Carbon Offsets: Buying Your Way Out of Responsibility

Presidential hopefuls do it, celebrities do it, educated CEOs and even Swedes do it -- it's carbon offsets, the market-based solution to global warming that's currently grabbing column inches and investment bankers' lips. A booming multimillion-dollar market that's expected to more than quadruple within the next three years, the industry has garnered as much criticism as feel-good hype. Its detractors, mainly in Europe, remain unconvinced the system actually works, claiming its impact is unclear at best, and that it creates loopholes that lets polluters do business as usual.

"It's buying your way out of responsibility," says Kevin Smith, a researcher with Carbon Trade Watch, a project of the Transnational Institute, an academic think tank based in Amsterdam, Netherlands. Smith, who also co-authored "The Carbon Neutral Myth," believes that free-market environmentalism is a gimmick that appeals to an increasingly carbon-conscious public. "It's a technological quick fix that's deeply flawed and used more as a means to absolve climate sins rather than tackle the actual issue," he says.

Carbon offset credits is essentially a market that helps consumers or corporations reduce or neutralize the impact of their net carbon dioxide emissions -- from flights, commuting, hefty utility bills or shipping online purchases -- through cost-effective alternatives. The system is based on carbon emissions trading, aimed at governments, industries and corporations that cannot meet emission targets set by the Kyoto Protocol, and in turn, buy or trade credit from those that beat theirs. In both cases, the polluter pays.

Since Kyoto came into force in 2005, the nascent, and potentially highly lucrative, emissions market has steadily increased. In America, which has refused to sign on to the Kyoto Protocol, much growth has been geared instead towards the voluntary offsets market. One such example is the Chicago Climate Exchange, the world's first greenhouse gas reduction trading system, which was established in 2003.

More recently, forerunners in the consumer market such as TerraPass, Native Energy and DriveNeutral have become high-profile, thanks to Al Gore, the Oscars and celebrity spin. Europe also boasts its share of offset companies. Germany's AtmosFair, Oxford-based Climate Care and the Dutch GreenSeat have joined the ranks of the carbon revolution.

Much of the criticism aimed at the voluntary market is what opponents claim is its seductive sales pitch: Just buy back your pollution and click, and the provider takes care of the rest, whether it's buying emission trading credits, planting a tree -- meant to absorb carbon from the atmosphere and by far the most popular, if controversial offset method -- or investing in renewable energy sources.

But there's a huge, immediate glitch: the current offsets market, an industry that has mushroomed only in the last several years, is unregulated and no universal carbon-offset standard exists. As carbon is an intangible commodity, companies can sell what they want, claiming its carbon neutral and "carbon calculators" and costs fluctuate widely, making what consumers are buying unclear.

"It's selling hot air and susceptible to fraud," says Oscar Reyes, Transnational Institute's communications officer, who cautions that all trading schemes are "ineffective as a means to stimulate cuts in carbon emissions."

"There is a lot of scope for 'cowboys' to cash in, and the supposed climate benefits are impossible to measure," says Smith, noting that offsets don't actually remove the tons of carbon dioxide currently in the atmosphere, and trying to guess how it will involves so many variables that working it out is almost impossible.

While Smith believes many people genuinely buy offsets out of concern for climate change, he sees businesses using them in a more cynical and calculating way. "It gives them a sophisticated veneer of environmental sensitivity they don't deserve," he says, referring to British Airways, one of many airlines that now encourage customers to buy carbon offsets for their flights.

The airline industry is a huge polluter, however. According to the Tufts University Climate Initiative, a round trip flight from America to Europe adds 3-4 tons of CO2 to the atmosphere, the equivalent of the carbon emissions from 20 Bangladeshis over the course of a year. Worse, in addition to carbon dioxide and other pollutants released during flight, airplanes also trail water vapor, which has a significant heat-trapping effect.

"British Airways is continuing to aggressively expand in the face of a known threat, and yet they're using these offset schemes to gain environmental legitimacy in the eyes of the public and the media," says Smith, who notes that since BA has been partnered with offset provider Climate Care, it has shown a 20 percent increase in pretax profits and launched a budget airline for commuter flights. "They're 'greenwashing' themselves, marketing themselves as being eco-friendly when they've done nothing to change the underlying reality, and the consumer is paying for it."

Climate Care actually highlights another issue -- the strange corporate partnerships many offset companies have formed to do business. Climate Care recently announced a comprehensive offset program in the United Kingdom with Land Rover, whose parent company Ford has the worst fuel efficiency and highest average vehicle greenhouse gas emissions of major U.S. automakers, according to a 2004 report from the Union of Concerned Scientists.

