator that creates heat for the barns and pumps excess electricity back into the grid. Many environmentalists laud the digesters because they create renewable energy and capture methane that would otherwise escape into the atmosphere. Released methane is worse for the atmosphere than carbon dioxide, as it is 20 times more effective in trapping heat.
“We make it a profitable enterprise for the farmer to engage in,” says Tom Arnold, CEO of TerraPass. “We pick projects that would not happen without our support, by providing funding that pushes the project to start.”
TerraPass is not among the top tier of carbon-offset retailers according to a recent report, “Consumer’s Guide to Retail Carbon Offsets.” Conducted by Trexler Climate and Energy Services for Clean Air-Cool Planet, the study was the first independent assessment of the voluntary offset market, according to Adam Markham, executive director of the CACP. CACP is a New Hampshire nonprofit that partners with corporations, universities, and communities to help reduce carbon emissions.
The report rated 30 organizations according to seven criteria, including the retailer’s prioritization of offset quality, transparency in operations and project selection, and education of consumers about global warming. The report’s popularity has sparked a lot of debate, with several of the second-tier retailers questioning its credibility because less than half of the questionnaires were actually completed. “We don’t want to see bureaucratic policies that prove additionality for you,” says Arnold of the study. “These studies undercut our achievements by casting doubts and bringing that message to millions of consumers.”
The report focused on the offset market’s contribution to the execution of environmental projects. Renewable energy certificates (RECs) were especially questioned. RECs are generated from renewable energy sources like wind, solar, and geothermal power and can be used to satisfy emissions mandates or sold on the voluntary offset market to retailers like TerraPass. The credits are then retired from the market in order to ensure that they are not used as offsets by other parties. Many offset retailers claim that this money is an incentive to develop more renewable energy projects. “Renewable energy certificates are a valid carbon offset strategy,” says Arnold. The TerraPass portfolio includes 33 percent Green-e certified renewable energy credits. Green-e is a program that certifies renewable energy projects.
According to the Consumer’s Guide report, the problem with the sale of RECs as carbon offsets is that these renewable energy projects are often already in place because of tax incentives. The report states that there is little evidence that prospective REC sales influence the decision to build these projects. Without this link, the voluntary offset industry may simply be capitalizing on the efforts of a few environmental projects.
Many carbon-offset retailers also fund forestry projects, because forests absorb CO2 through photosynthesis. These projects tend to be more popular than other types of offsets. For example, Dell recently announced its “Plant a Tree for Me.” The program gives customers a chance to donate $2 with the purchase of a notebook computer, or $6 with the purchase of a desktop computer, for tree-planting programs in the US.
Forestry projects fall into two broad categories, conservation and reforestation. Conservation projects protect forests slated for development. These projects are especially important in the Brazilian Amazon, which loses an area roughly the size of New Jersey to clear-cutting and timbering each year. The Amazon covers approximately five percent of the earth’s land area but accounts for ten percent of the CO2 consumed by vegetation, according to NASA’s Earth Observatory. Deforestation releases this CO2, accelerating global warming. The removal of tree canopies also speeds soil decomposition, releasing even more CO2.
While conservation projects have few critics, reforestation projects are more controversial. On the one hand, tropical rainforest reforestation has ample support, because these forests are important to the maintenance of a stable global ecosystem. One hectare of rainforest can include up to 300 different tree species, and the forests account for nearly half of the world’s plant and animal species.
As the water in plants’ tissues evaporates, tropical forests also contribute to global cooling. The water released from the forests condenses into clouds and returns to the Earth as precipitation. During the day, these clouds also act as a sort of sunblock for the planet, reflecting light back into space.
But reforestation of temperate forests is less straightforward. A recent study conducted by the Lawrence Livermore National Laboratory and the Carnegie Institution’s Department of Global Ecology reported potentially negligible effects of temperate forests on global warming. The dark coloration of temperate forests attracts sunlight. But due to lower temperatures and leaves with smaller surface areas (like pine needles), these forests transpire less water than tropical forests. Also, the process by which less sunlight is reflected from the surface and more is absorbed by the dark vegetation of temperate forests, known as the albedo effect, may ultimately neutralize the benefits of the trees’ carbon absorption.
“Our simulations indicate that the magnitude of warming due to global forestations is of the same order of magnitude as the cooling due to carbon-storage effects,” says the study. “Whereas cooling due to carbon cycle effects may dominate on the decadal time scale, warming with the associated albedo effects may dominate on the century time scale.”ÊThe authors recommend further research before “forest carbon storage should be deployed as a mitigation strategy for global warming.”
Dr. Alexandra “Sascha” von Meier, associate professor in the Department of Environmental Studies and Planning at Sonoma State University, concurs with the policy implications of the report. “This study shows that the climate system is more complicated than a lot of people thought,” she says. “We have to be more careful about actually emitting CO2, because reforestation may not be the easy fix.”
Retailers calculate offsets over the lifetime of trees, approximately 70 to 100 years. Yet there is no guarantee of the permanency of the forest, which may be destroyed by disease, fires, or human encroachment, releasing more CO2. “Depending on the method used to calculate the amount of CO2 stored, whether other pools of carbon in the forest are taken into account (e.g. soil, leaf litter), estimations of the amount of CO2 that a forest can absorb can differ vastly,” reads a statement penned by the World Wildlife Fund, Friends of the Earth, and Greenpeace.
