2: Problems with Traditional Offsets

Imagine making significant energy efficiency investments in your own house, and lowering your energy bills by 30% (which is quite possible in many cases). You would know those energy and corresponding emissions reductions were real because you’re paying the bills. You would know they are actually a reduction in emissions over last year because, well, you’re still paying the bills, and they’re much lower. You would know they’re going to last because you did it yourself, and you’re not likely to undo it. And if your family or friends pitched in with time or funds, they would likely believe you when told of the energy and emissions reductions, and would by rights be proud of their role.

But offsets, by definition, are *not* something you did yourself. This makes it a whole lot harder to be confident of their integrity, in many ways. Offsets are quantified packages of emissions reductions made by *someone else*, that you lay claim to through purchase. According to the World Resources Institute, the integrity of offsets consists of at least the five following criteria (http://www.wri.org/publication/bottom-line-offsets).

1.       Real – the reductions must exist – they must be actual reductions from a pre-determined baseline

2.       Permanent – they must not be reversible, to a reasonable degree of certainty

3.       Additional – they must be real reductions that *would not have happened* without the funds from the offset investors

4.       Verifiable and (5) Enforceable – projects must be monitored, and good records maintained on both the emissions reductions *and* the offset ownership, to avoid double counting or other fraud

But if you buy one carbon credit/offset (= 1 metric ton of carbon dioxide or equivalent), you have none of the same assurances/realities of when you made the reductions yourself through efficiency … or if you had invested in renewable energy at your home to reduce your fossil fuel use. The source of the offsets may be in the next state or half a world away, the permanence and additionality – even the very existence, the “realness” – entirely a matter of trusting the vendor. This situation has given rise to innumerable problems in both the regulated and unregulated carbon markets throughout the world.

  • Additionality is the most challenging criteria to meet and affects virtually all categories of offsets. Most renewable energy offsets, for example, are generated by utility projects, yet as the market cost-competitiveness of utility-scale renewable energy (wind, but also solar and geothermal) steadily improves, how is one to know whether a project would have happened even without the sale of offsets?
  • Tree-planting and soil sequestration projects potentially hold multiple benefits beyond emissions reductions. But they also are often planned in developing countries and never get planted (as was the case with the Vatican’s investment, as explained by this excellent article in Christian Science Monitor), or the trees – and emissions reductions – don’t survive (as in the classic Coldplay forest described in the Wikipedia article).
  • Voluntary markets are easy to criticize, and verification, monitoring, and enforcement are very important components of regulated carbon markets such as those administered by the European Union and the UN. Yet the for-profit companies and consultants that often carry out the verification are typically paid not by the offset purchasers or the regulators, but by the project developers themselves. This strong economic incentive to approve questionable projects creates a real conflict of interest – if they don’t approve projects the developers will take their business elsewhere.
  • According to the New York Times and others, there is growing evidence calling into question a large portion of offsets based on the destruction of a byproduct of the production of HCFC-22, an ozone-friendly refrigerant. HFC-23 is thousands of times more potent a greenhouse gas than carbon dioxide. Its destruction is thus worth a great deal in the offset market, which accounts for the fact that such projects have made up over half of all those traded under the UN’s CDM market (one of the two major regulated markets). The UN’s CDM itself is now investigating the likelihood that plants in China and elsewhere have been overproducing HFC23 for the sole purpose of deriving profit from the sale of offsets based upon its destruction.
  • Even when all the criteria appear to be acceptably met, offsets are still vulnerable to the charge of being, essentially, the equivalent of indulgences – a way for those guilty of emissions to pay for others to absolve them, a means for business as usual in the privileged world, a form of carbon colonialism.

3: Our Approach to Offsets