Carbon Offsets: The Indispensable Indulgence

Despite the potential for abuse, the concept of paying others to compensate for our environmental sins can be a valuable tool in helping reduce carbon emissions. But the world can’t simply buy its way out of global warming.

The idea of buying carbon offsets — compensating for your own global-warming emissions by paying somebody else to reduce theirs — has provoked a lot of inflammatory rhetoric over the past few years. The standard trope is that it’s like the old practice of buying indulgences from the Catholic Church: You get to commit environmental sin — driving your SUV or living in your McMansion — and still sit at the right hand of God. Offsets are a “get out of a jail free” card, or even, according to one overwrought writer in the Rocky Mountain News, a way of getting away with murder: You shoot somebody, then ease your guilt by holding a bandage on the wound until the ambulance arrives.

Well, OK, tweaking hypocrites can be great fun, and you feel so much better about yourself afterward. I’ve done it myself, mocking forestry offsets in a commentary on NPR. But here’s the hitch: I’m contributing to global warming and so are you, by all the usual means — driving cars, flying planes, heating or cooling homes, and consuming electricity (to write and read this article, among many other things). We can ignore it and just bump up the hypocrisy quota a bit. But if we choose to do something about it, the solution will almost certainly include offsets.

If it has never been clear to you what an offset is, you have plenty of company. Here’s a quick primer: The average American produces about 20 tons of global-warming emissions annually, mostly from burning fossil fuels. Markets now exist that allow you to offset each ton by paying somebody else to reduce their emissions by one ton. In countries that signed the Kyoto Protocol, some companies buy offsets to help meet compulsory emissions limits. The U.S. Congress is also considering such limits in this country, and a regional system affecting utilities goes into operation in 10 Northeastern states on January 1. But for individuals and most businesses, buying offsets is a voluntary choice made for do-good and feel-right reasons.

Offsets make sense because they provide a market-based approach for finding and testing global-warming remedies. They provide pools of cash to reduce global-warming emissions in ways that wouldn’t happen otherwise.

For individuals and most businesses, buying offsets is a voluntary choice made for do-good and feel-right reasons.
In Oregon, for instance, the Earth Advantage Institute, a nonprofit promoting green building methods, wants developers to spend $7,500 per house on a package of energy upgrades, such as putting in a better, more expensive grade of insulated window. The plan, says executive director Sean Penrith, is to reduce annual emissions by about a third, roughly two tons per house. Developers wouldn’t normally be interested, since the investment might not translate directly into a higher sales price. But Penrith’s plan is to sell a 15-year package of reductions into the offset market at perhaps $1,000 per house. By combining offset income with Oregon’s existing incentives for high-performance houses, the developer could come out $6,500 ahead on the deal. “I can take Joe Blow Builder. He can’t even spell ‘green,’” says Penrith. “But if I can present a value proposition on why he should move to an upgraded HVAC system, he’s going to get it.”

There are, of course, grounds to quibble about whether any offset adds up to a genuine reduction in emissions. (If the homeowner knows he’s got a high-performance house, will he be tempted to set the thermostat at 70 degrees instead of 68?) Moreover, the offset business can be insanely complicated. (Should the builder get credit for the reduction? Or does the utility get to claim it?
There are, of course, grounds to quibble about whether any offset adds up to a genuine reduction in emissions.
And how do you avoid double-counting?) The unregulated nature of the offset market in this country has also produced opportunities for misrepresentation and even fraud over the past few years. In one case, farmers were selling offsets based on no-till practices they had undertaken years before. So the offsets didn’t do anything new; they just rewarded existing good behavior. In another offset deal, it turned out that the methane-destruction project was required by law.

