Carbon offsetting promises to make erasing your environmental footprint easy, but where’s the money really going?
Guilt is a powerful tool. Any mother knows that. And so, too, do those in the business of fighting global warming. Almost daily we’re bombarded with evidence of our contribution to climate change. Flown lately? You unleashed more than a tonne of carbon dioxide (CO2) into the atmosphere. Drive a car? That’s six more tonnes. Even sending an email to mom adds to your carbon footprint. Short of curling up in a ball on the floor, what’s a guilt-ridden consumer to do? Go shopping for carbon offsets, of course.
Hundreds of carbon offset providers have sprung up in recent years as middlemen
between those looking to make up for their environmental indiscretions and projects that reduce greenhouse gases. The idea of paying to ease your conscience is nothing new. The Catholic Church perfected the practice in the 16 th century when it sold indulgences as a way to wash away mortal sins. Yet the notion that a credit card transaction can cancel out one’s responsibility for climate change is catching on. Almost weekly, another company or organization vows to go carbon neutral. In December, Aeroplan joined the airlines in allowing its customers to buy offsets against flights they book. Then, in January, National Car Rental, with a similar program, made renting an SUV that much easier
to swallow. As of last week, more than 500 National Hockey League players, in conjunction with the David Suzuki Foundation, had offset 10 tonnes of emissions they’ll each generate while on the road this year. Help the environment and unload your guilt, all for just a few cents a day.
At least, that’s the promise. As carbon offsetting grows in popularity among business leaders, some environmentalists worry the practice is in fact making matters worse, since it tempts wasteful westerners to crank up their lifestyles with a clean conscience. What’s more, a closer look at some offset programs reveals that a large chunk of the money consumers think is going to carbon dioxidereducing projects is actually eaten up by expenses and salaries. And finding projects that legitimately reduce humanity’s carbon footprint is hugely expensive and prone to abuse. “Being climate-conscious is fashionable and people want the prestige of ecoaction without having to make the sacrifices,” says Kevin Smith, author of The Carbon Neutral Myth: Offset Indulgences for your Climate Sins, and a researcher with the Transnational Institute in Amsterdam. “There are fundamental problems with how you calculate the supposed benefits of any carbon offset project. At best it’s guesswork. At worst, it’s people making stuff up, sticking a price tag on it and selling it to the gullible.” The fact is, those who buy carbon offsets shouldn’t be too quick to don halos.
With greenhouse gases being linked to every nasty weather pattern and melting ice floe, it’s not hard to see why carbon offset programs offer an alluring solution to some. Virtually every human activity has a corresponding greenhouse emission. Every year, Canadians produce an average of 5-7 tonnes of the stuff each—enough to fill six hot-air balloons. Carbon dioxide isn’t the only greenhouse gas, but it’s the most prevalent. Many countries have vowed to reduce CO2 emissions by 70 per cent by 2050. Most of those reductions, if they happen, will come through complex international agreements. But retail carbon offsets are touted as a way for individuals to do their part, too. That it helps businesses burnish their green halos doesn’t hurt, either. The sector has grown from virtually nothing a few years ago to US$100 million today, and is expected to top US$4 billion by 2010.
The concept behind carbon offsets is simple in theory, if not in practice. An individual enters her personal information into an online CO2 calculator, and presto, out comes a tally of her emissions, along with a price tag showing how much it will cost to make them go away. Her money then goes to projects that,
in theory, reduce the amount of gases in the atmosphere. Planting trees is a popular offset, since a hard-working deciduous can absorb more than one tonne of carbon dioxide over its lifetime. Other common projects include geothermal heaters, wind power, and technology that captures methane from garbage dumps. Whatever the project, to truly count as an offset it must be something that wouldn’t have happened otherwise, and be verifiable by third parties.
But this is where it all gets tricky. For one thing, critics have said it’s almost impossible to tell someone how big their carbon footprint is from a few questions on a website. And attempts to put a present value on a project’s future environmental benefits are fraught with pitfalls. For starters, carbon offset projects are often located in far-off developing countries, making it hard to ascertain their effectiveness. One favoured project involves installing energy-efficient wood stoves in countries such as Uganda and Nicaragua, to replace the smoke belchers many households now own. But keeping track of their usage is difficult. Likewise, some projects involve installing foot-powered treadle water pumps in small villages to replace diesel engines. Last summer, one British newspaper reported that a farmer in India would have to man the pump two hours a day, for three years, just to offset one return ticket between Britain and India. In fact, critics argue such projects are little more than “carbon colonialism”—an attempt by Western consumers to unload their burdens on the backs of developing nations.
Yet, of all the various types of offset projects out there, the ones that take the most knocks, surprisingly, are those involving trees. Stories abound of failed tree-planting campaigns. For instance, a few years ago the rock band Coldplay had 10,000 mango trees planted in India to cancel out the greenhouse emissions from their upcoming tour. Four years later, all the trees were dead, making the offset worthless.
