Lentis/Carbon Offsets

A carbon offset is a compensatory measure made by an individual or a company for carbon emissions, usually through sponsoring activities or projects which increase carbon dioxide absorption, such as tree planting. When a carbon offset vendor sells a carbon offset, the revenue funds a carbon-negative initiative managed by the company itself or run by another organization. This relationship is illustrated below in Fig. 1.

Fig. 1: Cash flow after the purchase of a carbon offset

This diagram shows several groups with interests in carbon offsets. Additionally, it depicts a challenge facing a carbon offset consumer; once an offset is purchased, it is difficult for a consumer to know exactly where their money is going. Critics of this system point out that both the vendors and verifiers are unregulated and could sell illegitimate products or approvals. The Clean Development Mechanism (CDM), created by the United Nations Framework Convention on Climate Change (UNFCCC) is an example of a market with government verified offset production. Nongovernmental organizations also certify carbon offset vendors using their own verification standards to help consumers make more informed decisions. This page discusses relevant participants, criticisms, and introduces early attempts at assuring quality in this new market.

Participants

Carbon Offset Vendors

Many organizations, including airlines, car companies, and shipping services, sell carbon offsets specifically for their products. For example, a consumer can choose to offset emissions associated with their travel or with shipping a package. These companies generally include offsetting emissions as an option during the purchasing process. One example is UPS, whose “carbon neutral option empowers you to take action to offset the climate impact of the carbon emissions that result from your shipping.”

There are also companies that sell general carbon offsets to individuals and businesses. They act as middlemen between consumers who wish to offset carbon emissions and carbon-negative projects such as planting trees, methane capture, and clean energy. Their sole purpose is marketing and selling carbon offsets, and they often have mission statements that reflect this:

“Carbonfund.org is leading the fight against global warming, making it easy and affordable for any individual, business or organization to reduce & offset their climate impact and hasten the transition to a clean energy future.”

Offset vendors use a variety of marketing techniques including strong imagery, endorsements from well-known companies, and verification services to entice consumers and corporations to purchase their offsets.

Carbon Offset Purchasers

Individual Buyers

Some individuals who choose to buy carbon offsets have already taken steps to reduce their carbon footprints through purchasing low-energy appliances or converting to renewable energy. Carbon offsets represent the next step for these consumers to reduce their carbon emissions. Other purchasers, however, “make no attempt to reduce their emissions before buying carbon offsets,” and may see offsets as “an easy, monetary way out of taking real responsibility.”

Corporate Buyers

Companies may be motivated to purchase carbon offsets because the appearance of being a green business can improve a company’s image and earn them tax credits. Businesses such as Land Rover highlight their commitment to sustainability in public statements:

“Our approach to a sustainable business for a lower carbon world involves investing in four key areas: e_terrain technologies, sustainable manufacturing, CO2 offsetting, and conservation and humanitarian partnerships.”

Purchasing carbon offsets is one way for companies to adhere to the environmental standards that they set for themselves without drastically changing how they operate their business or facilities.

Carbon Offset Critics

A major criticism of carbon offsets is that “as carbon is an intangible commodity, companies can sell what they want, claiming it is carbon neutral.” Because the voluntary market is unregulated, the legitimacy of some offsets may be questionable. Another criticism is that people may feel that they can buy their way out of responsibility, and otherwise do nothing to reduce their carbon emissions. Denis Hayes, the president of the Bullitt Foundation, an environmental grant-making group, compares some carbon offset programs to pre-Reformation Catholic indulgences:

“Instead of reducing their carbon footprints, people take private jets and stretch limos, and then think they can buy an indulgence to forgive their sins.”

The carbon offset market is also criticized for suggesting there is an “easy way out” for society as a whole to reduce carbon emissions. Energy economist Charles Komanoff says that offsets could “blunt public support for what will really needed in the long run: a binding limit on emissions or a tax on the fuels that generate greenhouse gases.”

Case Study: The Kyoto Protocol

The Kyoto Protocol established a cap and trade market for carbon emissions. The UNFCCC allocates carbon credits to participating countries based on their target emission levels. If a country exceeds its carbon reduction commitment, it may sell the excess credits to countries that have not met their reduction goals. Within the member states of the Protocol, National Allocation Plans specify how emissions credits are distributed among polluting institutions.

Countries can purchase carbon offsets that have been verified by the Kyoto Protocol's Clean Development Mechanism (CDM), which sets standards for carbon reduction projects and for the measurement and verification of their impact. Offset project designs, baseline measurement, and long-term monitoring are evaluated according to CDM approved methodologies. Third-party Designated Operational Entities (DOE), approved by the CDM executive board, periodically audit a project's carbon emissions accounting. Based on audit results, the Clean Development Executive board distributes Certified Emissions Reduction credits to the project participants. Certified Emissions Reduction credits are the only credits accepted in the emissions trading market created by the Kyoto Protocol. The CDM was the first successful regulation of carbon offset production, and resulted in the development of similar independent verification services.

Carbon Offset Verification

Verifying Carbon Offset Projects

Verification standards for carbon offsets have emerged due to uncertainty in voluntary markets. The CDM, the Gold Standard, and the Verified Carbon Standard are the leaders in verifying carbon offsets. These three organizations provide a framework for carbon offset project methodologies, independent emissions auditing, and project registration.

The Gold Standard is a nongovernmental organization that certifies carbon offsets. The Gold Standard exclusively accepts CDM project methodologies in the areas of renewable energy and end-use energy efficiency. Despite having in-house experts and association with the World Wildlife Fund (WWF), the Gold Standard builds on the CDM's authority using DOEs to directly review Gold Standard projects and audit their emissions reductions.

The Verified Carbon Standard, developed by industry groups, mimics the CDM but uses its own standards for methodologies, auditing, and registration.

Verifying Carbon Offset Sales

Green-e Climate and the International Carbon Reduction and Offset Alliance (ICROA) seek to improve the consumer experience of purchasing verified carbon offsets. Green-e Climate, founded by the Center for Resource Solutions, certifies carbon offset products sold by vendors. Certified products are issued a certificate featuring the Green-e Climate logo and information about the carbon negative activity. ICROA is an organization of businesses that provide carbon offsets and reduction services. Membership in ICROA requires that a company's carbon offsets are verified by the organizations listed in the previous section. These organizations assure consumers that the offsets they purchase are real, measureable, and unique.

Conclusion

Today's markets provide consumers with more choices than ever before. To help consumers make more informed purchases, a number of programs and organizations have been established. For example, Consumer Reports provides reviews and comparisons for a variety of everyday products, from household appliances to automobiles. The U.S. Environmental Protection Agency's (EPA) Energy Star program tests products and identifies which ones provide significant energy savings without compromising primary function. The U.S. Department of Agriculture's (USDA) Food Safety and Inspection Service (FSIS) grades beef and poultry for quality, and the USDA's National Organic Program (NOP) verifies foods which are produced by practices "that foster cycling of resources, promote ecological balance, and conserve biodiversity." These unbiased entities, either government affiliated or not, provide their stamp of approval to products meeting their quality standards. They evaluate products whose quality is difficult for consumers to evaluate themselves, so consumers have come to trust the aforementioned standards and rely on them when making purchasing decisions.

Green-E provides similar information to consumers in the carbon offset market. Carbon offset verifiers have established standards against which carbon offset projects can be measured, and Green-E is attempting to collect the different verifications and place them under a single stamp of approval. The carbon offset market benefits from unbiased third-party evaluation because carbon offsets are another example of an intangible product whose quality is difficult for consumers to determine.