Still, the offset business is growing up fast, with the U.S. voluntary market now worth about $100 million a year and likely to grow to $1 billion in the next few years. The effort to make offsets honest amounts to an “age of substantiation,” says one market watcher. Companies investing in offsets are becoming more demanding about what they buy, if only to avoid a Coldplay-style public relations debacle. (The British band claimed to have rendered a concert tour carbon-neutral by planting 10,000 mango trees in India. Then the trees died.) Two organizations — the Gold Standard Foundation and the Voluntary Carbon Standard — now screen investments and set standards for qualifying projects. Another nonprofit, Clean Air-Cool Planet, has posted a useful “Consumers’ Guide to Retail Carbon Offset Providers” on the Internet, and a web site, www.carboncatalog.org, provides a regularly updated checklist of whether offset providers meet certain criteria.

The standards for honest offsets are complicated: To be credible, they need to be transparent, meaning the seller tells you exactly what project you’re buying. They must also produce a real, measurable, and permanent reduction in global-warming emissions. For instance, destruction of methane from a coal mine or landfill may qualify as a high-quality project in part because it’s easy to quantify. Forestry projects, on the other hand, are likely to be low quality, because it’s too difficult t0 calculate the rate at which a given forest pulls carbon dioxide out of the atmosphere and into storage, especially when the climate happens to be changing. Forestry offsets have also been tainted because some businesses have used 30 or 50 years of future tree growth to offset the global-warming emissions from fossil fuels being burned now. Credibility also dictates that reductions be monitored and verified by an independent third party, and that the offsets be logged with a registry to prevent double-counting.

Finally, the project must be additional, meaning that it goes beyond what would have happened otherwise, for financial, regulatory, or other reasons. For instance, paying to insulate an underfunded public school building might qualify because it wouldn’t happen without the money from offsets. “Additionality” is the hardest standard to meet, and studies suggest that even projects developed under the stringent terms of the Kyoto Protocol’s Clean Development Mechanism often turn out not to be additional. But “additionality” is key, says Mark Trexler of EcoSecurities: “If we start rewarding all these good deeds without focusing on making real things happen, you could spend an infinite amount of money without changing anything.”

The other requirement for making offsets honest hasn’t gotten as much attention so far, because it involves a change in the behavior of buyers: If we accept that global warming is a serious threat, then the use of offsets makes sense only within the context of a carbon cap. Not a national or regional cap, but a self-imposed cap on the individual or organization buying the offset.
The other requirement for making offsets honest hasn’t gotten as much attention so far, because it involves a change in the behavior of buyers.
Otherwise, the critics are right, and buying offsets is like buying indulgences, so we can continue to sin in peace. Or even sin a little more. Having a cap means knowing your carbon footprint for a baseline year — 2008 will do — and having a plan to shrink it by a set amount each year. (Web sites like carbonfootprint.com can help with the calculations.) If you accept the premise that the U.S. must reduce its carbon emissions 80 percent by 2050, that means eliminating about 2 percent of your baseline footprint annually, hardly a radical goal. You could achieve the entire reduction in a single year by stunt eco-living (like the family whose list of banned products included toilet paper), or alternatively, by dropping dead. But a more practical approach is to hit or exceed your targets each year, then use offsets for the balance of emissions that you cannot immediately avoid.

All this is clearly daunting, particularly for people who are not true believers. Offsets are “such a noncompelling product,” says Gideon Greenspan, who runs carboncatalog.org. We’d be better off, he argues, if the offsets were incorporated directly into the products we purchase. “The classic example is cage-free eggs: It’s not like you buy eggs for $3 and then spend another $2 to free chickens.” The extra cost and the feel-good label are part of a single transaction. Similar products aimed at carbon-sensitive consumers are already in development. The British supermarket chain Tesco is putting a carbon footprint label on 20 test products, from potatoes to orange juice. (In global-warming terms, frozen turns out to be better than fresh.) British brewer Adnams has launched a carbon-neutral beer by combining a small amount of offsets with more efficient methods, including development of a lighter bottle.

But it’s a long way from a carbon-neutral beer to a carbon-neutral economy. For now, individuals and organizations wanting to use offsets, and use them honestly, still need to sharpen their pencils and do some hard calculating.