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Carbon Offsetting: forgive my carbon sin?

Jules Peck

3rd June, 2008

We all want our green wings, and the notion of purchasing them via carbon offsetting is powerfully seductive. as Jules Peck reveals, however, buying your way into eco heaven can be fraught with problems

If and when a universal cap on greenhouse gases is ratified, all emissions will be controlled by law. In the absence of such an agreement some say that carbon offsetting – a voluntary scheme that companies and individuals alike can participate in – has a role to play, and that it offers a simple way for anyone to neutralise their Brontosaurian emissions.

Put simply, offsetting entails paying for activities that prevent emissions from other sources, or those that attempt to remove CO² from the atmosphere, rather than reducing or avoiding your own CO² emissions. So instead of not taking a flight you purchase an offset certificate, the money for which might go towards building a wind turbine in India or planting a tree in Indonesia.

Offsetting is a divisive issue that fast brings to the surface discussions of political ideology, economic efficiency, moral and scientific dilemmas, and a host of other issues. Many of those who buy offsets are well-meaning and trying to ‘do their bit’. Nevertheless, there are concerns that much offsetting is little more than greenwash.

The companies that broker offsets are themselves split on the details of offsetting. Many call each other ‘cowboys’, and there is no agreement on standards. The corporate world is also split on the issue. The sectors most keen on offsetting seem to be travel, media and financial services, thus companies such as HSBC, BP, Sky, Dell and Co-op have all opted to offset.

Only companies with relatively small direct corporate carbon footprints, such as banks, offset their own direct emissions. Companies such as BA or BP, for example, would find it very expensive to do that, let alone to offset the emissions of their products, and so encourage their customers to offset instead.

Other companies, such as BT, Easyjet, TNT and Orange, have now decided against offsetting. BT has reduced its carbon emissions by 60 per cent by switching to a green fleet and green energy provision, and has committed to 80 per cent reductions by 2016. It is also investing £250 million in setting up wind farms to produce the power that its business uses, making it the UK’s largest non-energy sector wind farmer.

Easyjet backed out of offsetting, saying ‘there are too many snake-oil salesmen in the business’. TNT chief executive Peter Bakker says, ‘we concentrate on reducing CO2 emissions from our day-to-day activities, rather than shirking our responsibilities by purchasing “carbon credits”.’

Sustainability consultancy Good Business is ‘not convinced by the case for offset certificates and do not believe they have a valid place in genuine carbon reduction strategies’. A March 2008 report by Which? found that ‘schemes which help you offset your “carbon footprint” are often inconsistent and confusing for consumers’. A recent Tufts Climate Initiative study was more direct, describing the voluntary market as ‘the wild west’.

Parts of the media, such as the Independent newspaper, are likewise sceptical of offsetting, while just days after the Live Earth event Channel 4’s Dispatches programme came out very much against it, with negative portrayals of both Climate Care and The Carbon Neutral Company. The Advertising Standards Authority has even forced Scottish and Southern Energy to stop making claims about carbon neutrality in adverts.

Some NGOs are against carbon offsetting on principle, preferring regulatory approaches. WWF says ‘offsetting in itself is not a long-term solution to climate change and is rapidly becoming a distraction from the actions that need to be taken by governments, business and individuals to put the UK on a low carbon trajectory’. Kevin Anderson of the Tyndall Centre for Climate Change Research has described offsetting as ‘a dangerous delaying tactic’ and Ethical Consumer magazine described offsets as ‘an imaginary commodity created by deducting what you hope happens from what you guess would have happened’.

These very public debates aside, key questions still need answering. Does offsetting help us to contract emissions in developed countries and to support the developing world to follow a low-carbon development path? For instance, does offsetting reduce the likelihood that governments, companies and individuals will alter their own behaviour to lead to absolute reductions in their carbon footprints? In any case, do offsetting projects actually lead to real, absolute reductions of CO2? And does offsetting help to wean the global economy off its dangerous addiction to fossil fuels?

Help or hindrance?

Even if offsetting can be shown to lead to real carbon reductions in poorer countries, we still need to make huge reductions in emissions in the industrialised world as well. It’s not a question either of helping developing countries to reduce their carbon or reducing our own – it has to be both. And yet many consumers and companies are assuming they can simply offset their way to the kinds of 80 per cent plus carbon emissions reductions needed to tackle climate change. The Government is also hoping it can buy emissions reductions from developing countries and keep building airport runways and motorways.

