Oneota Tag Carbon Offsets

One of the most controversial topics in the climate change world today is that of carbon offsets (or more accurately: greenhouse gas reduction offsets).

Have you lowered your home energy use through efficiency and renewable energy (solar electricity, solar hot water, geothermal, wood heating and wind are all becoming more common and affordable), but want to reduce your contribution to climate change even further? Offsets are essentially a way for you to buy “shares” in projects that reduce greenhouse gas emissions somewhere else, thus “offsetting” your own emissions.

Sound complicated? Even a bit fishy? We’ll touch on the many problems with offsets in the next section, but for now, let’s take a look at many sources of offsets in existence today:

• Renewable energy credits (RECS) allow you to purchase the emission reductions from renewable energy (such as solar, wind, geothermal, or biomass) even if that power is being used somewhere else

• Energy efficiency and methane reduction projects all reduce emissions in buildings, industry, or waste (animal and human) from the “business-as-usual” state to something better

• Sequestration projects use tree planting or certain agricultural techniques to remove carbon dioxide from the air and “sequester” it in trees or soil, essentially storing it over the long term

There are many vendors of carbon offsets that you can find on the web, but remember – those projects and offsets are not local. Return here to purchase local offsets that support local projects!

The bulk of offsets – or “carbon credits” – are traded internationally in compliance markets. Almost all developed countries in the world except the United States are signatories to the Kyoto Protocol, and the European Union has also developed its Emissions Trading Scheme. These mechanisms are versions of cap-and-trade approaches to reducing emissions, whereby companies and countries are required to steadily reduce emissions over time. If they can’t reduce their own emissions, they purchase offsets from other companies or from projects in other countries, including in the developing world.

In the US, however, much of the offset market is voluntary. Individuals, businesses, or organizations decide to purchase offsets to reduce emissions based upon ethics or ideas about social responsibility. Some of the offsets are generated locally, but in most cases, they’re purchasing offsets from far away projects they know little about.

For much greater detail on carbon offsets see this good Wikipedia entry or this summary article from Green America.

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.

What is a conscientious person (or business) to do?

The first two steps are clear:

1. REDUCE your emissions by reducing your fossil fuel consumption via energy efficiency and conservation. Our Cost-Share and Direct-Install programs can help.
2. Replace remaining fossil fuel use by generating your own RENEWABLE energy to the degree possible.
3. Then and only then, consider RECYCLING some of your saved energy dollars locally, through purchasing local offsets, or other types of emissions reductions efforts.

We’ll address some of the criticisms of offsets as an emission reduction tool in discussing the destination of Oneota Tag funds, and the source of their figures. But we should also note that a major strength of local projects is their multiple benefits:

• Emissions reductions from *local* projects, where the local light of day isn’t an absolute guarantee of integrity but is certainly a powerful disinfectant of many common offset problems. We’ll keep good records and report the data and progress within 6 months, and at least every year thereafter. We’re always open to questions, and you’ve even welcome to join us “in the field” as a volunteer Energy Corp member.
• Local economic development and stimulus benefits, through not only the local reinvestment of offset funds but the multiplier effect of those projects and of the annual savings in energy dollars now prevented from flowing out of the local economy. See this brief Department of Energy fact sheet for more on the benefits of plugging the energy leaks in local economies (it includes a feature on Osage, IA).
• Social and educational benefits that accrue from local leadership and partnerships in energy issues; the involvement of local volunteers, students, contractors, and the general public in retrofit activities; and the evolution of community attitudes and ethics that may come from a local offset program being part of a vast array of locally-led, long-term participatory energy efforts.

The concept of offsets, while fraught with implementational and moral problems, also holds potential economic integrity in this interconnected world.  We believe the real power of offsets is local, and we hope you’ll join us in transitioning Winneshiek County towards both energy and carbon independence.