Ford is also partnered with Terrapass, of recent Oscar hype, and which has been cutely dubbed by the L.A. Times as "Kyoto for commuters." This begs the question is this really tackling the issue (such as reducing emissions from fossil fuels by using, er, less fossil fuel) or peddling positive publicity?

But one of the most important points for environmentalists is the north/south exploitation that the offsets industry embodies. A crucial element of the Kyoto Protocol is the Clean Development Mechanism (CDM), which allows heavily industrialized northern countries to invest in carbon saving projects in the global south as an alternative to reducing their own emissions. There are many reasons for this, the first quite obvious: It's cheaper. The same goes for many offset projects, which choose to invest in projects in Latin America, Africa and Asia. But, as environmentalists are quick to point out, it's not cheap for the locals who suffer the impact.

A case in point is the band Coldplay, which offset recording its "A Rush of Blood" album with 10,000 mango saplings in Karnataka, India. The band urged fans to join in and offset trees with Carbon Neutral Co., the United Kingdom's largest offset provider, also used by Al Gore. According to various media reports, nearly 40 percent of the saplings died, mostly because the dry, rocky village didn't have an adequate water supply and there was no financial infrastructure in place to support it. And while the companies involved in the project got paid, the local peasants who maintained the trees did not.

Or there's Mount Elgon National Park in east Uganda, where the Dutch FACE Foundation has been planting carbon offset trees since 1994. FACE is partnered on this project with offset provider GreenSeat, whose clients include Amnesty International, the British Council and the Body Shop. According to a report by World Rainforest Movement, a Uruguay-based nonprofit, villagers living along the park's boundary have been beaten and shot at, seen their livestock confiscated by armed park rangers guarding the "carbon trees," and largely made homeless, forced to sleep in either neighboring town mosques or caves.

"CDM is being used as a way of legitimizing industries that continue to damage the local environment," says Reyes of Transnational Institute. While Reyes is speaking more broadly of government carbon trading schemes, similar conditions apply to offset companies, which create projects that are actively opposed by local communities.

For example, according to Reyes, in Raigarh city (in the Indian state of Chhattisgarh), sponge iron plants that pollute water from rivers and irrigation channels are being rebranded as CDM projects; in West Bengal, many firms that use the heat from kilns to generate electricity are now being paid carbon credits for their efforts, even though they continue to pollute groundwater supplies and the local atmosphere.

But those who work in the voluntary offsets industry say the market's still young and don't disagree that major kinks need to be ironed out. "I understand the criticism. I always think criticism is an important message the system's not working good enough," says Sascha Bloemhoff, marketing and sales director at New Values, an online emission rights trading service based in Amsterdam. Geared towards businesses rather than individuals, New Values works rather like eBay, where companies can counter bid on emission rights, or pay for credits on the spot. Bloemhoff, who has worked in development aid her entire career, admits that while she sees many hurdles ahead, she also remains positive.

"Considering how rapidly the market has taken off, I'd say it has been a huge success. That doesn't mean it is working as it should, but we're only in the first phase. If we do nothing at all, there will be no change," she says, adding, "It's easy to say business is creating the problem, but it's our consumption, or consumer demand, that's creating climate change. We're buying it."

This is point where environmentalists would agree. If the offset industry has created a situation much like this: deck chairs, Titanic, reshuffle -- then environmentalists believe it's important to seek alternatives. "There's a danger that offsets will absorb all the public's attention because they're easy, convenient and cheap. But they're stymieing collective action and debate, and encouraging complacency," says Smith. "There are hundreds of things people can do to address climate change. Offsets are not the only solution."

What can people do? Smith launches rapid fire into a list: Lobby to cut the $200 billion per year global subsidies for coal and oil power; reduce the supply of fossil fuels by supporting communities resisting their development, address over consumption, put pressure on the government to create systematic change, and so forth. For example, before Kyoto went into effect, in the 1990s Denmark introduced a variety of "green taxes," including an energy tax, recycling the revenues into subsidies for energy-saving projects.

While environmentalists seek alternatives to emissions trading, Mark Trexler, president of Trexler Climate + Energy Services, Inc., an energy and environmental policy consulting firm in Portland, Ore., feels they are having at least one positive impact: educating the public. "Certainly no one should be arguing offsets are the answer, but they're a step in the right direction if used to start to building constituencies for future public policy," he says. "Whether it's emissions trading, new technology or carbon taxes, each has a role to play in what is a very large jigsaw puzzle."

Trexler believes the voluntary markets are no substitute for government policy. "This by far the hardest environmental issue we have ever tried to tackle, and unfortunately, there's no silver bullet solution," he says. "It will take lots of work and experimentation."

Only it's anybody's guess how much time we have to experiment.

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