There are real fears that offsetting diverts the attention of governments, companies and consumers from strategies to reduce their own carbon footprints, does little to prepare developed economies for a carbon-constrained future and creates a dangerous illusion that something meaningful is happening.

There are real fears that offsetting diverts the attention of governments, companies and consumers from strategies to reduce their own carbon footprints, does little to prepare developed economies for a carbon-constrained future and creates a dangerous illusion that something meaningful is happening.

Some argue that the language around offsetting engenders a ‘calculate, pay, forget’ attitude, with little resulting change. If you give someone an easy way out they are bound to take it, is the implication – it’s human nature. There are also concerns that commoditising to the click of a mouse people’s desires to do something good is simply another form of consumerism.

Offsetting individualises responsibility for carbon emissions at a time when what is most needed is collective pressure from society to push governments to act. By individualising carbon responsibility, offsetting militates against the emergence of a sense of collective responsibility, thus undermining the likelihood both of pressure on governments to act and of collective grassroots change from communities. Under such circumstances the future looks particularly bleak. Governments could then continue to avoid delivering effective regulation that enforces low-carbon strategies in developed countries.

If countries such as the UK choose to rely on offsetting, then international leadership will be lacking in showing other nations that it is possible to shift to low-carbon economic development, with the result that countries such as China and India will be unlikely to take the need for reduced CO2 emissions seriously.

Can offsetting deliver?

Under the Kyoto Protocol, countries in the developed world have targets to reduce their own emissions and/or trade by buying carbon credits from other protocol signatories. They can also trade in offsets in the Clean Development Mechanism (CDM) by investing in emissions cuts in developing countries currently not included in Kyoto, thereby gaining a Certified Emissions Reduction (CER).

Individuals and companies not bound by Kyoto can work in a similar way through carbon offsetting, which caters for those not legally required to reduce emissions but wishing voluntarily to buy offsets instead of reducing their own emissions. These can be bought from the compliance market or from an alternative Voluntary Emissions Reductions (VER) market.

The CDM, and in many cases the voluntary market, includes little either to help wean countries off fossil fuels or to develop alternatives, and only includes two per cent renewable energy projects. In 2007, 53 per cent of all CERs came from just six huge hydrofluorocarbon (HFC) avoidance projects in India, China and South Korea. Concerns have even been raised that companies actually produce HFCs deliberately, in order to profit from their ‘destruction’. In any case, avoiding HFCs in industrial processes does nothing to shift economies away from fossil-fuel energy.

As well as doing little to help global economies shift to low carbon, the history of offsetting is beset with stories of a lack of delivery of emissions reductions in the developing world. WWF recently reported that at least 20 per cent of the CDM had not led to any real reductions; others say it could be as much as 60 per cent. If this is the case in the compliance market, how much worse might it be in the unregulated voluntary one, lacking as it does standards and transparency?

Several factors need to be considered.

Baseline estimates of how much carbon has been emitted in the activity to be offset are crucial, and yet such estimates vary enormously between offsetters. The Intergovernmental Panel on Climate Change (IPCC) has found a margin of error of 10 per cent when measuring emissions from cement manufacture, 60 per cent with oil, gas and coal, and 100 per cent with some agricultural processes. Offsetting companies themselves cannot agree: the Carbon Neutral Company states that a return flight from London to Bangkok produces 2.1 tonnes of CO per passenger; Myclimate says 3.6 tonnes and Atmosfair 6.9 tonnes.

Additionality – how an offset project shows it is actually adding reductions beyond business-as-usual (BAU) – is also a key factor. For example, if a project is due to begin anyway, as a result of regulation or because it is already profitable, then it does not need offsetting finance support, as it is no more than BAU. This is a highly contentious and problematic area, with diverse standards and quality, and The Royal Institute for International Affairs has been quoted as acknowledging the ‘impossibility of measuring and defining savings that are additional to those that would have occurred in the absence of emissions credits’.

Reports into offsetting activities are full of well-documented examples of projects that are little better – and occasionally worse – than BAU. For example, Climate Care sold offsets for supposed additional-to-BAU emissions reductions from 10,000 energy-efficient lightbulbs distributed in South Africa, only to find that the Government was already providing these free of charge anyway.