There are clearly many options for emissions reductions here in Winneshiek County, from agricultural sequestration projects to renewable energy to energy efficiency. In evaluating where to start, we considered not only the criteria for offset integrity described earlier, but also the following:

• Projects where implementation can begin relatively quickly and proceed with relatively small investment
• Projects that carry community and educational benefits: that allow for involvement of volunteers, students, and community members in implementation and involve large numbers of households and businesses in generating savings
• Projects that are high on the list of cost-effectiveness, allowing for a relatively low cost/ton of emissions reductions

This last point of the cost of emissions reductions is both the fundamental economic rationale of using offsets as part of cap-and-trade regulated structures, and the cause of the widespread crisis of integrity in international markets. On the one hand, an efficient market should result in the most cost-effective reductions prioritized and implemented, wherever and whatever they may be. On the other hand, the range of potential offsets is so broad, the incentive among developers to cut corners so powerful, and the system so complex, that there is danger of offset markets and the policies behind them collapsing from lack of integrity.

Identifying the most cost-effective practices is actually not especially difficult in theory, however. McKinsey and Company have produced a number of excellent and widely respected reports in recent years, including the development of greenhouse gas abatement curves for the US and the world. In these and almost all other analyses, residential energy efficiency falls at the most cost-effective end of the spectrum. In fact, most energy efficiency improvements in all sectors can be made at substantial *negative* cost, that is, they more than pay for themselves during their useful life, even at significant discount rates.

Happily, many residential efficiency improvements also meet the criteria of timeliness and participatory approach outlined above. Also happily, Winneshiek Energy District has funding for AmeriCorps volunteers to become trained and to implement simple but effective residential energy efficiency practices right here in Winneshiek County, through a partnership with Green Iowa Americorps. Starting in the fall of 2010, the District’s Energy Corps has begun a residential “direct-install” program, including:

• Replacing incandescent light bulbs throughout the house with compact florescents
• Replacing inefficient shower heads with efficient ones, and installing faucet aerators
• Installing current-sensing smart strips with computer or entertainment systems, and adjusting the computer power settings together with homeowners
• And potentially many more simple, quick, steps to saving energy, including:
• Installing and/or setting programmable thermostats
• Conducting weatherstripping and air sealing

The “possibly” list above represents just part of what our AmeriCorps team will be doing, but not all practices will be funded with Oneota Tag funds. This is because – as will be explained in the next section – determining actual cost/ton of various practices isn’t as simple as it appears. Beyond the direct install efforts, we will also over time be organizing workshops, participatory “weatherization” days, training Luther College work-study students to participate in the direct-install, and much more.

Possibly could also refer to the fact that there *are* a wide range of potential projects beyond residential energy efficiency where we could invest Oneota Tag funds. From agricultural methane capture and use to renewable energy generation, we are not ruling anything out, we’re just starting with residential efficiency. We’re also seriously considering the possibility of “local brokering” of offsets for major projects. If a large business, or a school or unit of government, wanted to undertake a major solar photo-voltaic installation, for example, and local individuals or businesses are interested in significant offset purchases, the Oneota Tag program could function as an aggregation mechanism.

Warning to the reader: this section is all about numbers and calculations! Proceed to The Upshot if it’s too early in the day for that.

1 metric ton CO2 equivalent = 1 Oneota Tag = $30

Why metric ton? We’re not trying to be european, it’s just the international unit used for offsets, even in the US.

What do we mean by CO2 equivalent? Carbon dioxide (CO2) isn’t the only gas causing climate change and warming, but it’s the most ubiquitous, so the others are all converted by potency and lumped into CO2 equivalent offsets.

That’s the magic formula. We need say no more, right? Actually, placing a price on a ton of offset is one of the greatest challenges facing any organization involved in the market.