It’s a story Ron Dembo, the CEO and founder of Zerofootprint, a not-for-profit offset firm in Toronto, has heard many times over. As one of the larger players in the Canadian market, Zerofootprint handles the carbon offset program for Air Canada. And last month, along with the City of Toronto, it launched a tool allowing those in Hogtown to see how they stack up to their carbon-spewing neighbours. Zerofootprint also relies heavily, for now, on a 250,000-hectare reforestation project in Maple Ridge, B.C., for many of its offsets. “Trees are carbon machines,” he says. “Every year another ring comes along, and that’s another bunch of carbon that’s been taken out of the atmosphere.” Dembo
COLDPLAY had 10,000 trees planted
to offset emissions from one of their tours. Four years later, all the trees were dead.
says the problem isn’t the trees themselves, but how some reforestation programs fail to account for unforeseen problems. (Dembo knows all about risk—he used to provide riskmanagement software to financial services firms before selling his company, Algorithmes, in 2005, for $175 million.) And so those in charge of the Maple Ridge project have tried to anticipate every possible snag. It took two years to negotiate legal agreements that ensure the trees will be around for at least eight decades, while each young tree is entered into a computer database and regularly monitored. Dud trees will be replaced.
As laudable as those safeguards are, they come at a steep price. According to Air Canada, as of earlier this month, $113,961 worth of offsets had been purchased over the last year, putting nearly 1,400 trees in the ground in Maple Ridge. That works out to nearly $80 a tree. According to one forestry official in British Columbia, the cost to plant a tree and make sure it survives for the first few years is around $1.70. There are obvious problems with comparing a purely commercial endeavour with one guided by loftier environmental motives, especially this early in the project’s life, but it does raise ques-
tions about how much bang carbon offset purchasers get for their buck.
In many ways, voluntary carbon offset programs are a bit like charities. There is no concrete financial return for your investment, just the promise that your money will reduce your carbon footprint and help the environment. But as with some large charities, critics have raised concerns about the cost structure at many offset providers. While larger players in Europe that have been around longer publish full annual reports and financial statements, such disclosure is still almost non-existent in Canada. Those offset purchasers who are eager to know how much of their money goes to salaries and office equipment are left with little more than a single figure, buried on a Web page, that relates to “expenses.” Typically the number is around 10 to 20 per cent, but that still leaves many questions. What is the breakdown between salaries and other expenses? And does that figure include the costs incurred by both the carbon offsetter and the various projects they support?
There have been some attempts to dig into the numbers. Last year, the Tuffs Climate Initiative at Massachusetts-based Tuffs Uni-
versity published a report on the industry. What it found was astonishing. The amount of money that actually makes its way into emission-fighting projects ranged from as high as 93 per cent at some European players, to just one-quarter at Toronto-based Cleanairpass. Bryce Conacher, the founder and CEO of Cleanairpass, a for-profit company, says costs are now down to roughly one-third and will fall as the company achieves economies of scale. “What we’re concentrating on now is building a sustainable business so that as we do scale up, we can ensure our portfolio of carbon meets the highest standards,” he says.
The problem is, the voluntary carbon offset sector can’t agree on what those standards should be. Currently there’s a mishmash of more than 15 different industry standards, all with very trustworthy sounding names like the Gold Standard and ISO 14064-2. Perhaps as a result, there’s almost no consistency in how much carbon one dollar will buy. A quick sample of half-a-dozen offsetter websites found one tonne of carbon going for anywhere from $5.50 all the way up to $35If easing your guilt is your main reason for buying offsets, clearly, it pays to shop around.
For larger players in the voluntary carbon offsetting industry, such as power producers and other utilities, the lack of transparency and the problems that have ensued threaten to undermine the market. If done right, they say, carbon offsetting can be an effective way to encourage investment in energy saving initiatives that wouldn’t happen otherwise. But “so many people are coming out with projects and getting people to put in money to offset their flights, who knows where some of that money is going,” says the manager of one large power producer’s carbon offset division. “It’s led to a lot of uneasiness in the market and created a lot of falsehoods for us.”
For now, those small offset providers trying to gain traction have their work cut out for them. Consumer interest in offsetting is still limited. If Air Canada’s published figures are any indication, barely .02 per cent of its passengers have taken up the offer. For entrepreneurs like Dembo, who see a burgeoning market in helping people unload their guilt while cutting emissions, it will take time for consumers to come around.
“There is a lot of junk out there,” he says. “But let’s be fair, when automobiles first came online there were no regulations, no proper roads and anybody could be a mechanic. As things improved, 400 car manufacturers became three. So we’re still in the early stages of this market.” Still, if the voluntary carbon offset sector ever hopes to enjoy anything like the clout of the exhaust-spewing car industry, it’s going to have to clean up its act first. M
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