Timing of offset carbon reductions is also problematic. The method of ‘future cost accounting’ means that offsetters in the voluntary retail market are usually selling future offsets long before real reductions in emissions are supposed to happen – especially in the case of forest offsets. For instance, according to calculations in Carbon Trade Watch in 2007, under future cost accounting a flight to New York in 2008 that emits 0.77 tonnes of CO per person, costing £5.77 to offset, would be 80 per cent offset by 2020. Not until 2108 would 100 per cent of the flight be offset.

Prices of offsets vary hugely, which makes one wonder: What is the ‘right’ cost for true reductions? The Tufts Climate Initiative study found offsets between $5.50 and $18 per tonne, depending on offsetter. A report by Clean Air-Cool Planet found prices between $5 and $25, and stated ‘there probably is a general correlation between price and quality in the retail offset market’. At a Carbon Disclosure Project launch, Adair Turner, now chair of the UK Climate Change Committee, commented that offsetting does not stack up, and that if companies had to pay the full costs of carbon in offsetting then none would continue to offset. This seems to be a point well made, as Stern calculated the full social cost of carbon to be at least $85 per tonne – more than 10 times higher than many current offsets.

Verification of offset project reductions by an accredited third party is often not undertaken. How, for instance, can one know if every individual fire built by households in South Africa’s Basa Magogo offset scheme really is now built with coal on the bottom of the fire only (thus emitting less)? Whole offset schemes are based on the idea that such changes in practice will actually be implemented continually in every case.

Then there is the issue of double-counting – either by mistake or deliberate reselling. This can be avoided with strict credit registers and audit trails, but this is not common in the voluntary market. There are also serious issues of lack of transparency in the voluntary offset market. For instance, TerraPass is very secretive about its revenue, profits or even how much it has invested so far in carbon offset projects, which means that no one using TerraPass has any clue how much of their money goes to carbon offsets.

A further concern is permanence, especially in forest offsets where trees may be cut down or burned way before the emissions attributed to them might have been sequestered. Mike Mason, founder of Climate Care, told the UK Parliamentary Environmental Audit Committee in 2007: ‘I think planting trees is mostly a waste of time and energy’ – even though his company still sells as much as 20 per cent of its offsets from forest projects. Non-forestry project failure is also well documented by groups such as Carbon Trade Watch, WDM and Cornerhouse.

There is no agreed standard for voluntary offsets, which are bought from projects and its 2007 consultation on a voluntary code of best practice for offsetting, the Government decided to exclude all voluntary offsets as it felt they were of dubious quality, but in February 2008 it changed its mind and agreed VERs could be part of a standard.

The Voluntary Carbon Standard (VCS) has been launched by UK NGO The Climate Group to be an entry-level standard that calls for reductions to be additional to business-as-usual, but not extra social and environmental benefits. However, WWF has called the additionality requirements in the VCS ‘completely inadequate’ and refuses to recommend VCS, calling it ‘bottom of the barrel’.

There is also a rebound effect, which means that money saved through energy efficiency improvements may simply be spent elsewhere leading to increased emissions or no reduction overall. There is good evidence that energy-efficiency leads to more not less energy-profligacy, so for instance TVs may use less power today than 10 years ago, but most homes have twice as many TVs.

Carbon colonialism

Many see carbon trading and offsetting merely as an extension of colonialist profiteering from poor countries. Indeed, as Oxford academic Adam Bumpus said in a recent paper delivered to the Royal Geographic Society, ‘carbon offsets are premised on North-South inequity. You have to have a developing world if you’re going to get your cheap carbon offsets’.

One of the more perverse effects of offsetting might be to exacerbate the divide between north and south, rich and poor. Logically, to get emissions reductions in China and India you would start with the urban rich who are accounting for large amounts of avoidable emissions, and yet offsetting projects mostly target the activities of the poor, whose emissions are from daily necessity and who are never likely to get much chance to emit in any case. There is also evidence of a lack of consultation with communities and accusations that offset projects – solar power projects in Sri Lanka, for instance – are merely perpetuating semi-slavery, bonded-labour practices in tea plantations. A knock-on effect of forests being ‘protected’ can be forced removal of indigenous people.