Take a light bulb example and these inputs:

• Say you replace a 100-watt incandescent with a 25-watt compact fluorescent
• the bulb cost $2, lasts 8-10,000 hours, and provides a similar amount and quality of light
• It is in your bedroom and on for an average 2.5 hours/day, 355 days/year
• Interstate Power and Light (provider for Decorah) emits 2.4 lbs CO2 for every kilowatt hour of electricity you use
• A metric ton equals 2205 pounds

75 watts/hour savings (100W-25W) x 2.5 hours/day x 355 days/year = 66.5 Kwh/year saved

66.5 Kwh/yr x 10 year x 2.4 pounds CO2/Kwh = 1,596 pounds CO2 = 0.72 metric tons CO2 lifetime

$2/bulb divided by 0.72 metric tons CO2 = $2.78 per metric ton CO2.

Now you’re thinking either “$2.78!! why are the charging me $30??”  or “wait a minute, I don’t leave my bedroom lights on 2.5 hours/day”,  and [a biggie] “I have some lights I use a lot more than that, and some I use almost never”, and [here’s the real biggie] “I was planning on replacing those bulbs *anyway*, so you can’t claim 10 years worth of savings!”.

There are SO many variables, even for just one practice like light bulbs, and so many assumptions that have to be made, and light bulb change-outs are probably the single most cost-effective (and easy-to-calculate) practice. When you try to develop a suite of practices, with many being less cost-effective than CFLs, the aggregating and weighting of costs based upon varying assumptions gets mind-boggling pretty quickly. That said, we’ve run the numbers many different ways, studied assumptions and discussed figures with other program managers, and in the end, we believe we can provide a suite of efficiency supplies and services using $30/ton as a fairly conservative figure, as shown below.

Note, these figures do not include labor, thanks to the availability of our well-trained Americorps volunteers functioning as the District’s Energy Corps. We will determine what portion of proceeds will be required for program administration over time, but are confident it will be a small fraction and is included in the $30/ton.

Possibly the most important part of this conservative approach is what we call the additionality factor, a number we try to assign to identify how much of the total lifetime emissions savings we’re counting, versus how much would have happened anyway. Our additionality factor is no more than a best guess, but it’s a guess many programs don’t even bother to make- they just claim credit for all savings of everything they do.

These factors will be adjusted like so many of our calculations as we monitor the progress of the program. For example, we’re counting only 25% of the savings of LEDs, assuming that many if not most people would have changed out bulbs anyway over time, given rising energy prices and climate awareness. We’re guessing that 35% of shower head savings makes sense, and maybe 45% of the savings of smart strips and some other items that aren’t as likely to rapidly reach high rates of market penetration.

So here is an outline with what we consider to be conservative, theoretical numbers:

• We’re estimating (from initial survey data) an average of 50 light bulbs in each house. Some will have many CFLs and some none, let’s say we replace 45 bulbs/house, at $1.50/bulb, total cost $67.50. They vary in wattage from 30-100+, we’ll use 60 watts average incandescent, replaced with 13-watt CFL equivalent, for a savings of 47 watts/hour used. Some bulbs are used 6 hours/day (2,190 hr/yr) or more, some barely an hour a week (52 hr/yr). We’ll use an average of 500 hours/year throughout the house, lower than most estimates. 45 bulbs X 47 watts saved/hr X 500 hours/bulb gives a total annual savings of 1,057.5 kWh of electricity. Right about 2.4 lbs of CO2 are produced for every kWh of electricity used locally, so this hypothetical household saves 2,538lbs, or 1.15 metric tons of CO2 in a year. Lifespan of these bulbs is about 10,000 hours, or 20 years at 500 hrs/year, but we’ll be conservative and say ten years, or 11.5 metric tons CO2 reduction, for $67.50 investment. Using our “additionality factor” of just .25 (claiming only 25% of savings, assuming many would have changed out light bulbs anyway over the years), we claim 2.88 tons, which results in $23.44/ton of emissions reductions for light bulbs.
• Shower heads are a bit simpler to figure in some ways but have just as many assumptions. If a shower gets used 1 time/day most of the year, that’s 355 showers, at an average of 10 minutes each. Starting with a typical flow rate of 4 gallons per minute and reducing to 2 with an efficient showerhead saves 2 gallons per minute, or 20 gallons/shower. If a hot shower uses 75% hot water that’s 15 gallons hot water saved, or about 120 pounds. Heating 120 pounds water from 55 degrees to 120 degrees with an 80% efficient gas water heater takes 9,750 Btu/shower or 3,461,250 Btu/year saved, or 3.46 million Btu (MMBtu). Using a DOE conversion of 116.7 lbs CO2/mmbtu, we’re saving 404 lbs/year. If the showerheads have a 10-year lifespan, that’s 4,040 lbs or 1.83 metric tons CO2 saved, and if we use an additionality factor of 0.35 (only claiming 35% of total savings), we get 0.64 tons. For a showerhead that costs $5, that’s $7.81/ton of emissions reductions for showerheads. Of course, some showerheads don’t get used, and some take shorter showers … and faucet aerators are even cheaper but cost more per ton of emissions because of the relatively low volume of hot water used in faucets compared to showers. We’ll also be installing hot water insulation in some cases, measuring hot water temperature and potentially turning it down, and talking with homeowners about easy “bright ideas” such as washing clothes in cold water with special cold-water detergents, all no or low-cost steps with potentially high savings.
• Finally, we’ll include smart power strips here in the early stage calculations, as plug load is the fastest growing portion of home energy use and these current-sensing strips hold tremendous potential to reduce demand for computer and entertainment systems. The makers of the principal product on the market uses figures from a study showing between 300 and 600+ kWh savings annually per strip, so we’ll be conservative and use 150kwh/year savings, a lifespan of 10 years, a cost of $20/strip, 2.4 lbs/CO2/kwh, and an additionality factor of 0.45. This gives us a cost of $27.40/ton of emissions reductions from smart power strips, though this will need to be verified, like everything else, from the data.
• If nothing else, we’re attempting to show that $30/ton is a conservative figure. We hope to include a broader suite of practices as we go on, from programmable thermostats to furnace filters, air sealing to tire pressure gauges. Part of the reason we’re being conservative on our figures is in case the data we collect show we’re still off, but partly so that as we expand the suite of practices that Energy Corp implements, we are able to include some measures that may have a higher cost/ton, yet they balance out when included with lower-cost items.

Where does $30/ton fall in the broader marketplace? As of the fall of 2010, offsets in Europe’s Emissions Trading Scheme (the largest market in the world) were in the $20 range, where they’ve been for a while.

Yale University, which has a well-respected local program focused on residential efficiency, values their offsets internally at $40/ton, not including overhead. We are developing our databases to not only allow careful tracking of products installed and estimated savings and costs, but also to allow regular input from participant questionnaires and follow-up surveys and visits. We will post our first detailed report six months into the program, at which time we will assess potential changes to the pricing structure, along with other adjustments.

Are Oneota Tags a good investment?

If you’ve taken action to reduce your own footprint through efficiency measures first, and at least seriously considered generating some of your own renewable energy, then take a look at our Oneota Tags as a way to invest in more local reductions.

Why?

• We’re real, we’ll be installing simple measures in homes around the County
• Our efficiency improvements are permanent to the degree customers don’t reverse them, which studies show is uncommon and will be part of our monitoring process
• The emissions reductions are undeniably additional to the degree that we would not be making the improvements without the funds from Oneota Tags, and the homeowners certainly hadn’t already done so, and we *are* factoring in the likelihood that some would do so in time
• We will strive for maximum transparency in our reporting of accomplishments and accounting at regular intervals and will be happy to discuss the program in more detail

PLUS (and this you don’t get from any other offset program in the world):

• We’re local, and reinvest all money right here in Winneshiek County, which means economic activity, and energy dollars prevented from leaving the local economy – a gift that keeps on giving and growing, every year.

We’re part of a local movement we’d like you to join, a transition in our local culture and economy toward greater self-reliance and sustainability in energy and emissions and beyond.