Dr. von Meier points out that reforestation projects are occurring at the same time as massive deforestation, and therefore have a contestable effect on net carbon emissions. “Reforestation is necessary to counter the cutting down of trees,” she says, “but it does not counteract the burning of fossil fuels. We need to plant more trees and stop burning fossil fuels.”
Although historically reforestation projects have received approval from environmental advocates, there is concern over the implications of social reliance on forestry projects as a means of addressing carbon emissions. “Buying forestry offsets does nothing to lessen society’s dependence on fossil fuels to generate its energy—something that is ultimately needed to address climate change,” reads the statement issued by the World Wildlife Fund, Friends of the Earth, and Greenpeace.
In October 2006, Sir Nicholas Stern, the United Kingdom’s Head of the Government Economics Service, published the “Stern Review on the Economics of Climate Change,” an analysis of the economic and environmental impacts of climate change.
“Central estimates of the annual costs of achieving stabilization & are around one percent of global GDP, if we start to take strong action now,” Stern’s review says. According to the report, stabilizing emissions will be a costly endeavor, yet the offset retailers charge a mere $5 to $25 to offset a ton of carbon. The discrepancy is attributed to an abundance of offset projects that are just on the threshold of execution, like the biomass projects that Tom Arnold of TerraPass mentioned. These “low-hanging fruit” will soon be plucked away, and other projects will be far more costly. The EU cap-and-trade system maintains a large market for carbon emissions credits, which is predicted to expand when more stringent emissions targets are implemented in 2008.
The multiple variations of offset projects, the opacity of project funding, and the general lack of project criteria all underline a fundamental flaw in the carbon offset market. “There’s a desperate need for standardization,” says Arnold of TerraPass, “but it needs to be a transparent standard that involves all stakeholders.”
Prominent among the organizations developing offset guides is the Gold Standard, created in 2003 by several NGOs, including the World Wildlife Fund, the Species Survival Network, and Helio International. The Gold Standard certifies Clean Development Mechanism (CDM) projects, which are part of the cap-and-trade system of the Kyoto Protocol. CDM projects employ renewable energy and energy efficiency technologies in developing countries to reduce carbon emissions. These reductions are sold as emission credits to developed countries that must meet caps under the Kyoto Protocol.
In May 2006, Gold Standard launched a methodology for voluntary offset projects. The methodology’s criteria include three screens: project type (renewable energy and energy efficiency projects only), additionality, and sustainability. The criteria define less stringent applications of additionality than the CDM certification. No detailed financial plan is submitted under the voluntary offset criteria, and the project does not need to document how new technologies or innovative knowledge is introduced.
Several organizations related to the offset market have members or partners who stand to gain from the positive publicity of being involved in environmental projects. They benefit more from voluntary greenhouse gas reduction programs as opposed to national emissions regulations. The Climate Group, a nonprofit organization that works as a coalition of businesses and governments to disseminate information about environmental projects and practices, includes British Petroleum, Alcan Inc. (the world’s second largest aluminum producer), and Baker & McKenzie. Baker & McKenzie is an international law firm that “is a leader in multinational oil and gas pipelines, and liquefied natural gas projects,” which “helps develop, finance, and sell facilities,” according to its web site. Recent clients include Petrobras, PetroChina, BP Chemicals, and BP Amoco.
The Ford Motor Company recently partnered with TerraPass in a program called “Greener Miles.” The program allows Ford customers to calculate their yearly carbon emissions and purchase offsets directly from TerraPass. Ford is also running a pilot program to offset carbon emissions from the production of its hybrid electric vehicles.
Despite a lack of criteria for carbon offsetting projects, discrepancies in carbon emissions calculations, and questionable corporate sponsorships, carbon offset retailers do provide funding for many progressive projects. Funding from some carbon offsets may create the incentives necessary to push certain projects to execution. The industry’s biggest contribution, however, is likely to be increased citizen awareness of global warming. “People are starting to get into habits,” says Dr. von Meier. “They are counting their own emissions. That’s a start.”
Many critics agree that the voluntary carbon offset market can be a platform for an understanding of the scale of carbon emissions. However, there is broad concern that focus on offsets will take the place of regulating and reducing emissions and pollutants.
The growing number of carbon offset retailers means more choices are available for the consumer. Until the industry is standardized, it remains up to the individual or corporation to choose a retailer that manages a portfolio of progressive and sustainable projects, advocates citizen responsibility in adopting methods of combating individual emissions, teaches the public about the reality of global warming, and maintains an active role in the maintenance of its projects.
Most agree that carbon offsets are a minor means of combating carbon emissions. Environmental advocates urge progressive legislation, aggressive regulation, and financial incentives to cap carbon emissions while promoting renewable energy. “Carbon offsets deal with a small part of the problem slowly,” says Dr. von Meier. “It’s not complete in any way.”
Get Involved: The Center for Resource Solutions certifies renewable energy providers, including TerraPass. A draft of its guide, “Retail Greenhouse Gas Reduction Product Certification Standard,” is now open to public comment. Another certifier, the Climate Group, has released its “Voluntary Carbon Standard.” Drafted with the International Emissions Trading Association, it too is also open to commentary. The IETA is a nonprofit organization comprised of 143 international companies that work to promote the emissions trade market.