Offsetting’s ability to alleviate poverty must also be questioned. In 2000, the US Congress’s Meltzer Commission found that 65-70 per cent of World Bank development projects in the world’s poorest countries had failed to make any difference to poverty. Try mixing the profit motive with that of development, as offsetting does, and one can only assume effective delivery of equity and poverty alleviation becomes even harder. Successful investment in the developing world is more likely to result from improvements to governance, and that is best delivered through government and multi-lateral institution channels supported by the NGO community.

Changing behaviour?

Even if we assume that all the problems associated with offsetting highlighted so far can be dealt with – and that seems a huge ‘if’ – is there evidence that offsetting can also help the public be more carbon-literate and to change the way people consume?

It is clearly beholden upon the offsetting sector to prove a causal link between offsetting and other carbon-reduction activities. Climate Care says it has evidence that a significant proportion of its customers state they have, as well as offset, engaged in energy efficiency. And yet Mike Mason of Climate Care is nevertheless proud to say,
‘I would rather 100 per cent of people offset their emissions from flights than 50 per cent of those people not fly at all’, suggesting he sees offsetting as the only real objective rather than reductions in people’s footprints.

There is also a concern that offsetting sets up a confusing cognitive dissonance in people’s minds – they are told both that ‘climate change is serious and huge and scary’ and ‘don’t worry you can continue as normal and just pay a few quid’.

BP and Forum For The Future (FFF) encourage drivers to offset through Target Neutral, saying ‘we all contribute to CO2 emissions when we drive. We can all do something about it. It’s simple and doesn’t cost the Earth. On average its just £20 a year’ – but the cost of this offset is so low that this surely simply encourages people to keep driving. What evidence BP and FFF have of any more positive change in behaviour is unknown. WWF has said of this scheme that BP is ‘completely misleading as they imply that it is fine to continue with business as usual as long as you purchase offsets’.

The Parliamentary Environmental Audit Committee (EAC) concluded, ‘there is at the moment very little evidence as to the effect of offsets upon the behaviour of those who purchase them’. Carbon Clear told the EAC that only one to two per cent of consumers currently buy offsets, and the Energy Savings Trust suggested these were people either concerned with green issues already and/or affluent. According to consultancy Energy for Sustainable Development (ESD), there is a paucity of evidence about whether the people offsetting are the same as those reducing carbon.

An industry in crisis

These days, offsetting is facing a serious crisis of legitimacy. First, there are real concerns that a knock-on effect of offsetting is that it sanctions and perpetuates the heavy emissions behaviour that we so urgently need to change. For instance, many people consider that one of the major contributions to future carbon footprints will come from flying. Some 85 per cent of Climate Care’s tenfold increase in sales during 2006 came from the online offsetting of flights.

Assuming that we aim for 80 per cent carbon reduction across the economy and yet have no decline in the expected growth of UK flights and no intervention from government, by 2050 aviation would account for 135 per cent of our emissions. We need both political leadership to provide alternatives and disincentives to increased flying. We need a real culture change away from the Prague stag weekend and Newquay surf-flights.

Second, offsetting may delay rather than promote reduced dependence on fossil fuels. Third, the evidence is scant that it leads to absolute emissions reductions.

Fourth, there is real danger of exacerbating inequity, as the funds from offset schemes are largely benefiting the rich and corporate in the developing world rather than those most in need. Instead of targeting the poor we urgently need to invest in new technologies that are scalable and transferable to developing economies, in order to provide large amounts of sustainable, low-carbon energy and to wean economies off a dangerous diet of fossil fuels.

Finally, it is questionable whether offsetting fits with broader sustainability concerns related to social issues, unsustainable resource use and the Millennium Development Goals.

Do the concerns about offsetting highlighted here sound the death knell for offsetting? Is there perhaps ‘less bad’ offsetting activity? Some companies now bypass the offset sellers and access projects directly, thus gaining more control over real reductions. Some companies do make real efforts to assess and radically reduce their emissions as well as offset, but that is rare.

As ever, the worst drags down the overall level of the playing field, and there is a real need to blow away the fog from the offsetting market to assess whether it can be any part of tackling climate change.

It is absolutely beholden upon the offsetting community to prove that it can deal with these concerns before offsetting can be given anything like a green light.

Jules Peck is a director of Arkism (www.arkism.com), which works with companies and NGOs on sustainability issues. He is also a director of the Conservative Party Quality of Life Review

This article first appeared in the Ecologist May 2008

 

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