Carbon offset confusion

Warning – this is a bit of a ramble/stream of conciousness.

I am trying to get my head around the carbon trading (and especially personal offsetting) industry. Whilst it seems a good thing to do on the face of it, it does seem to suffer from a lack of transparency in how the market works, and potentially an pretty inefficient market.
There are a wide variety of projects and techniques, and one might suppose that you simply buy the ‘offset’ at the lowest marginal cost. But, the lack of clear standards and independence in review seems to mean that this may mean you fund projects that would happen anyway (and so do nothing to reduce your actual carbon load). Or, the projects cause other issues such as forced relocation of people to make way for trees.

Also, many of the projects seem to be mixed up with other factors such as a ‘local industry booster’ mentality that says that small scale projects in developing countries wil be favoured (e.g. see the DEFRA page). There is some logic here as it apparently helps avoid double counting, and if you want to support developing economies AND carbon offset then your pound goes further. But, I’m not clear why this would create an efficient market – whilst I might like Africa to get more efficient, today it is rarely a good place to do efficient business, with all sorts of corruption and cultural issues, and I am not clear why emissions offsets should be any different. Moreover, it feels more attractive to be taking the most marginal piece of pollution out of circulation that planting trees to offset it all and hoping that the carbon doesn’t get released sometime in the future.

There are people who seems to be addressing this – e.g. CarbonClear or CO2 balance . But, the FT did a review in April that showed that there were still some material flaws in the market.

The other element I am musing on is why carbon neutrality is the right answer. Put another way, if I am spending discretionary cash on carbon reduction, why is spending enough to get neutrality the right answer? The only real merit I can see is that I become aware of implicit cost that I don’t spend today … but even then it is only for carbon. Why should I not be worried about/offsetting the methane emissions from cows that are associated with beef consumption? Why should I not be worried about offsetting the carbon/other pollution load in indirect pollution – e.g. cotton or aluminium production? That really ought to be what the Kyoto protocol/EU emissions trading scheme does. I guess it helps in making the desire more visible, but I do worry that it allows me to salve my conscience without actually making a material difference (like making a special trip to take bottles to a bottle bank – I might feel good, but it is a bad thing to do from a pollution perspective). Maybe a better approach would be to buy out and close down really dirty production systems, or work to make alternatives so much more efficient that the old schemes aren’t productive to run (tricky as capital/sunk costs can dominate and make it impossible for new investment to compete the old stuff away, though it feels intrinsically more attractive).

I did a check on our flights to South Africa. For the four of us we generated ~16 tonnes of CO2 (a scarely large number BTW). At Carbon Clear this would cost £151 to offset, but at CO2 balance it would be £120. The project mix looks about the same, though Carbon Clear seems to do more verification, so may be ‘worth’ the extra. But, are either of them efficient, and do they really tell me much about the ‘cost’ of our pollution? Maybe the right cost is what the EU emissions trading scheme spot price is, plus some allowance for the cost of doing the trade. After all, EU emissions trading cancellation is one of the options given by Carbon Clear, and you get to choose what they spend your money on (itself confusing given no variation in price).

So, I checked the spot price. It currently appears to be about 5 pence/tonne, so we would have change from a pound! This is two orders of magnitude lower than the £7.50+/tonne that is charged in the options above, though it has been as high, and sometimes has been higher. This seems to link to a pretty dramatic failure of the market through over-allocation (corroborated here and here). But, if this is true, why has Carbon Clear not pulled out of that part of the market? In any case I have to believe that a large and liquid market will price the offset more efficiently, and one that is mandatory will make a more material difference.

So, in conclusion I am still in a quandary.  I think the carbon offset industry feels immature and likely to be swept away by an efficient EU trading scheme … and if we don’t get one of those then we have bigger issues than personal offsets by those wealthy enough to be able to salve their conscience (someone made a great comparison with medieval ‘indulgences’ or prayers said by monks on rich folks behalf to make up for any impurities in your conduct).  Reducing actual emissions still seems to be a better way to go … so maybe I better get on with replacing the old house boiler project, and feel good about our normal holidays camping in Northumbria!

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One Response to Carbon offset confusion

  1. Sean O says:

    I write about this a lot on my site that covers global warming ( and I am typically very skeptical of carbon trading schemes.

    P.T. Barnum supposedly said that there was a sucker born every minute. Sometimes, when I read about carbon credits, I am not sure who the sucker is – the person buying, the person selling, or the general public for thinking it is helping!

    In order for credits to be feasible and to be more than a “feel good” gesture, we need solid accounting, accountability, and penalties. We have none of that now and this article makes this painfully clear. We cannot allow credits to be used for minor contributions to a project. The credit must go to the cost of reducing the greenhouse gas.

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