Can Carbon Offsets Be Confirmed?

Many celebrities have sought to burnish their environmental credentials by purchasing "carbon offsets" to compensate for their lavish lifestyles. Former vice president Al Gore, among others, claims the purchase of such offsets enables him to live a "carbon neutral" lifestyle, despite his conspicuous energy consumption. Think of these carbon offsets as environmental indulgences. Some corporations have also begun to purchase carbon offsets so as to reduce their net carbon dioxide emissions.

An investigation by the Financial Times suggests that many carbon offsets are illusory, and that there is little assurance that purchasing carbon offsets does much of anything to reduce carbon dioxide emissions. Specifically, the report found:

- Widespread instances of people and organisations buying worthless credits that do not yield any reductions in carbon emissions.

- Industrial companies profiting from doing very little -- or from gaining carbon credits on the basis of efficiency gains from which they have already benefited substantially.

- Brokers providing services of questionable or no value.

- A shortage of verification, making it difficult for buyers to assess the true value of carbon credits.

- Companies and individuals being charged over the odds for the private purchase of European Union carbon permits that have plummeted in value because they do not result in emissions cuts.

The idea of markets for carbon emissions is a good one. If carbon dioxide emissions need to be reduced, it makes sense to achieve those reductions in the most cost-effective manner possible. Carbon credits can also enable those with stronger environmental preferences to take additional voluntary action, such as celebrity carbon offset purchasers have purported to do. The problem is that offset plans can often be more difficult and costly to verify than more traditional means of controlling emissions. When these costs are factored in, it is not always the case that such market-based approaches are more cost-effective than more clumsy alternatives.

The bottom line is that if Al Gore and Leo DiCaprio truly want to be sure they are reducing their carbon footprint, they are going to have to reduce their own energy consumption, rather than paying others to do it for them.

Did British Government Push Worthless Carbon Credits?

Yesterday the Financial Times reported on accusations that the British Department for Environment, Food and Rural Affairs (DEFRA) has encouraged British companies to purchase carbon dioxide emission credits that do not actually produce carbon reductions.

The first charge against Defra is that under a proposed code of practice, it has been advising businesses and consumers wishing to offset their emissions to buy carbon credits through the European Union or UN carbon trading scheme. However, phase one of the scheme was discredited last May for flooding the market with too many permits to achieve any emissions cuts.

With so many carbon trading schemes on the market, many British companies were keen to follow official advice. However, the result is that many were persuaded to buy environmentally worthless carbon credits.

NYT Examines Carbon Offset "Gimmick":

Today's New York Times looks into the debate over carbon offsets, and questions whether claims of "carbon-neutrality" are just a "gimmick."

is the carbon-neutral movement just a gimmick?

On this, environmentalists aren't neutral, and they don't agree. Some believe it helps build support, but others argue that these purchases don't accomplish anything meaningful — other than giving someone a slightly better feeling (or greener reputation) after buying a 6,000-square-foot house or passing the million-mile mark in a frequent-flier program. In fact, to many environmentalists, the carbon-neutral campaign is a sign of the times — easy on the sacrifice and big on the consumerism. . . .

"The worst of the carbon-offset programs resemble the Catholic Church's sale of indulgences back before the Reformation," said Denis Hayes, the president of the Bullitt Foundation, an environmental grant-making group. "Instead of reducing their carbon footprints, people take private jets and stretch limos, and then think they can buy an indulgence to forgive their sins."

"This whole game is badly in need of a modern Martin Luther," Mr. Hayes added.

Some environmental campaigners defend this marketplace as a legitimate, if imperfect, way to support an environmental ethic and political movement, even if the numbers don't all add up.